Independent News & Media PLC. Annual Report 100 YEARS

Transcription

1 Annual Report YEARS

2 Vincent Crowley Chief Executive Independent News & Media (Ireland) International Profile Ireland No. 1 Newspaper Publisher National Newspapers Regional Newspapers Directories No. 1 Wholesaler & Distributor of Newspapers and Magazines Leading Commercial Printer No. 1 News Website Internet & Mobile Data Ivan Fallon Chief Executive Independent News & Media (UK) United Kingdom Leading National Newspaper Publisher (UK) No. 1 Newspaper Publisher (Northern Ireland) No. 1 Commercial Printer (Northern Ireland) Leading Specialist Magazine Publisher (London) Internet & Mobile Data Brendan Hopkins Chief Executive APN News & Media Limited Tony Howard Chief Executive Independent News & Media (South Africa) South Africa No. 1 Newspaper Group Metropolitan Newspapers Leading Community Newspaper Publisher No. 1 Outdoor Advertising Operator No. 1 News Website Magazines Internet & Mobile Data Australasia No. 1 Metropolitan Newspaper Publisher (New Zealand) No. 1 Regional Newspaper Publisher No. 1 Radio Operator No. 1 Outdoor Advertising Operator No. 1 News Website (New Zealand) Leading Commercial Printer (New Zealand) Leading Magazine and Specialist Publisher Internet & Mobile Data

3 1 Key Performance Indicators Group Turnover (in m) 1, , , ,557.4 Fully Diluted Adjusted Earnings per Share (in cent) Dividend per Share (in cent) Market Capitalisation (in m) 1, ,387 1,727 Corporate Profile Contents (INM) is a leading media and communications Group, operating primarily in Australia, Ireland, New Zealand, South Africa and the United Kingdom. Spanning four continents and eight individual countries, INM has marketleading newspaper positions in Australia (regional), New Zealand, Ireland and South Africa. In the UK, it owns the largest newspaper group in Northern Ireland and the flagship Independent titles. The Group publishes over 175 newspaper and magazine titles with a weekly circulation of 14.3 million copies and operates over 70 on-line sites. The Group is also the largest radio and outdoor advertising operator in Australasia, and has leading outdoor advertising operations in South Africa, Hong Kong, Malaysia and Indonesia. The Group has grown consistently over the last 15 years by building a geographically diverse portfolio of market-leading brands, and today manages gross assets of over 3.9 billion, turnover of over 1.8 billion and employs over 11,000 people worldwide. Corporate Profile 1 Chairman s Statement 2 Chief Executive s Review 3 Operating & Financial Review 8 Operations Review 13 Notice of Meeting 26 Financial Statements 27

4 2 Chairman s Statement Promises delivered would be an apt description of the Group s performance in In addition to delivering a 55% increase in profit before tax, the Group also honoured its commitment to improve operating margins (17.7%); reduce indebtedness (Net Debt:EBITDA reduced to 2.99 times) and effect a 5% headcount reduction that will result in annualised savings of at least 18.9m from The Group also demonstrated its ability to grow the business organically with the launch of innovative new products and formats, including glossy lifestyle magazines and the revolutionary new compact newspaper design, spearheaded by The Independent in London. The outcome has been higher circulation, higher readership and increased market penetration across a younger, urban and female demographic. Over an extended period the Group has also demonstrated its ability to develop strong brand franchises across geographically diverse economies. The Group has developed strong market positions on an incremental basis in South Africa, New Zealand and Australia. Following changes to legislation governing foreign media ownership, the Group s proposed 26% investment in Indian publisher Jagran Prakashan Private Limited (JPPL) opens up exciting market development prospects. India has a population of over one billion people and JPPL s Hindi language newspaper Dainik Jagran already has over 17.5 million readers. All of these factors combined with an energetic and experienced management team underpin my belief in the ability of to continue to deliver double digit earnings growth for shareholders. Sustainable growth has been INM s catch phrase for the past 30 years and represents yet another promise delivered giving shareholder compound annual return of 19.7% since I believe shareholders can look forward to continued and sustainable double-digit growth over the coming years and I wish, on your behalf, to thank our readers, listeners, advertisers and staff worldwide who have made this possible. Dr. Brian Hillery Chairman Dr. Brian Hillery Chairman,

5 3 Chief Executive s Review What would William Martin Murphy have thought 100 years on? A Centenary is an index point in any organisation. It forces you to look back and forward in equal measure. From whence we came and where me might aspire to. William Martin Murphy started the Irish Independent in 1905, and this year we celebrate 100 years of organisational change, structure and international reach, which despite his Belvederian education he could hardly have conceived! Would he have known that the paper he started would today literally span the globe? There is no other newspaper organisation, with the exception of News Corporation, that publishes major indigenous titles in five, soon to be six, different countries. We are attempting a concept of a media group that provides a service around the world from Auckland to Dublin, via New Delhi, Cape Town, London and Belfast. I think William Martin Murphy would have approved of this. He was an internationalist at heart, had commercial dealings in West Africa and in South America and had other substantial interests, including Clerys (the great Dublin store) and the Dublin United Tramway Company. What would have astounded him is the enormous synergy that can now be created between all of our operating centres through the magic of the internet and the instant nature of news transfer, both written and visual. The arrival of PDF technology enables us to transfer entire pages without adaptation from one publication to another. The assembly of newspapers over the next decade if they are to compete vigorously with other forms of media must concentrate on producing better papers, at less cost and probably all day. Easy to say; difficult to do. It is astounding that in our new theatre of investment, India, Dainik Jagran, India s largest read newspaper, will be printed at 25 different print stations throughout Northern India with software which will be able to personalise and editionalise each print edition for the local community. The newspaper has withstood radio, television and the ever-increasing pace of modern technology whilst still retaining its central position as a primary source of news, views, comments, colour, variety, observation, controversy and life in all shapes and sizes. For the advertiser, the newspaper remains the most effective mechanism to convey to the potential consumer the virtue, value, colour and style of any new product, service or offering that he has. There are no TiVo s to exclude advertising in your TV viewing. There are no DVD s to replace normal television, but there is, I think, the correct mixture of news, views and creative advertising that provides a satisfying menu to all consumers. That is why newspapers will survive and prosper; that is why they are the ultimate browsers in a time-starved world. That is why the internet will make newspapers its focused and edited companion. Sir Anthony O Reilly Chief Executive,

6 4 100 years Irish Independent Again, I think William Martin Murphy would have approved mightily. In 1973 when I acquired 100% of the voting shares in Independent Newspapers, it was essentially a domestic company. At the time, the Company said: It is the intention of the Board... to develop the Company into an international communications group, based in Ireland. It is anticipated that this development will be achieved both by internal growth and by selective acquisition. The new operations being examined include, in addition to newspapers, expansion into the fields of advertising, publicity and commercial radio and television. Such expansion will not be limited to Ireland. It is reasonable to ask 32 years later, How have we done? The figures below speak for themselves: Turnover PBT million 1.1 million ,557.4 million million In 1973 we published seven titles, and only in Ireland. Today we publish 175 titles in five countries and have added radio, TV, outdoor, distribution, contract printing and the internet to our business portfolio. This achievement, I think, speaks for itself. We are now an organisation with 11,000 people around the world, soon to be associated with 3,500 people from the continent of India. Since year-end, we have reached a market capitalisation of 1.9 billion or US$2.5 billion. This compares very favourably with NY Times (US$4.9 billion); West Australian Newspapers (US$1.3 billion); Singapore Press Holdings (US$4.3 billion); Trinity Mirror Group (US$3.8 billion); Telegraaf Holding (Holland) (US$1.3 billion). Our return to shareholders over a 32-year period has been 19.7% on a compound annual basis. If you joined us on this great journey in 1973 and invested 1,000, today it would be worth 376,259. All in all, it has been an extraordinary journey; always exciting, at times disappointing, at times fraught with the problems of reconciling growth with control, debt with equity, ambition with regional regulation such as controls of ownership by foreign companies in Australia and India, and competition from every conceivable type of alternative media. However, at all times, we have attempted to keep an unwavering eye on the bottom line and the long term capacity to reward our shareholders with the increased reach of the Group. In this, I believe, we have succeeded. Reconciling the irreconcilable is a daily problem in all businesses, but in media, the number of constituencies is enormous. Shareholders, workers, consumers, advertisers, bankers, readers, listeners, governments, political parties, sectional interests, trade unions, and a host of others, all compete vigorously for the public s attention. In a sense, a media group is a unique entity we are not selling ketchup or cement blocks we are selling the news of the world and our views of that news in that world. Each day it is not another cement block. Each day is 50 different points of view on 50 different things to individual groups who have very strong views, many contrary to what our writers have written. Someone once described newspapers as an annual general meeting in permanent session. That is what makes it so complicated. That is what makes it so exciting and, in the long term, so rewarding. Yes, again I think William Martin Murphy would have approved. Ireland, the original home for our Group now contributes 28.6% of our operating profits. In the Sunday Independent and the Sunday World, we have the two largest selling newspapers in this nation. Both underline that demographics form a critical part of our marketing strategy, and both papers, as market leaders in their respective markets, are forceful reminders that the price of market leadership is a constant sense of renewal, vivacity, relevance, colour, value and an awareness of what the competition has to offer. Both papers have shown that they contribute mightily and importantly to our democratic institutions in the process. Both have withstood the challenge of newcomers and have been strengthened by the process, and when I tell you that the Irish Sunday market has 15 competing newspapers including the most excellent Sunday Tribune in which we have a 29% investment it will be clear to all that the Irish Sunday newspapers market must be the most competitive in the world.

7 5 The Irish Independent remains the nation s leading daily newspaper, with a readership of 612,000 readers each day. The new compact edition has been a great success and allows the consumer to choose at his or her convenience which size of paper most matches their daily needs. The paper maintains a rugged independent line that is fair, rational, modern, both national and international, and reminds us in its title that it is, above all else, independent, as it set out to be 100 years ago. In conjunction with Aengus Fanning and Colm MacGinty at the Sunday Independent and Sunday World respectively, I would like to pay a particular tribute to Vinnie Doyle, who has for 23 years been the Editor at the Irish Independent. In April, his contribution to our company and his country was recognised by his being conferred with an Honorary Doctorate at University College Dublin. I can think of no-one more deserving. The Evening Herald with Gerry O Regan and The Star with Ger Colleran as editors complete our stable of domestic newspapers at a national level. I do not believe there is a better evening paper or morning tabloid in the British Isles to compare with these two daily offerings. When you add our circulation of over 110,000 in the provincials, starting with The Kerryman, The Corkman, the Wexford People, the Wicklow People, the Bray People, the Enniscorthy Guardian, the Carlow People, the Gorey Guardian, the New Ross Standard, the Fingal Independent, the Drogheda Independent and the Dundalk Argus, you can see that under the direction of Ger Walsh in Wexford, we have a vibrant provincial group which will be a focal point for expansion as the prosperity of Ireland grows over the next decade. Provincial newspapers are a central part of the expanding drama of modern Ireland, and we intend to play a major part in that, both North and South. Newspread has been one of the great successes of the company. Laurence Roe and his predecessor, Bobby Burns, have fashioned and structured the ultimate low cost operator in the distribution of a wide range of papers, magazines and periodicals to give us the premier newspaper distribution business in Ireland. It is one we intend to build on in the years ahead. Our internet service continues to expand, and we now have, through Unison, the single biggest news portal in Ireland with over 13 million page impressions per month. In total we now have over 70 websites across the world and own the largest news websites in three of our five markets, replicating our market leadership in print, on to the internet. We see the internet as a key tool in cost reduction and as a companion, not a competitor in the next decade. We must learn to accommodate and modulate to its growth and focus on where it can bring real benefit to our shareholders. In the United Kingdom, the success of The Independent compact continues, and recently in another new development, the company moved to a beautifully designed, single-section newspaper, comparable in its print structure to the Daily Mail and both dramatic and pleasing to the eye. We have had 18 consecutive months of year-on-year circulation growth and now have the best advertising demographics in the United Kingdom, and we will continue to attack our cost base with vigour and commitment. The Independent, apart from being voted Newspaper of the Year last year, is now seen as a considerable Group asset and in ever greater number its stories and by-lines such as Robert Fisk, Hamish McRae, John Walsh, Andrew Grice, Jeremy Warner, 1905 William Martin Murphy founds Independent Newspapers 1968 Independent acquires regional titles 1973 Sir Anthony O Reilly acquires control of Independent Newspapers 1988 Independent acquires stake in APN 1994 Independent acquires controlling stake in Argus Group in South Africa 1995 Independent acquires stake in Wilson & Horton, New Zealand s leading media group 1998 Independent acquires 100% stake in The Independent and The Independent on Sunday 2000 Independent acquires Belfast Telegraph group 2003 Compact edition of The Independent is launched in the UK 2004 Compact edition of the Irish Independent is launched in Ireland

8 6 James Lawton, Bruce Anderson, Miles Kington and a host of other extraordinary talented writers whose stories are used increasingly within the overall Group throughout the world, as noted in our operating and financial review section. In Northern Ireland, we continue to be pleased with the general work ethic and the great commitment to extending our circulation, innovating our new morning compact edition and revitalising the Sunday Life. This, together with substantial investment in our presses in Northern Ireland, has given us the capacity to extend competitively our print business for other titles. We now contract print in Northern Ireland for nine different companies. This is a section of our business that we believe will expand considerably over the next five years. South Africa continues to be a great success story. We invested in South Africa in 1993 prior to the election which brought Nelson Mandela to power. It was a decision fraught with potential difficulties, but the new rainbow nation of South Africa has triumphantly overcome these and fashioned an economy which is the envy of Africa and indeed the surprise of the last five years to the world. President Thabo Mbeki has followed on the extraordinary work of Nelson Mandela to build an economy, whose currency reflects the world confidence that this is a place which will achieve its goals and objectives over the next decade. We now produce 16 of the 29 newspapers in the three major metropolitan areas in South Africa and are the largest group in terms of total circulation and, importantly, advertising market share in our markets in South Africa. We feel confident that opportunities for expansion such as our investment in outdoor, in which we now have a market share of over 50% in conjunction with Clear Channel, is evidence that we can profitably participate in the expansion of that country s dynamic economy. In Australia and New Zealand, the economies again, as in South Africa, Ireland and the United Kingdom, helped all our businesses. In New Zealand, a combination of immigration, new housing starts, strong markets, basic industries for the Far East and good government policy has produced an economy in which we expanded and prospered in the past year. Brendan Hopkins and Ken Steinke launched a new Sunday paper the Herald on Sunday which has proven to be very successful, and reproduced our community papers in full colour under the Aucklander title which made considerable progress. As an old Lion, we are hopeful that the tourist industry in New Zealand will be greatly aided by the advent of the British and Irish Lions tour in June and July 2005, which will showcase to the world New Zealand as a beautiful and welcoming country for tourism. Our views on the test series will remain a secret, which we will share only with Sir Wilson Whineray, the Deputy Chairman of APN News & Media Ltd., and the former captain of the All Blacks against the Lions in Incidentally, on that issue, I do not believe that either Noel Murphy or William Martin Murphy would have approved! In Australia, as in New Zealand, the economy continues to grow vigorously, and will do so as long as the Chinese economy continues its spectacular growth. Australia, with only 20 million people has the same land area as the USA. It has natural resources in coal, iron, uranium, natural gas and a host of other key raw materials, that put it in a privileged position in regard to the expansion of both China and India, the two most potentially powerful future growth areas in the world. Australia has been described as the lucky country, and I am confident that this century will prove this will be the case. The government is concerned with overheating in the economy and will, I think, maintain a growth path that is sustainable without, if possible, peaks and valleys. This will be very much to the benefit of the media industry at large. We are the largest company in the outdoor business in Australia and have with Clear Channel, our partners in outdoor in South Africa, the largest share of the radio market in Australia and New Zealand with 123 stations.

9 7 We have the largest regional press group, most particularly sited in Australia s fastest growing region which is Queensland described as the California of Australia. We also have, through APN, substantial interests in the outdoor business in Hong Kong, Indonesia and Malaysia, and we shall be looking to expand this outdoor market, particularly in India, over the next few years. The operating and financial review section of this report will deal with the bread and butter issues of ratios, debt and margins. In this we have the special skills of Gavin O Reilly, our Chief Operating Officer, and Donal Buggy, our Chief Financial Officer, in conjunction with the Executive Group of CEO s comprising Ivan Fallon, Brendan Hopkins, Tony Howard and Vincent Crowley. They form the core of our management team. They are a very small group for a company of our size and complexity, but each has a fine sense of direction both with their daily tasks in enhancing our margins and becoming the low-cost operator in everything we do, and at the same time maintaining a collective imagination about where and when and how we can expand this company with profit for our shareholders and our workers. When I look at our World Headquarters at Citywest and the magnificent architecture which blends so eloquently with Conor Fallon s three beautiful equine sculptures, I feel it makes a statement in a curious way both about our company and about our selfconfidence as a nation. There are a great number of people who have contributed to an environment in which risk is encouraged and reward is acknowledged. Deutsche Bank produced some startling new long-range projections on 5 April last; they suggest that by 2020, the USA will still lead the world in real GDP growth at $50,000 per head, but that Ireland will be at second place in the whole world in per capita income at $48,000 per capita ahead of Canada, Norway, Austria and a host of others with the United Kingdom at number 19 just ahead of Portugal. While long-range economic forecasts are notoriously inaccurate, this is a prospect which must please every shareholder. In a speech on 13 April to the Royal College of Surgeons in Ireland, I spoke about Ireland s rather new and startling prosperity. I said there were many architects of this but perhaps the most important of all was Dr. Ken Whitaker. In that speech, I quoted an excerpt from an article by the Bishop of Clonfert, Dr. Philbin, written in 1957 in Studies which Dr. Whitaker claimed was the main inspiration for his work. It read: Our version of history has made us think of freedom as an end in itself and of independent government like marriage in a fairy story as the solution of all ills. Freedom is useful in proportion to the use you make of it and it is sad to think that at a time when our religious vigours are allegedly at their height that our productive vigour s should be so low. Ken Whitaker is a particular icon of the 20th Century and of our renaissance. It was he who crafted the First Programme for Economic Development from which it can be generally said that our current prosperity descends. There are many companies in Ireland today who are pursuing this path with vigour and success. We are proud of each and every one of them. For our own company I see us operating in five superior economies, each with its own particular reasons for growth which I have attempted to describe. In this we are unique. If we can harness these platforms through the marriage of the internet and our present business structures and market shares, then the next decade will be as rewarding if not more so than the past. We think that William Martin Murphy would surely have approved. Sir Anthony O Reilly Chief Executive

10 8 Operating & Financial Review OBJECTIVES SET OBJECTIVES MET: Our objective in 2003 was to position the Group for sustainable growth. The record 2004 financial performance represents progress towards that objective. The objective now is to sustain superior growth. Our enduring focus is doing what we do, but doing it better. A shared belief that good is never good enough has enabled us to produce growth in all regions and at every level of the organisation during The Group s structure and strategy fully support the objective for 2005 and beyond to deliver and to sustain double-digit earnings growth. Gavin K. O Reilly Chief Operating Officer, Donal J. Buggy Chief Financial Officer, Focused Core Operations Operationally, our focus remains on what we do best and where we can add value publishing, radio and outdoor. Following a period of significant yet judicious capital investment, the Group now has a well invested asset base to sustain growth. Similarly a continuous, unrelenting focus on operating cost reduction has improved our cost base. These initiatives will sustain improved operating margins, strong cash flow characteristics and the consequent ability to enhance shareholder returns. Consistent with our objective to be recognised as the industry s low cost operator, our operating margin is among the highest of our peer group today. Innovative Anticipate Market Preferences Superior products form the basis of superior growth. In an ever increasing competitive market place, continued innovation is the only means to meet and to then exceed changing consumer demands. In 2004, our ability to anticipate consumer preference through innovation was evidenced by the introduction of the compact offering for both The Independent and the Irish Independent. The introduction of the compact format contributed to each title consistently outperforming the broader market. The Group also introduced the Sunday Independent s Life glossy magazine in Ireland, the new compact Herald on Sunday in New

11 9 Zealand and, more recently, the popular tabloid Daily Voice in South Africa. A focus on continuous innovation, across markets and products, once again reflects our belief that innovation is a journey, not a destination. Group Strategy Local Execution The Group is well known for having a truly balanced portfolio of assets and geographies. That did not happen by chance, rather by design. In 1973, Sir Anthony O Reilly first invested in what was a relatively small Irish local newspaper business. At that time, he clearly set out a vision of what and how Independent News & Media should be. Over the past 30 years that vision has been successfully implemented, and today that same Group manages gross assets of over 3.9 billion in a multitude of markets. But how does this work? How do you manage businesses as near as Dundalk and as far away as Cape Town? What is the common link that binds this Group? In shorthand, the Group shares common beliefs and yet always recognises that the local dynamic should dictate the day-to-day operations. While our business is primarily the business of newspapers, local tastes and consumer preferences mean that it is never a case of one size fits all. We recognise the inherent differences of each of our titles and the markets they serve. So, in many ways, the Group operates as a de facto support structure/facilitator for its region-by-region operations, assisting in strategy formulation and implementation. The Group has stringent management reporting procedures, through its rigorous budgeting process and daily reporting on each operating unit. Allied to this, the Group operates bench-marking intra-group to ensure consistency in execution and to optimise rates of return. A focus on continuous innovation, across markets and products, once again, reflects our belief that innovation is a journey, not a destination. In addition, the Group is able to leverage its global scale and reach, specifically in areas of procurement, editorial copy-sharing and digital convergence. Editorial copy-sharing, through the Group s dedicated intranet platform, provides for significant editorial copy-sharing in real time such that the story can be covered by local journalists closest to the story. This means that not only is editorial excellence ensured in any and all of our 175 individual titles, but is done so in a most cost effective and timely manner. On average, over 750 individual articles are shared intra-group on a daily basis, the majority emanating from the award-winning Independent titles in London. Facilitating Local Expertise at a Group Level Strategy formulation & implementation Internal benchmarking Stringent management reporting Rigorous pricing strategies Identifying cost/procurement efficiencies Building a knowledge base Editorial sharing intra-net Sponsoring/communicating innovation Digital convergence

12 10 Above all, sharing a common vision perhaps translates into the most valuable asset of all a collegiate management style that produces a centralised knowledge base of winning ideas and strategies. As such, our management philosophy ensures that good ideas be they in new product development, marketing, editorial, distribution, cost management or advertising are given full ventilation and exposure to the wider Group. Balanced Geographic Diversity The Group s strong geographic balance, together with leading market positions, also supports sustainable growth. The Group now spans four continents and operates in eight countries, with marketleading positions in the majority of its markets. In 2004, we continued our strategy of broadening our geographic reach with the announcement of the proposed acquisition of 26% of the leading Indian newspaper publisher, Jagran Prakashan Private Ltd (JPPL). JPPL publishes Dainik Jagran, a Hindu-language title which is India s most read daily newspaper (read by 17.5 million people daily) and is one of the most widely read daily newspapers worldwide. This very important strategic transaction is subject to Indian government statutory approval. Global Diversification Growth Through Innovation Low Cost Operator In total, the Group now publishes over 175 titles with a weekly circulation of 14.3 million copies and operates over 70 on-line websites. The Group operates in some of the world s fastest growing economies protecting against downside risk while providing substantial growth opportunities. Delivering Top-Line Growth The Group reported revenue from continuing operations of 1,557 million, up 14% on This financial performance reflects strong growth in underlying advertising revenues of 18.0%, enhanced yield and higher volumes. Circulation also improved with revenues increasing by 7.7%, reflecting underlying circulation growth and cover price increases. Delivering Sustainable Growth The Group reported a record operating profit, before exceptional items, of almost 286 million for 2004 a 23% increase on These record results reflect improved revenues across all regions together with a continued focus on operating cost reduction. The majority of the re-structuring plan, announced in December 2003, has already been successfully implemented. The Group is on target to at least achieve the expected annual savings of 18.9 million by A continued focus on effective cost control contributed to a 78 basis point increase in operating margin from 16.96% in 2003 to 17.74% for Investing in Growth In 2004, total capital expenditure was 67.7 million, which related to the capital investment programme at APN News & Media Limited (APN); a full-colour upgrade at the Belfast printing facility; the fit-out of the new Dublin Talbot Street premises; together with other ongoing maintenance expenditure. As a consequence, your Group now has a more effective cost structure and a well-

13 11 invested asset base. The capital spend in the period has achieved its primary aim of reducing cost and allowing us to capitalise upon growth opportunities. Intrinsic Business Worth Hidden Values The main assets of a media group are its mastheads, licences and brands. Under current accounting standards these can only be carried at acquired cost on the balance sheet which, at 31 December 2004, was 1.5 billion. However these mastheads, licences and brands are currently valued at 2.6 billion, which represents their real value. The uplift of 1.1 billion is not recorded on the balance sheet and represents the hidden value of these assets. To put this 2.6 billion in perspective, it compares very favourably to the Group s total net debt of 986 million at the end of The Group s total net debt of 986 million includes 304 million relating to APN s net debt, which is completely non-recourse to the Group and therefore only 682 million of the total net debt is recourse net debt. The focused strategic effort to reduce the Group s debt levels over the last few years has proved extremely successful and is highlighted by the strong financial ratios produced by the Group at the end of 2004 which showed Net Debt to EBITDA falling below 3.0 times and interest cover rising to a very comfortable 4.75 times. All of this demonstrates the solid asset backing and sound balance sheet which your Group enjoys. Enhanced Shareholder Returns 2004 profit before tax increased by 55% to 189 million. This increase was driven by the Group s strong operating results and reduced exceptional costs. This record performance has enabled the Board, once again, to deliver the stated financial objective of double-digit earnings growth, with adjusted earnings per share increasing by 12% to cent. The Group s final dividend for 2004 increased by 16.5% to six cent per share, yielding a total dividend of nine cent per share for the full year. This represents a 14% increase in the total dividend on 2003 levels and reflects the record operating performance and the Board s confidence in the Group s prospects. The Group s dividend policy is to sustain the level of dividend growth in line with earnings growth. International Financial Reporting Standards The application of International Financial Reporting Standards (IFRS) will become mandatory for financial statements of EU listed companies with effect from 1 January This will require the presentation of IFRS compliant financial statements by the Group for the financial year ending 31 December 2005, together with comparative figures for the prior year. In addition, it will require the presentation of IFRS compliant Objectives set Objectives met Double-digit EPS growth % Medium-term target operating margin of 20% % (+78 basis points) Target Net Debt to EBITDA below 3.5 times 2004 Net Debt to EBITDA 3.0 times 5% headcount reduction 2004 Ahead of target Restructuring programme with 18.9 million 2004 Ahead of target annualised savings by 2006

14 12 interim financial statements for the half-year ending 30 June 2005 together with prior period comparative figures. The Group has substantially completed its preparations for the move to report under IFRS in line with this timetable and a detailed plan is in place to ensure compliance; further guidance will be provided on this later in the year. Gavin K. O Reilly Chief Operating Officer Promises Made Promises Kept The Group s 2004 financial performance represents progress towards our financial objectives. The Group continues to deliver to plan. Donal J. Buggy Chief Financial Officer 10 Year Summary (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) m m m m m m m m m m Group Turnover 1, , , , , , Profit on Ordinary Activities before Interest & Exceptional Items Profit before Taxation Profit after Taxation Earnings/(Loss) per Share (cent) (6.58) Fully Diluted Earnings per Share before Exceptional Items and Amortisation (cent) Dividend per Share (cent)

15 13 Operations Review Australasia

16 14 APN News & Media Limited (APN), in which Independent News & Media PLC has a 39.7% shareholding, is Australasia s leading regional publisher, radio broadcaster and outdoor advertising operator. Listed on both the Australian and New Zealand Stock Exchanges, APN publishes New Zealand s largest newspaper, The New Zealand Herald, and has interests in specialist publishing, magazines, new media and pay TV. APN has a current market capitalisation of A$2.3 billion, valuing INM s share at just under A$1 billion. In 2004, APN produced a record net profit of A$130.2 million excluding nonrecurring items up 26% on the prior year. The Group also enhanced its media assets with a range of innovations including the launch of the Herald on Sunday and the introduction of two major new radio formats (Coast and Flava) in New Zealand. In Australia, APN launched a number of new regional non-daily newspapers into the fast growing markets in South East Queensland and established Tribe Outdoor a new community targeted poster network. These initiatives greatly enhanced the strength of the group s core business, which achieved its stated objective of double-digit earnings growth while increasing group revenue by 13% to A$1,262 million. Publishing Operating profit from the publishing division was up 20% on 2003, with newspapers contributing 70% of overall group profits. Growth in the sector was assisted by a buoyant New Zealand economy which produced very good figures in employment and property advertising. New Zealand National Publishing Division largest newspaper, The New Zealand Herald, increased overall revenue by 11% and operating profit by 16% year-on-year. In October 2004, APN successfully launched the Herald on Sunday, which has a current average weekly circulation of approximately 100,000 copies, of which 50,000 are regular subscriptions. This success is largely attributable to The New Zealand Herald s extensive and established distribution network. With over one million weekly readers and a committed subscriber base, The New Zealand Herald remains the largest circulating daily newspaper in the country. During 2004, advertising volumes and yields increased by 1.7% and 7.2% respectively. During 2004, New Zealand Magazines redesigned the New Zealand Woman s Weekly and The NZ Listener, consolidating their market positions. The New Zealand Woman s Weekly remains the most read weekly magazine in the country, and had another record year. Finally, work on doubling the colour capacity at the Ellerslie print press was well advanced during the year. This project is due for completion at the end of The New Zealand National Publishing Division, which includes New Zealand s

17 15 Regional Newspapers APN s regional newspaper network performed ahead of expectations, with advertising yields increasing by 9.7% in Australia and 5.1% in New Zealand. Overall, divisional revenues were up 9% and operating profit increased by 24% to A$100 million. Circulation revenue increased by 4% to A$61 million, with particularly good circulation volume gains in Australia. Circulation figures for the six months to December 2004 showed that APN published the five fastest growing newspapers in Australia. Continuing strength in local economies such as the North Island in New Zealand and Queensland in Australia produced very good growth in employment, real estate and motoring advertising. Employment and real estate advertising increased by 39% and 27% respectively in Australia and by 30% and 23% respectively in New Zealand. APN is planning to build on these revenue gains with the development of a A$35 million press centre at Yandina on Queensland s Sunshine Coast. Radio Both Australian and New Zealand radio operations performed well, growing revenue by 14% to A$243 million, and increasing operating profit by 20% to A$67.5 million. Strong audience survey results across all 123 stations in both markets led to an increased share of agency advertising, as well as continued gains in direct advertising. The Australian Radio Network (ARN) increased revenue by 20% and operating profit by 22% in In addition, it strengthened its position as the market leader in Sydney and Melbourne in the commercially important year old demographic. In New Zealand, APN s The Radio Network (TRN) secured the dominant market share. More than 53% of people aged 10 and above listen to a TRN station each week. During the year, TRN increased underlying revenue by 8% and operating profit by 18% also saw the launch of two new radio formats Flava and Coast with listenership well ahead of expectations. TRN commissioned 14 new stations throughout the year in the roll-out of its eight networks across the country, taking its total number of stations at the end of 2004 to 111. Outdoor During 2004, APN restructured its market leading outdoor division APN Outdoor consolidating from 17 locations to seven. It also implemented a new sales structure, which paid dividends with revenue increasing by 22% to A$227 million and operating profit rising by 14% to A$21.6 million. Trading performance across all segments was strong. New transit contract wins in Adelaide and Melbourne in the last quarter reinforced the national sales network for APN s Buspak business. Buspak also secured important bus advertising contracts in New Zealand and in Hong Kong. In New Zealand, the roll-out of the Adshel street furniture network continued with more than 2,800 illuminated panels now installed nationally. Print and Specialist Publishing Following the restructuring of the Print and Specialist Publishing Division undertaken in 2003, operating profits increased by 31% and revenue was up 6% in Additional printing capacity was introduced close to year-end with the installation of a 32-page press in Manukau creating new revenue opportunities for the company going forward. New Media/Interactive The New Zealand Herald s brand positioning continues to be reflected in the popularity of its news website which is New Zealand s most visited site.

18 16 Operations Review South Africa

19 17 Independent News & Media (South Africa) (Pty) Limited is the leading newspaper group in South Africa, publishing fifteen daily and weekly newspapers in the country s major metropolitan centres. The group owns and publishes 14 free/community newspapers in the Cape and has interests in free/community newspapers in Gauteng and KwaZulu Natal. Through its 50% interest in Clear Channel Independent, the group is South Africa s leading outdoor advertiser. Additional interests include three of South Africa s leading lifestyle magazines, leading interactive websites and commercial printing. The South African operation produced strong results in a robust economic and trading environment where the stable Rand saw inflation and interest rates reduced to historically low levels. These factors drove consumer and business confidence and retail activity to all time highs during Despite the strength of the Rand, the manufacturing/export sector has adapted well. Overall, the group produced very strong year-on-year growth, with revenue and operating profit increasing by 24% and 32% respectively. This performance combined a strong double-digit improvement in total revenue with the benefits of extremely low cost increases. The ongoing focus on cost containment included the reorganisation and rationalisation of the group s production and distribution activities and enhanced operational efficiency. Operating margins increased from 14.7% to 15.6%. The Cape and Gauteng newspaper divisions performed well in their respective markets reflecting firm, sustained improvements in trading profits and in operating margins. The KwaZulu Natal division continued to build on the back of its turn-around programme which began during This division recorded substantial growth on its prior year performance and made a major contribution to the group s overall performance. Newspapers In Cape Town, the group publishes the Cape Argus, the Cape Times, the Weekend Argus in separate Saturday and Sunday editions and 14 Community Newspapers. The group s flagship title, The Star, is published in Gauteng along with the Saturday Star in Johannesburg, the Pretoria News in Pretoria, The Diamond Fields Advertiser in Kimberley and The Sunday Independent nationally. The group holds a 25% interest in 12 free/community newspapers in Pretoria. In KwaZulu Natal, the group publishes the Daily News, The Mercury, the Post, The Independent on Saturday, The Sunday Tribune and Isolezwe and has a 33% interest in a number of free/community newspapers which are distributed in and around Durban.

20 18 Press advertising in South Africa showed good growth during 2004, with the group maintaining its firm share of the display advertising market and retaining its dominant share in the classified market where it enjoys a market share of more than 50%. Circulation also performed very well, with all of the group s 15 titles showing year-on-year volume sales improvement in a market where many of the group s direct competitors showed ongoing declines. Circulation of Isolezwe the group s Zulu language newspaper continued its remarkable development, with its daily average sale increasing to over 65,000 copies per day in the second half of 2004, up from 55,000 in In March 2005, the group launched Daily Voice, South Africa s newest popular newspaper aimed at the emerging mass-market. Outdoor In 2004, the group increased its interest in Clear Channel Independent (CCI) to 50%. CCI has a presence in 14 African countries and is South Africa s leading outdoor advertising company. During 2004, it delivered a 47% increase in its profit contribution through new product innovations and a strong focus on the overall profitability of its African operations. CCI has over 50% of the outdoor advertising market in South Africa. During 2004, operating profit increased on the back of stronger yields as the roll-out of the Citilite back-lit illumination format continues to attract new higher yielding advertisers. The African operation, which holds market leading positions in 10 countries, improved its profitability dramatically on the prior year through the introduction of new products to the market, a drive for greater efficiency between regions and the turn-around of loss-making operations. With its very solid market presence, CCI is well positioned for further growth. Magazines The magazine operation had a good year with the launch of Glamour, which sold 92,500 copies per month in its second ABC period, bringing critical mass to the business. This achievement was ahead of the group s launch expectations and has quickly established Glamour as the number two women s glossy monthly magazine, with a 15% market share. In addition, the established titles, House and Garden and GQ (helped by the launch of a new quarterly product GQ Cars), performed well in very competitive markets. New Media/Interactive The group s news portal, Independent On-Line (iol.co.za), and its suite of newspaper websites continues to be the dominant on-line news and current affairs provider in Southern Africa, commanding two million unique visitors per month. The newspaper websites are proving to be excellent marketing tools for newspaper subscription and classified advertising business.

21 19 Operations Review UK

22 20 In the UK, the Group publishes the quality nationals The Independent and The Independent on Sunday and also owns the Belfast Telegraph group, the largest newspaper publisher in Northern Ireland. The UK division recorded revenue from continuing operations of Stg 139 million, up 7.3% on a like-for-like basis on This was partly attributable to a moderate upsurge in the advertising sector most notably in the Northern Ireland market throughout the year and latterly in the UK advertising market in the second half of In addition, increased circulation of The Independent compact contributed to revenue growth. Overall operating profits from continuing operations were up on last year at Stg 9.8 million, reflecting a modest upturn in the advertising market and the continuing success of The Independent compact. National Division The Independent became fully compact in May 2004, leading the way in what has become a worldwide revolution in quality newspapers. By July, UK paid sales were up over 34% on the same month the previous year. This was achieved against a backdrop of a decline in overall newspaper sales in the quality market. The success continued throughout the year, with the March 2005 ABC figures recording the eighteenth consecutive month of year-on-year circulation growth. Market share exceeded 12% in the second half of the year, the highest since The success of the compact format was further underlined with the release of the first set of National Readership Survey statistics since the change to compact. These showed a 31% increase in total readership for The Independent, including a 47% increase in female readership and a 40% increase in the important age bracket. The high quality of journalism and continued innovative use of the front page has received widespread acclaim again this year, with the The Independent winning almost every industry award available, including Newspaper of the Year for the second year running and a key marketing award for the overall best marketed product in In addition, Simon Kelner was named Editor of the Year at three different award ceremonies. The Independent on Sunday was further strengthened in the first half of 2004 with additional sections and a new look. This paid dividends in the second half of the year with strong growth in UK paid sales. This continued into 2005, with the first quarter s sale 4.1% ahead year-on-year. Belfast Division Through its two market leading titles, The Belfast Telegraph and Sunday Life, the

23 21 group continues to be the largest newspaper publisher in Northern Ireland, consistently delivering the highest circulation and readership figures of any local titles. Continuing product improvement and innovation in 2004 included a new magazine, More 2 Life, for the Sunday Life and promotion of the highly successful Jobfinder and Homefinder supplements and twentyfourseven magazine. Group owned daily and Sunday newspapers are now read by over half the adult population in Northern Ireland. Advertising was strong in a continuing difficult market. Market share for The Belfast Telegraph was up slightly year-on-year, driven by strong recruitment from both the private and public sectors. Property also showed good growth in the second half, helped by the launch of the Homefinder supplement and website which facilitates a strong on-line/off-line advertising offering also saw good revenue growth from contract print, with the first full year benefit of a contract to print the Mirror titles in Belfast which commenced in September Ongoing editorial development was recognised with awards at both local and national level. Most notably Best Daily Newspaper and Best Newspaper of the Year Overall for The Belfast Telegraph; Magazine of the Year for twentyfourseven; Sunday Newspaper of the Year for the Sunday Life; as well as a string of awards across our titles for journalism, photography, advertising and production. Since year-end, The Belfast Telegraph has launched a new all-day Saturday paper and a compact morning edition which will further increase market penetration in Magazines Division The group is the number one recruitment magazine publisher in London and an operator of exhibitions and recruitment fairs. It also publishes sports magazines in the UK. Market share for group recruitment titles remained strong despite weak advertising volumes for the London secretarial and financial recruitment markets. As a result of continued cost saving initiatives, the division remains in a strong position to benefit from the eventual recovery of the London recruitment advertising market. New Media/Interactive The group continued to leverage its editorial content into the on-line arena. Page impressions averaged 27 million per month across all the UK sites. The current stable of sites includes and Web only on-line revenue improved in 2004, in line with the national on-line advertising market improvement. Sales of paid for content have also shown growth, leveraging further the quality editorial in the off-line products.

24 22 Operations Review Ireland

25 23 Independent News & Media is Ireland s leading media company, publishing five market-leading national newspapers, 12 regional newspapers and a fast growing consumer directory. It is also the nation s leading newspaper and magazine wholesaler and distributor and Ireland s leading on-line news portal. New formats, new products and a transformative restructuring programme marked 2004 as a milestone year for INM s Irish operations. Permanent cost savings, achieved as a result of the restructuring programme and the move to highly efficient outsourced telesales and back-office facilities, will deliver substantial and sustainable benefits during 2005 and beyond. Turnover increased by 8% and operating profit by 10%, driven by strong circulation, a strengthening in advertising and selected cover price increases. Advertising revenues showed double-digit increases year-on-year, with a stronger second half, a trend which has continued into Advertising income was boosted by strong growth in property, improving recruitment revenue and healthy retail advertising. On the publishing front, product innovations included the launch of a compact Irish Independent and a number of new lifestyle supplements and magazines across our market leading stable of titles. The result has been record readership numbers, particularly amongst a younger and female demographic. Strong cost control was another feature of During the year the group completed a restructuring of its advertising circulation and administrative support functions at the Evening Herald, Irish Independent and Sunday Independent titles. The transition to outsourced support services occurred seamlessly, delivering significant ongoing cost savings as well as focussing resources on product development, editorial and marketing. October 2004 marked the end of an era as staff relocated from the company s traditional home on Middle Abbey Street where leading group titles were published since 1905 to new modern premises on Talbot Street. Publishing National group titles in Ireland include the Irish Independent, Sunday Independent, Evening Herald, Sunday World, Irish Daily Star and the Irish Daily Star Sunday. During 2004, Ireland s leading daily newspaper, the Irish Independent, attracted

26 24 a record readership of 612,000, an increase of 80,000 readers per day on It also underpinned its number one circulation slot, with 114,359 broadsheet and 62,136 compact sales per day, way ahead of its nearest daily rival. This compares with total daily sales of just 115,269 by our nearest rival. This strong performance was driven by compelling editorial and the launch in February 2004 of a Monday to Friday compact edition which attracted an increasing number of commuters and younger and female readers. By mid year, the dual format was extended nationwide and a Saturday edition was added in November. Readership of the Sunday Independent continues to dwarf its broadsheet competitors, delivering 1,075,000 readers each Sunday. The combination of strong readership, strong circulation of on average 291,625 copies per week and product enhancements such as the highly successful Sunday Life glossy magazine makes the Sunday Independent the number one choice for advertisers. This is a remarkable achievement given the highly competitive nature of the Sunday newspaper market in Ireland where no less than 17 titles are on sale each week. The Sunday World retains its undisputed number one position in the Sunday popular market, delivering 852,000 readers and sales of 268,354 each Sunday. Its glossy lifestyle magazine has proven most popular with younger readers. Despite the current international dip in demand for evening newspapers, the Evening Herald continues to attract over 348,000 readers and delivered average daily circulation of 90,397 copies. The Evening Herald now has the highest reach of any daily newspaper in Dublin, with a 30% market share. This strong performance has been assisted by very robust sales through our street trader network and by product innovations. The Irish Daily Star remains Ireland s best read daily red top, increasing its readership in 2004 by 2.3% to 447,000 readers each day, with average sales of 107,175 per day. The Irish Daily Star Sunday performed well in its first full year in operation, achieving average weekly sales of 51,515 copies and attracting 190,000 readers each week. The group s 12 paid for regional titles delivered a combined circulation of over 110,000 copies per week, making INM Ireland s number one regional newspaper group. Ongoing product innovations together with the location of group titles along the fast growing east coast corridor from Louth to Wexford, continue to add to the profitability and inherent value of our regional titles. The Independent Directory performed well in 2004, building on its already strong position in the Dublin metropolitan area. Wholesale & Distribution Newspread, INM s distribution and wholesaling company, increased turnover by 7% and currently has contracts to distribute almost 2,000 newspaper and magazine titles. New Media/Interactive Unison.ie is the number one news portal in Ireland, with over 13 million page impressions per month and 813,000 unique users. The site is increasingly popular with on-line advertisers and we see considerable scope for building on this success in 2005 and beyond.

27 Years Independent Reporting by Vinnie Doyle Editor, Irish Independent Irish Independent, 1905 One hundred years ago the fledgling Irish Independent made its first appearance across the nation. It cost a half-penny. Advertisements competed for attention on the very first front page. But inside readers found a bright, lively newcomer to Irish publishing. As the first leading article put it, we believe we are right in claiming for the first half-penny morning newspaper published in Ireland, that it contains the news of the day presented in a form which the public will appreciate, as a departure from traditions of journalism which are now outworn. The Irish Independent... holds itself free to help in every good cause which is for Ireland s benefit. It will place our country s interests above those of party, and will not seek to exploit any section or individual. Over the last 100 years we feel we have more than justified the criteria under which we were founded. It was said somewhere in the distant past that the first duty of the editor of the Irish Independent was to ensure he was not the last one. For the past 100 years we have held the looking glass up to the nation and so far the mirror has not shattered. Instead it has recorded the birth of the nation, always with clarity, sometimes with sadness but almost always with affection. We feel people very definitely enjoy their paper, to browse through its pages, to interact with one another over its stories or commentary and to use it as a symbolic identifier. Every day truck loads of the Irish Independent leave our Citywest plant to go across the nation to be read by over 600,000 people. We like to think it goes into those homes as a friend. And now the friend has found a new pal. It is fitting that this centenary period has seen the birth of the compact Irish Independent which, since we launched it, has attracted many new readers and further expanded its influence. The Irish Independent has, for a century, been a beacon of good journalism in Ireland. Our new format ensures that we will continue to prosper and perform our unique role in Irish society. We ve had the revolution, now the evolution. Most editors of quality national newspapers operate on a collection of policy principles that set the bar for the paper. Ours is simply this: we define the position of the papers as liberal, centrist and supportive of a mixed economy. We are against violence we are for peace. It s what we stood for 100 years ago and it s what we stand for today. End of World War II, 1945 Kennedy Assassination, 1963 First Moon Landing, 1969 Band Aid Concert, 1985 September 11, 2001 Pope John Paul s Death, 2005

28 26 Notice of Meeting Notice is hereby given that the Annual General Meeting of will be held in the O Reilly Hall, UCD, Dublin 4 at noon on 8 June 2005 for the following purposes: 1. To receive and adopt the Report of the Directors and Financial Statements for the year ended 31 December 2004 and the Independent Auditors Report thereon. 2. To declare a Final Dividend on the ordinary shares. 3. To re-elect the retiring Directors (please refer to biographical details on pages 30 to 31). 4. To fix the remuneration of the Directors. 5. To authorise the Directors to fix the remuneration of the auditors. 6. To consider, and if thought fit, pass the following resolution as an Ordinary Resolution: That, pursuant to the provisions of Section 140 of the Companies Act 1963, the Company may convene and hold its next Annual General Meeting at any location outside the State as determined by the Directors at their sole and absolute discretion. Note 1. A member who is unable to be present at the Meeting is entitled to appoint a proxy to attend, speak and vote instead of him/her and the proxy need not be a member. To be effective, a Form of Proxy must be received at the Office of the Registrar of the Company not later than noon on 6 June The Company, pursuant to Regulation 14 of the Companies Act, 1990 (Uncertificated Securities) Regulations, 1996, specifies that only those Shareholders registered in the register of members of the Company as at noon on 6 June 2005 (or in the case of an adjournment as at 24 hours before the time of the adjourned meeting) shall be entitled to attend and vote at the Meeting in respect of the number of shares registered in their names at that time. Changes to entries in the register after that time will be disregarded in determining the right of any person to attend and/or vote at the Meeting. By Order of the Board Andrew Donagher Company Secretary 6 May 2005

29 27 Financial Statements Contents Directors and Other Information 28 Executive Directors 30 Non-Executive Directors 31 Report of the Directors 32 Independent Auditors Report 45 Accounting Policies 47 Group Profit and Loss Account 50 Statement of Retained Profits 51 Statement of Total Recognised Gains and Losses 51 Reconciliation of Movement in Equity Shareholders Funds 52 Group Balance Sheet 53 Company Balance Sheet 54 Group Cash Flow Statement 55 Notes to the Financial Statements 56

30 28 Directors and Other Information Board of Directors Dr. BJ Hillery (Chairman) Sir Anthony O Reilly (Chief Executive) LP Healy (Deputy Chairman) DJ Buggy PM Cosgrove (Australia) VC Crowley CU Daly (USA) JC Davy IG Fallon VA Ferguson Senator MN Hayes BMA Hopkins (UK) Baroness M Jay (UK) Dr. IE Kenny F Murray B Mulroney (appointed 28 June 2004) AC O Reilly (Australia) AJ O Reilly Jr GK O Reilly BE Somers Board Committees Executive Committee Sir Anthony O Reilly DJ Buggy VC Crowley IG Fallon BMA Hopkins AL Howard GK O Reilly Audit Committee VA Ferguson (Chairman) CU Daly LP Healy Remuneration Committee Dr. IE Kenny (Chairman) JC Davy Senator MN Hayes Nomination Committee Dr. BJ Hillery (Chairman) Sir Anthony O Reilly Baroness M Jay Secretary and Registered Office A Donagher Independent House 2023 Bianconi Avenue Citywest Business Campus Naas Road Dublin 24 Advisors Solicitors Matheson Ormsby Prentice McCann FitzGerald Stockbrokers Davy Stockbrokers Goodbody Stockbrokers Hoare Govett Merrill Lynch NCB Stockbrokers Auditors PricewaterhouseCoopers Principal Bankers ABN Amro Bank NV Allied Irish Banks p.l.c. ANZ Banking Group Limited Bank of Ireland BNP Paribas IIB Bank Limited Lloyds TSB Bank PLC Scotia Capital Ulster Bank Ireland Limited Registrars Capita Corporate Registrars plc Unit 5 Manor Street Business Park Dublin 7

31 29 Directors and Other Information (continued) APN News & Media Limited JJ Parkinson (Chairman) AE Harris (Joint Deputy Chairman) Sir Wilson Whineray (Joint Deputy Chairman) S Atkinson DJ Buggy PPJ Cody PM Cosgrove LP Healy BMA Hopkins KJ Luscombe JH Maasland AC O Reilly GK O Reilly Independent Newspapers (Ireland) Limited GK O Reilly (Chairman) BL Brennan DJ Buggy VC Crowley MJ Doorly LP Healy B McCabe Independent News & Media (Northern Ireland) Limited IG Fallon (Chairman) AA Canavan Dr. C Gibson BMA Hopkins B McIvor LJP O Hagan Prof. D O Reilly Lady M Quigley TM Ringland Lord D Rogan AJ Round Independent News & Media (South Africa) (Pty) Limited GK O Reilly (Chairman) DJ Buggy IG Fallon JG Featherstone N Howa AL Howard SA Johnson AJ Konig S Montsi Independent News and Media Limited LP Healy (Chairman) BC Bradlee Rt. Hon. Kenneth Clarke, MP Sir Sean Connery IG Fallon Senator MN Hayes BMA Hopkins Rt. Hon. Baroness Margaret Jay H Kennedy QC Sir Anthony O Reilly Sir George Quigley A Whitham-Smith International Advisory Board BC Bradlee (Chairman) Rt. Hon. Kenneth Clarke, MP Sir Sean Connery D Dinkins IG Fallon Prof. J Gerwel AE Harris LP Healy Rt. Hon. Baroness Margaret Jay S Johnson E Molobi Rt. Hon. Brian Mulroney Prof. W Nkuhlu Sir Anthony O Reilly Lord D Rogan Sir Wilson Whineray Hon. A Young

32 30 Executive Directors Sir Anthony O Reilly is a former Chairman, President and Chief Executive Officer of HJ Heinz Company. He was also a member of the board of the New York Stock Exchange. He is also Chairman of Waterford Wedgwood plc and Chairman of Eircom Group plc. He has been a Director of since 1973 and became Executive Chairman in Following a decision by the Board in June 2004 to separate the roles of Chairman and Chief Executive, Sir Anthony O Reilly continued as Chief Executive of the Group. Attended seven Board meetings in DJ Buggy is a chartered accountant and was appointed to the Board of in 2002 as Chief Financial Officer. He was Group Financial Controller since he joined the Group in 1996 from PricewaterhouseCoopers. He is also a Director of News & Media NZ Limited and APN News & Media Limited. Attended eight Board meetings in VC Crowley was appointed Chief Executive of Independent News & Media Ireland in Previously he was Finance Director, and later Chief Executive, of APN News & Media Limited. A chartered accountant, he joined the Group in 1990 and became a Director of the Group in Attended eight Board meetings in IG Fallon was appointed Chief Executive of Independent News & Media (UK) Limited in Previously he was Chief Executive of Independent News & Media (South Africa) (Pty) Limited. He became Non-Executive Chairman of itouch plc in He joined the Board of the Group in Attended eight Board meetings in GK O Reilly was appointed Chief Operating Officer of in 2001 and was previously Managing Director of Independent Newspapers (Ireland) Limited. He is also a Director of News & Media NZ Limited, APN News & Media Limited and itouch plc. He joined the Board of the Group in Attended seven Board meetings in Seconded Director BMA Hopkins was appointed Chief Executive of APN News & Media Limited in Previously he was Chief Executive of Independent News & Media (UK) Limited. He became a Director of the Group in 1990 and a Director of itouch plc in Attended six Board meetings in 2004.

33 31 Non-Executive Directors Dr. BJ Hillery joined the Board of in 2003 and was appointed Non-Executive Chairman in June He is also Chairman of both UniCredito Italiano Bank (Ireland) p.l.c. and Providence Resources Plc. He is a former member of Dáil Éireann and Seanad Éireann. He is a member of the Government Review Body on Higher Remuneration in the Public Sector and of the National Pensions Reserve Fund Commission. Attended eight Board meetings in LP Healy joined the Board of in 1972 and became Chief Executive in He retired as Chief Executive in 2000 and was appointed Deputy Chairman. He is a Director of APN News & Media Limited. Attended eight Board meetings in PM Cosgrove is the founder and Chairman of the Buspak companies in Australia and Hong Kong and is a Director of several other companies, including APN News & Media Limited. He has been a Director of since Attended six Board meetings in CU Daly is Director Emeritus of the John F Kennedy Library Foundation. He is also a Director of the American Ireland Fund Boston and the Joyce Foundation. He joined the Board of in Attended eight Board meetings in JC Davy is a senior executive of the firm of Davy Stockbrokers. He has been a Director of since Attended seven Board meetings in VA Ferguson has been a Director of since He was appointed Senior Independent Director in Attended eight Board meetings in Senator MN Hayes is a member of Seanad Éireann, and a former Northern Ireland Ombudsman. He is Chairman of the National Forum on Europe and a member of the Senate of Queens University Belfast. He is Chairman of the Advisory Committee of the Ireland Funds. He has been a Director of since Attended eight Board meetings in Baroness M Jay is a Life Peer in the UK and a former member of the UK Cabinet. She is currently Chair of the Overseas Development Institute, a Director of British Telecom and is founder Director of the National Aids Trust. She was appointed to the Board of in Attended eight Board meetings in Dr. IE Kenny is a Director of Kerry Group Plc, IONA Technologies Plc and of other companies. A Senior Research Fellow at UCD, he is also President of the International Management Centres. He has been a Director of since Attended eight Board meetings in B Mulroney is a Senior Partner at the Montreal law firm of Ogilvy Renault. He was Prime Minister of Canada from September 1984 until June He is a Director of several leading companies and is a Trustee of the George Bush Presidential Library and other educational and charitable organisations. He was appointed to the Board of in June Attended all four Board meetings held in 2004 since his appointment to the Board. F Murray is Chairman of the Department of Foreign Affairs Appointments Committee and is also Commissioner of the Civil Service. He is the Independent Reviewer of Complaints for the Institute of Chartered Accountants in Ireland. He was appointed to the Board of in Attended eight Board meetings in AC O Reilly is a former Chief Executive of APN News & Media Limited. He is Chief Executive of Bayard Capital Partners. He joined the Board of in Attended three Board meetings in AJ O Reilly Jr is Chief Executive of Wedgwood, the ceramics division of Waterford Wedgwood plc and is Chairman of ARCON International Resources Plc. He is also a Director of Providence Resources Plc and Waterford Wedgwood plc. He became a Director of in Attended four Board meetings in BE Somers is a chartered accountant and is senior partner in Somers and Associates. He was appointed to the Board of in Attended seven Board meetings in 2004.

34 32 Report of the Directors The Directors have pleasure in submitting their annual report on the affairs of ( the Company ) and its subsidiary undertakings ( the Group ) together with the financial statements and the Independent Auditors Report for the year ended 31 December Principal Activities and Review of the Business The principal activities of the Group continue to be the printing and publishing of national and provincial newspapers in Ireland and New Zealand, national and metropolitan newspapers in the United Kingdom, regional newspapers in Australia and metropolitan newspapers in South Africa. The Group also has radio operations in Australia and New Zealand and outdoor advertising operations in Australia, New Zealand, South-East Asia and South Africa. The information to be included with respect to the review of the business and future developments as required by the Companies (Amendment) Act, 1986 is contained in the Operations Review which appears on pages 13 to 25. Results and Dividends Group results, dividends (paid and proposed) are as follows: m The profit of the Group after taxation and minority interests amounts to 80.6 Dividends: Interim ordinary dividend paid of 0.03 per share (22.2) Proposed final ordinary dividend of 0.06 per share (44.7) Retained profit for the Group and its share of results of joint ventures and associates 13.7 Research and Development Certain of the Company s subsidiary undertakings are engaged in ongoing research and development aimed at improving production processes and expanding product ranges. Further information in relation to product development is contained in the Operations Review which appears on pages 13 to 25. Events since the Year-End Information in respect of events since the year-end as required by the Companies (Amendment) Act, 1986 is contained in the Operations Review which appears on pages 13 to 25.

35 33 Report of the Directors (continued) Directors and their Interests The interests of the Directors and Secretary of in office at 31 December 2004 in the share capital of, APN News & Media Limited and itouch plc at the beginning (or date of appointment, if later) and end of the year were: Interests in Share Capital: Ordinary Shares of 0.30 each Beneficial At 31 December 2004 At 31 December 2003 Dr. BJ Hillery 11,383 11,383 Sir Anthony O Reilly 195,447, ,781,124 LP Healy 3,999,211 3,999,211 DJ Buggy 34,456 23,316 PM Cosgrove 442, ,365 VC Crowley 300, ,212 CU Daly 23,200 6,700 JC Davy 621, ,974 IG Fallon 33,990 22,866 VA Ferguson 127, ,733 Senator MN Hayes 16,279 15,741 BMA Hopkins 1,310,149 1,259,862 Baroness M Jay 6,336 6,200 Dr. IE Kenny 57,112 30,762 B Mulroney F Murray 2,000 AC O Reilly 1,000,000 1,000,000 AJ O Reilly Jr 308, ,000 GK O Reilly 632, ,244 BE Somers 204,374, ,564,693 Company Secretary A Donagher 7,855 7,596

36 34 Report of the Directors (continued) Directors and their Interests (continued) APN News & Media Limited Ordinary Shares of A$0.40 each Beneficial At 31 December 2004 At 31 December 2003 LP Healy 581, ,112 VC Crowley 850, ,871 AC O Reilly 1,000,000 2,750,000 BMA Hopkins 783, ,311 3,214,965 4,519,294 APN News & Media Limited Convertible Notes of A$3.95 each Beneficial At 31 December 2004 At 31 December 2003 VC Crowley 90,000 90,000 itouch plc Ordinary Shares of Stg 0.01 each Beneficial At 31 December 2004 At 31 December 2003 Sir Anthony O Reilly 1,428,571 1,428,571 LP Healy 142, ,857 DJ Buggy 10,000 10,000 VC Crowley 28,571 28,571 IG Fallon 100, ,000 BMA Hopkins 274, ,285 GK O Reilly 142, ,857 2,127,141 2,127,141 Company Secretary A Donagher 14,285 14,285

37 35 Report of the Directors (continued) Directors and their Interests (continued) Interests in Share Options: Share Options over Ordinary Shares of 0.30 each At 31 At 31 Weighted December Granted Exercised December Average Exercisable 2003 During Year During Year 2004 Exercise Price Up to Sir Anthony O Reilly 5,856,668 2,000,000 (666,643) 7,190, DJ Buggy 693,880 1,000,000 1,693, VC Crowley 654,850 1,000,000 1,654, IG Fallon 1,642,267 1,000,000 2,642, BMA Hopkins 1,154,215 2,000,000 3,154, AC O Reilly 221, , GK O Reilly 1,163,654 1,000,000 2,163, Company Secretary 11,387,474 8,000,000 (666,643) 18,720,831 A Donagher 374, , Options granted during the year were granted at 2.28 each. The above mentioned options are exercisable at prices ranging from 1.25 to 2.58 per share. Details of share options exercised during the year are as follows: No. of Options Weighted Average Weighted Average Share Exercised Exercise Price Price at Exercise Date Sir Anthony O Reilly 666, The market price of Ordinary Shares of 0.30 each was 2.32 at 31 December 2004 and 1.88 at 31 December 2003 and ranged from 1.82 to 2.32 during the year. Details of all outstanding options in the Company are given in note 19 to the financial statements.

38 36 Report of the Directors (continued) Directors and their Interests (continued) APN News & Media Limited Share Options over Ordinary Shares of A$0.40 each At 31 At 31 Weighted December Granted Exercised December Average Exercisable 2003 During Year During Year 2004 Exercise Price Up to BMA Hopkins 1,000,000 1,500,000 2,500,000 A$ VC Crowley 400,000 (400,000) PM Cosgrove 100, ,000 A$ ,500,000 1,500,000 (400,000) 2,600,000 Options granted during the year were granted at A$3.85 each. Details of share options exercised during the year are as follows: No. of Options Weighted Average Weighted Average Share Exercised Exercise Price Price at Exercise Date VC Crowley 400,000 A$3.51 A$5.00 The market price of Ordinary Shares of A$0.40 each was A$5.15 at 31 December 2004 and A$4.00 at 31 December 2003 and ranged from A$3.72 to A$5.25 during the year. itouch plc Share Options over Ordinary Shares of Stg 0.01 each At 31 At 31 Weighted December Granted Exercised December Average Exercisable 2003 During Year During Year 2004 Exercise Price Up to IG Fallon 2,022,222 2,022,222 Stg The market price of Ordinary Shares of Stg 0.01 each was Stg at 31 December 2004 and Stg at 31 December 2003 and ranged from Stg to Stg during the year. There have been no changes in any of the above interests between 31 December 2004 and 20 April 2005 other than the following: On 22 February 2005, BMA Hopkins purchased 100,000 ordinary shares in APN News & Media Limited. On 22 February 2005, GK O Reilly purchased 20,000 ordinary shares in APN News & Media Limited. On 23 March 2005, Dr. BJ Hillery purchased 13,617 ordinary shares in. On 29 March 2005, CU Daly purchased 7,500 ordinary shares in. Details of Directors remuneration and transactions are given in note 31 and note 32 to the financial statements. The Company s Register of Directors Interests (which is open to inspection) contains full details of Directors shareholdings and options to subscribe as above. The Directors and Company Secretary and their families had no other beneficial interests in the shares of the Company or any subsidiary undertaking of the Company at 31 December 2004, other than interests in, APN News & Media Limited and itouch plc as noted above.

39 37 Report of the Directors (continued) Other Interests There have not been any contracts or arrangements with the Company or any subsidiary undertaking during the year in which a Director of the Company was materially interested and which was significant in relation to the Company s business, except as detailed in note 32 to the financial statements. Substantial Shareholdings The Company has been notified by FMR Corporation and Fidelity International Limited and their direct and indirect subsidiaries (non-beneficial holdings) that they together held between 10% and 15%; by Bank of Ireland Nominees Limited that it is the registered owner (on behalf of a range of clients) of between 5% and 10% and by Marathon Asset Management Limited (on behalf of a range of clients) that it held between 5% and 10% of the issued ordinary share capital of the Company at 20 April As far as the Board is aware, other than the Chief Executive Sir Anthony O Reilly, FMR Corporation and Fidelity International Limited, Bank of Ireland Nominees Limited and Marathon Asset Management Limited, whose shareholdings are set out above, no person or corporation held 3% or more of the ordinary share capital of the Company at 20 April Corporate Governance The Board of Directors General The Directors are committed to maintaining the highest standards of corporate governance and this statement sets out how the principles and provisions of The Combined Code on Corporate Governance, July 2003 are applied. Board The Board holds regular meetings, eight in 2004, and there is contact between meetings as required in order to progress the Group s business. The Board has a formal schedule of matters specifically reserved to it for decision, including: approval of interim and final financial statements; approval of the Group s long-term objectives and strategy; changes relating to the Group s capital structure; material contracts; terms of reference of Chairman, Chief Executive and other executive Directors; terms of reference and membership of Board Committees; risk management strategy; and review of the Group s overall corporate governance arrangements. Board Committees There are three Board Committees with formal terms of reference: the Audit Committee, the Remuneration Committee and the Nomination Committee. These Committees are dealt with in detail later in the report. Directors The Board consists of six executive Directors and fourteen non-executive Directors. The list of Directors and short biographical notes appear on pages 30 and 31 of this report. The Articles of Association require all Directors to submit themselves for re-election once every three years. Non-executive Directors are appointed for three-year terms, subject to re-election and to Companies Act provisions relating to the removal of a Director.

40 38 Report of the Directors (continued) Corporate Governance (continued) Independent Non-Executive Directors The Board is satisfied that all the non-executive Directors are independent in character and judgement. In accordance with the provisions of the 2003 Combined Code, the Board is satisfied that the Chairman, Dr. Brian Hillery, satisfied the independence criteria prior to his appointment to the position. The Board has determined that LP Healy, PM Cosgrove, CU Daly, JC Davy, VA Ferguson, Senator MN Hayes, Baroness M Jay, Dr. IE Kenny, B Mulroney, F Murray and BE Somers are independent in accordance with the provisions of the 2003 Combined Code. The Board considered certain factors which may appear relevant in reaching this determination, including the length of service on the Board, additional fees payable apart from Directors fees and other factors referred to in the Combined Code and, having considered these factors, the Board determined that the Directors referred to above are independent non-executive Directors. Board Appointments The Nomination Committee is responsible for making recommendations on Board appointments. The members of the Nomination Committee are Dr. Brian Hillery, Sir Anthony O Reilly and Baroness Margaret Jay. Dr. Hillery was appointed Chairman of the Committee in December The Committee reviewed its terms of reference in 2004 and recommended changes to take account of the requirements of the 2003 Combined Code. The new terms of reference were adopted by the Board and a copy of the terms of reference is available from the Company Secretary and on the Company s website at In June 2004, as announced in June 2003, the roles of Chairman and Chief Executive were separated. Sir Anthony O Reilly continued as Chief Executive and Dr. Brian Hillery, who was appointed a Director of in December 2003, was appointed Chairman. A sub-committee of the Board, which included the members of the Nomination Committee, proposed the appointment of Dr. Brian Hillery as Chairman. The Nomination Committee did not consider it necessary or appropriate to look outside the existing Board members in nominating a new Chairman. Dr. Hillery has considerable experience in chairing boards and the Nomination Committee was satisfied that his nomination was in the best interests of the Company. In addition, in June 2004, Brian Mulroney, former Prime Minister of Canada, was appointed to the Board. Mr. Mulroney is a member of the Group s International Advisory Board (appointed in 1999) and is well known to the Nomination Committee. The Nomination Committee was satisfied that neither the use of an external search consultancy nor open advertising was necessary. Non-executive Directors are appointed for three-year terms. A letter of appointment was issued to the new appointee in 2004 and will be issued to all new appointees in the future. A copy of the terms and conditions of appointment of non-executive Directors is available from the Company Secretary. The Nomination Committee met twice during the year and all members attended each meeting.

41 39 Report of the Directors (continued) Corporate Governance (continued) Information and Professional Development Newly appointed non-executive Directors are supplied with copies of the most recent annual report and half-yearly report, recent announcements and any other documentation required. Arrangements are made to meet with senior management and site visits are arranged. Non-executive Directors are entitled to obtain independent legal advice, if necessary, at the expense of the Company, provided this is discussed in advance with the Company Secretary. Performance Evaluation A sub-committee appointed by the Board carried out the evaluation of the Board and its Committees. The members of the subcommittee were: Dr. Brian Hillery (Chairman), Sir Anthony O Reilly (Chief Executive) and Vincent Ferguson (Senior Independent Director). In conducting the review of the Board and its Committees, the sub-committee considered a number of matters including: the role and effectiveness of the Board and Committees; Board procedures including the frequency of meetings and preparation of the agenda; communications within the Board and Committees and with other parties; the composition of the Board and Committees; and the sufficiency of information provided to the members of the Board and Committees. The evaluation of individual non-executive Directors included: attendance and contributions at meetings; the level of knowledge of the Group s business and industry; and the relationship with other Directors and with management. The Chairman and the non-executive Directors met without the executive Directors present and reviewed the performance of the Chief Executive. The non-executive Directors, led by the Senior Independent Director, met separately to review the performance of the Chairman. Re-election of Directors The Articles of Association require all Directors to submit themselves for re-election at least once every three years. Under the Articles of Association all Directors are subject to re-election by shareholders at the first AGM following their appointment. At the AGM this year, JC Davy, VA Ferguson, BMA Hopkins, Dr. IE Kenny and AC O Reilly retire by rotation in accordance with the Articles of Association and being eligible offer themselves for re-election. B Mulroney, having been appointed since the last AGM, offers himself for re-election. Biographical details of these Directors appear on pages 30 and 31 of this report. The Board is satisfied that your Company benefits from the skill, experience and independence the above Directors bring to your Company and is very pleased to recommend their re-election to the Board.

42 40 Report of the Directors (continued) Corporate Governance (continued) Remuneration The Remuneration Committee is made up entirely of independent non-executive Directors. The members of the Committee are: Dr. IE Kenny (Chairman), JC Davy and Senator MN Hayes. The Committee reviewed its terms of reference during 2004 to take into account the requirements of the 2003 Combined Code. The Committee proposed amendments to its terms of reference and these were adopted by the Board. A copy of the terms of reference is available from the Company Secretary and on the Company s website at The Committee s functions include the following: determining the remuneration of the Chief Executive and the Chairman of the Board; determining in consultation with the Chief Executive, the remuneration of the executive Directors; satisfying itself that remuneration is competitive so as to attract and retain key personnel; advising on the share option scheme and determining eligibility to participate therein; and the granting of options. The remuneration of non-executive Directors is determined by the Chairman of the Board and the executive Directors. Remuneration for executive Directors consists of basic salary, performance related annual bonus, share option scheme, pension benefits and a company car. 1) Basic Salary Salaries for executive Directors are reviewed annually. The Committee is aware of what comparable companies are paying and takes into account relative performance. It is also sensitive to the wider business environment and to pay and employment conditions elsewhere in the Group, when determining executive Directors salaries annually. 2) Performance Related Annual Bonus The performance related elements of the annual bonus are designed to align the interests of Directors and shareholders and to give executive Directors an incentive to perform at the highest levels. 3) Share Option Scheme The Group operates a share option scheme for Directors and executives which was approved by the shareholders on 26 May The percentage of share capital which can be issued under the scheme and the individual grant limits comply with guidelines published by the Irish Association of Investment Managers. There are also options outstanding under the earlier scheme which was approved by the shareholders on 4 April 1989 and which expired on 3 April Basic options cannot be exercised before the expiration of three years from the date of grant and super options cannot be exercised before the expiration of five years from the date of grant. Options can only be exercised if certain performance conditions, primarily relating to growth in Earnings Per Share, are achieved. Share options are granted to Directors and executives of the Group to encourage management to build, over time, a shareholding in the Company, which is material to their net worth. The Committee believes that this long-standing policy has been instrumental in motivating and retaining the quality of senior management required to run a successful business. Share options are offered on a phased basis and all employees are encouraged to hold their options beyond the earliest exercise date.

43 41 Report of the Directors (continued) Corporate Governance (continued) 4) Pension Benefits Pension benefits for executive Directors are based on basic salary only and are expected to provide a pension of two-thirds final salary at normal retirement age. 5) Service Contracts There are no service contracts between Directors (executive and non-executive) and the Company with notice periods of more than twelve months. 6) Emoluments Details of Directors emoluments are as per note 31 to the financial statements. The Remuneration Committee met six times during the year in the performance of its functions and all members attended each meeting. Accountability and Audit Under Irish company law the Directors are responsible for the preparation of the financial statements and these responsibilities are outlined in detail under the heading Directors Responsibilities. The Directors acknowledge that they are responsible for the Group s systems of internal controls and for reviewing their effectiveness. This review is carried out with the assistance of the Audit Committee. Report from the Audit Committee 1. Members of the Committee The Audit Committee comprises of three independent non-executive Directors. The members at 31 December 2004 and who were in office for the full year are: VA Ferguson FCCA (Chairman) LP Healy FCA CU Daly The Committee reviewed its terms of reference during the year to take account of the requirements of the 2003 Combined Code. New terms of reference were proposed and adopted by the Board. The terms of reference are available from the Company Secretary and on the Company s website at 2. Role and Responsibilities The Committee s functions include the following: to monitor the integrity of the financial statements of the Company and any formal announcements relating to its financial performance; to review the consistency of, and any changes, to accounting policies; to review the methods used to account for significant or unusual transactions where different approaches are possible; to review the clarity of disclosure in the Company s financial reports; and to review the effectiveness of the Company s internal controls and risk management systems and to review the statements to be included in the Annual Report concerning internal controls and risk management.

44 42 Report of the Directors (continued) Corporate Governance (continued) 3. Meetings The Committee held three meetings during the year. All the members of the Committee attended each meeting. At each of the meetings, members of management and the external auditors attended. During one of these meetings, the Committee met separately with the external auditors, without members of management present. 4. Financial Statements The Committee reviewed the annual and interim financial statements and the Stock Exchange announcements with management. The Committee received reports from the external auditors on the results of the annual audit and the review of the interim results. These reports were discussed in detail with the external auditors. The Committee reviewed the Annual Audit Plan with both management and the external auditors. 5. Internal Control and Internal Audit The Committee reviewed the Group s systems of internal control and the on-going process for identifying, evaluating and managing risks faced by the Company. The Committee reviewed and approved the statement to be issued in the Annual Report concerning internal control and risk management. There is no formal Group internal audit function. Management provided details of how the Group currently reviews internal controls. This includes a system of self-assessment of risks and controls carried out for all regional and Group head offices and a rotating sample of business units. A peer review process of internal controls is carried out at selected business units. These processes have been in place for a number of years. The results are collated at Group head office and presented for review to the Committee. In addition management reported on the detailed and timely financial reporting requirements for each region to Group head office. These reports, which are reviewed in detail at Group head office, include a comparison of actual results against budget and against last year with detailed explanation of significant variances. Management confirmed that both the Group Chief Operating Officer and the Group Chief Financial Officer regularly visit each regional head office and conduct detailed reviews with local executives. The Committee recommended to the Board that the current process was appropriate to ensure the effectiveness of the Group s internal controls and at present there is no requirement for a separate Group internal audit function. 6. Auditor Objectivity and Independence The Committee is required to explain how, if the auditors provide non-audit services, auditor objectivity and independence is safeguarded. The Committee reviewed the total fees paid to the auditors in 2004 and fees paid for non-audit services. The Committee discussed this with the external auditors. The external auditors described how auditor independence is managed in their firm and also confirmed that they complied with all regulatory and ethical guidelines in this matter. The Committee was satisfied with the explanations received.

45 43 Report of the Directors (continued) Corporate Governance (continued) Relations with Shareholders The Group attaches considerable importance to shareholder communications and has a well-established investor relations function. There is regular dialogue with institutional investors and shareholders as well as presentations after the announcement of interim and preliminary results. This dialogue is primarily with the executive Directors who meet shareholders regularly throughout the year. The non-executive Directors are informed of any significant shareholder concerns. Results announcements are sent to all shareholders and published on the Company s website at The website contains additional information for investors which is regularly updated. At the Company s AGM, the Chairman makes a presentation and answers questions on the Group s business and its performance during the prior year. Arrangements have been made for the 2004 Annual Report and AGM notice to be sent to shareholders 20 working days before the meeting and for the level of proxy votes cast on each resolution, and the numbers for and against, to be announced at the meeting. This year s AGM will be held in the O Reilly Hall, UCD, Dublin 4 at noon on 8 June Internal Control The Directors acknowledge that they are responsible for the Group s systems of internal control and for reviewing their effectiveness. An ongoing process, in accordance with the guidance of the Turnbull Committee on Internal Control, has been established for identifying, evaluating and managing risks faced by the Group, and is reviewed regularly by the Board. The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Group s strategic objectives. It should be recognised that such systems can only provide reasonable and not absolute assurance against material misstatement or loss. Risk assessment and evaluation take place as an integral part of the annual planning and budgeting process, the results of which are reviewed by senior management and the Board. A co-ordinated annual programme of risk and control self assessment, which is supplemented by peer audits in part of the Group, is also carried out, and the results of these are reported to the Audit Committee. The Board s annual review of the effectiveness of internal control, advised by the Audit Committee, has been based on that programme. Going Concern After making enquiries, the Directors confirm that they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Compliance The Group has complied, during the year ended 31 December 2004, with the Principles and Provisions of The Combined Code on Corporate Governance, July 2003.

46 44 Report of the Directors (continued) Directors Responsibilities Irish company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group and of the profit or loss of the Group for that period. In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements are prepared in accordance with accounting standards generally accepted in Ireland and comply with Irish statute comprising the Companies Acts, 1963 to 2003 and the European Communities (Companies: Group Accounts) Regulations, They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The measures taken by Directors to secure compliance with the Company s obligation to keep proper books of account are the use of appropriate systems and procedures and the employment of competent persons. The books of account are kept at the registered office of the Company. A copy of these financial statements will be published on the Company s website at The maintenance and integrity of the website is the responsibility of the Directors. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Safety, Health and Welfare at Work Act, 1989 The Group pursues an active policy of providing safe systems of work and safety training for its employees worldwide. The above Act imposes certain obligations on employers and appropriate measures have been taken to ensure that health and safety standards are complied with at all relevant locations and that all relevant Group companies meet the requirements of the Act. Auditors The Auditors, PricewaterhouseCoopers, will be re-appointed in accordance with Section 160(2) of the Companies Act, On behalf of the Board Sir Anthony O Reilly Donal J Buggy 25 April 2005

47 45 Independent Auditors Report to the Members of We have audited the financial statements on pages 47 to 92 which comprise the Group profit and loss account, the Group statement of retained profits, the Group statement of total recognised gains and losses, the Group reconciliation of movement in equity shareholders funds, the Group balance sheet, the Company balance sheet, the Group cash flow statement, the notes to the financial statements and the accounting policies set out on pages 47 to 49. Respective responsibilities of Directors and auditors The Directors responsibilities for preparing the annual report and the financial statements in accordance with applicable Irish law and accounting standards generally accepted in Ireland are set out on page 44 in the statement of Directors responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements, auditing standards issued by the Auditing Practices Board applicable in Ireland and the Listing Rules of the Irish Stock Exchange. This report, including the opinion, has been prepared for and only for the Company s members as a body in accordance with Section 193 of the Companies Act 1990 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 2003, and the European Communities (Companies: Group Accounts) Regulations, We state whether we have obtained all the information and explanations we consider necessary for the purposes of our audit and whether the Company balance sheet is in agreement with the books of account. We also report to you our opinion as to: whether the Company has kept proper books of account; whether the Report of the Directors is consistent with the financial statements; and whether at the balance sheet date there existed a financial situation which may require the Company to convene an extraordinary general meeting; such a financial situation may exist if the net assets of the Company, as stated in the Company balance sheet, are not more than half of its called-up share capital. We also report to you if, in our opinion, information specified by law or the Listing Rules regarding Directors remuneration and transactions is not disclosed. We read the other information contained in the annual report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises only the Chairman s Statement, the Chief Executive s Review, the Operating and Financial Review, the Operations Review and the Report of the Directors. We review whether the corporate governance statement on page 43 reflects the Company s compliance with the nine provisions of the Combined Code (issued 2003) specified for our review by the Listing Rules and we report if it does not. We are not required to consider whether the Board s statements on internal control cover all risks and controls or to form an opinion on the effectiveness of the Company s or Group s corporate governance procedures or its risk and control procedures.

48 46 Independent Auditors Report to the Members of (continued) Basis of audit opinion We conducted our audit in accordance with auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 December 2004 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Acts, 1963 to 2003, and the European Communities (Companies: Group Accounts) Regulations, We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the Company. The Company balance sheet is in agreement with the books of account. In our opinion the information given in the Report of the Directors on pages 32 to 44 is consistent with the financial statements. The net assets of the Company as stated in the Company balance sheet on page 54 are more than half of the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 31 December 2004 a financial situation which under Section 40(1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the Company. PricewaterhouseCoopers Chartered Accountants and Registered Auditors Dublin 25 April 2005

49 47 Accounting Policies The significant accounting policies adopted by the Group are as follows: Basis of Preparation The financial statements have been prepared in accordance with Accounting Standards generally accepted in Ireland and in accordance with Irish statute comprising the Companies Acts, 1963 to 2003, and the European Communities (Companies: Group Accounts) Regulations, Accounting Standards generally accepted in Ireland in preparing financial statements giving a true and fair view are those published by the Institute of Chartered Accountants in Ireland and issued by the Accounting Standards Board. Historical Cost Convention The financial statements are prepared under the historical cost convention except that certain land and buildings are stated at professional valuation in excess of cost. Turnover Turnover mainly represents revenue earned from the printing and publication of newspapers and magazines, commercial printing, distribution of newspapers and magazines, radio broadcasting and specialist transit and static outdoor advertising. Turnover represents the sale of goods and services to third parties. Turnover is stated net of Value Added Tax. Circulation and printing revenue is recognised when control of the goods passes to the buyer. Advertising revenue from publishing is recognised when a newspaper or magazine is published, from radio when the advertisement is broadcast and from outdoor when displayed. Distribution revenue is recognised when the newspaper or magazine has been delivered. Consolidation and Equity Accounting The Group profit and loss account, Group balance sheet and Group cash flow statement represent a consolidation of the financial statements of the parent Company and its subsidiary undertakings and the Group s share of results and net assets, including premium on acquisition, of its joint ventures and associates. Where subsidiary undertakings, joint ventures and associates have been acquired or disposed of, the financial statements include only the proportion of the results arising since the dates of acquisition or up to the effective dates of disposal. Mastheads, Radio Licences, Transit and Electronic Systems and Brands Mastheads, radio licences, transit and electronic systems and brands are stated at cost. The Directors believe that most of the Group s mastheads, radio licences, transit and electronic systems and brands do not have a finite economic life because of their proven value over long periods and their position in the market is sustainable for the foreseeable future. The Directors consider that these mastheads, radio licences, transit and electronic systems and brands are durable in nature because they are expected to maintain market share and profitability over a long period. This is supported by the barriers to entry that exist, the nature of competition in these industries, the intellectual property rights and the quality of branding associated with these mastheads, radio licences, transit and electronic systems and brands. These mastheads, radio licences, transit and electronic systems and brands are subject to an annual impairment review to identify any diminution in recoverable amount. A small number of the Group s mastheads are considered to have a finite economic life and these mastheads are amortised on a straight line basis over their estimated useful economic lives, not exceeding 20 years. Goodwill In general, positive goodwill, which includes premiums arising on acquisition of subsidiary undertakings, joint ventures and associates, is written-off over twenty years by equal annual installments subject to acceleration of write-off for impairment. Negative goodwill is amortised in line with the depreciation of the underlying non-monetary assets. Tangible Assets Freehold land and buildings are stated at cost or valuation less accumulated depreciation on buildings. Other tangible assets are stated at cost less accumulated depreciation.

50 48 Accounting Policies (continued) Tangible Assets (continued) Depreciation is calculated in order to write-off the cost or valuation of tangible assets other than land over their estimated useful lives by equal annual installments. Finance costs directly attributable to the construction of tangible assets are capitalised as part of the cost of those assets. Subsidiary Undertakings, Joint Ventures and Associates Shares in subsidiary undertakings, joint ventures and associates are stated in the holding Company s balance sheet at cost less provision for impairment. Trade Investments Trade investments are stated at cost less provision for impairment. Stocks Stocks are stated at the lower of cost and net realisable value. Cost is based on normal levels of cost and comprises cost of purchase, i.e. supplier s invoice price with the addition of charges such as freight or duty where appropriate. Net realisable value comprises the actual or estimated selling price (net of trade but before settlement discounts), less all costs to be incurred in marketing, selling and distribution. Deferred Taxation All deferred taxation liabilities arising from timing differences are recognised. Deferred taxation assets arising from timing differences are recognised to the extent that they are expected to become recoverable in the foreseeable future. Deferred taxation is provided for on an undiscounted basis. Timing differences are temporary differences between profits as computed for taxation purposes and profits as stated in the financial statements which arise because certain items of income and expenditure in the financial statements are dealt with in different periods for taxation purposes. Foreign Currencies Transactions designated in foreign currencies are translated into Euro at the rate of exchange ruling at the transaction date or, if hedged forward, at the rate of exchange under the related forward currency contract. Monetary assets and liabilities designated in foreign currencies are translated at the rates ruling at the balance sheet date (closing rate) or, if hedged forward, at the rate of exchange under the related forward currency contract. The resulting profit or loss is included in the profit and loss account. The balance sheets of foreign subsidiary undertakings, joint ventures and associates are translated into Euro using the closing rate method and profit and loss accounts are translated using the average rate for the period or, if hedged forward, at the rate of exchange under the related forward currency contract. Exchange differences arising from translation of the opening net investment together with the difference between the profit and loss translated at the average rate and the closing rate, net of related foreign currency financing are dealt with as adjustments to reserves. Leases Where tangible assets are financed by leasing agreements which give rights approximating to ownership ( finance leases ), they are treated as if they had been purchased outright at the present values of the minimum lease payments; the corresponding obligations are shown in the balance sheet as finance leases. The present value of the minimum payments under a lease is derived by discounting those payments at the interest rate implicit in the lease, and is normally the price at which the asset could be exchanged in an arm s length transaction. Depreciation is calculated in order to write-off the amounts capitalised over the estimated useful lives of the assets by equal annual installments.

51 49 Accounting Policies (continued) Leases (continued) The excess of the total rentals under a lease over the amount capitalised is treated as interest, which is charged to the profit and loss account in proportion to the amount outstanding under the lease. Leases other than finance leases are operating leases and the rentals thereunder are charged to the profit and loss account on a straight line basis over the periods of the leases. Pensions and Post-Retirement Obligations Costs and liabilities in respect of pensions and post-retirement obligations are independently assessed in accordance with the advice of professionally qualified actuaries. The regular cost of pensions and post-retirement obligations are charged to trading profit over the employees service lives on the basis of a constant percentage of earnings. Variations from regular cost, arising from periodic actuarial valuations, are amortised to trading profit over the expected remaining service lives of current employees. The capital cost of unfunded pensions, as determined by independent actuaries, is recognised in the accounting period in which the unfunded pensions are granted. The Group also has a number of defined contribution pension schemes. The costs arising under such schemes are charged to the profit and loss account as incurred. Cash and Liquid Resources Cash is defined as cash on hand together with deposits repayable on demand. Deposits repayable on demand are defined as those which can be withdrawn at any time and without penalty or where a maturity or period of notice of not more than 24 hours has been agreed. Liquid resources are defined as stores of value which are readily convertible into known amounts of cash at or close to their carrying amount without curtailing or disrupting the business. They primarily consist of deposits held with a period of notice greater than 24 hours. Start-up Costs Start-up costs arising from new businesses, products or facilities are expensed in the year they are incurred unless they meet the specific conditions for recognition as assets under the relevant Accounting Standards. Product Development Expenditure Product development expenditure is charged to the profit and loss account in the year in which it is incurred with the exception of expenditure on certain projects where the outcome of these projects is assessed as being reasonably certain as regards viability and technical feasibility. Such expenditure is capitalised and amortised on a systematic basis. Financial Instruments Debt instruments All borrowings are stated at the value of consideration received after the deduction of issue costs. The issue costs and interest payable on borrowings are charged to the profit and loss account at a constant rate over the life of the borrowings. Interest rate swaps The cash flows from interest rate swaps and gains and losses arising on termination of interest rate swaps are recognised as returns on investments and servicing of finance. Where associated debt is not retired in conjunction with the termination of an interest rate swap, gains and losses are deferred and are amortised to interest expense over the remaining life of the debt to the extent that such debt remains outstanding. Forward contracts At the balance sheet date, debtor or creditor balances that are hedged by forward foreign currency contracts are translated into Euro at the contracted rate. The cash flows from forward contracts are classified in a manner consistent with the underlying nature of the hedged transaction.

52 50 Group Profit and Loss Account Year ended Year ended 31 December December 2003 notes m m Turnover Continuing operations 2 1, ,363.4 Discontinued operations , ,388.2 Operating profit Continuing operations Exceptional items 3 (15.8) (82.3) Operating profit from continuing operations Discontinued operations Exceptional items Profit on ordinary activities Net interest charge 2 (80.4) (84.1) Exceptional finance charge 3 (2.9) (8.0) Profit on ordinary activities before taxation Taxation on profit on ordinary activities 4 (31.8) (14.6) Profit on ordinary activities after taxation Minority interests (including non-equity minority interests) 22 (76.7) (60.5) Profit on ordinary activities after taxation and minority interests Dividends paid 8 (22.2) (20.2) Dividends proposed 8 (44.7) (38.0) Retained profit/(loss) for the Group and its share of joint ventures and associates 13.7 (11.3) Earnings per share c 6.81c Fully diluted earnings per share c 6.81c Fully diluted earnings per share before exceptional items and amortisation c 12.63c The movements in the Group s Reserves are shown in note 20 to these financial statements. On behalf of the Board Sir Anthony O Reilly Donal J Buggy

53 51 Statement of Retained Profits Audited Audited notes (Inc. mastheads) (Inc. mastheads) m m m m Retained profit at beginning of year Profit on ordinary activities after taxation and minority interests Dividends paid and payable (66.9) (58.2) (66.9) (58.2) Exchange rate adjustments Movement in treasury shares Retained profit at end of year Statement of Total Recognised Gains and Losses Audited Audited notes (Inc. mastheads) (Inc. mastheads) m m m m Profit on ordinary activities after taxation and minority interests Currency translation differences on foreign currency net investments (28.0) 16.0 (27.9) Revaluation surplus Profit on sale of treasury shares Total recognised gains relating to the year On behalf of the Board Sir Anthony O Reilly Donal J Buggy

54 52 Reconciliation of Movement in Equity Shareholders Funds Audited Audited notes (Inc. mastheads) (Inc. mastheads) m m m m Profit on ordinary activities after taxation and minority interests Dividends paid 8 (22.2) (20.2) (22.2) (20.2) Dividends proposed 8 (44.7) (38.0) (44.7) (38.0) 13.7 (11.3) 13.7 (11.3) New share capital subscribed (including share premium) Currency translation differences on foreign currency net investments (28.0) 16.0 (27.9) Revaluation surplus Disposal of UK regional mastheads (28.2) Movement in treasury shares Net movement in equity shareholders funds Opening equity shareholders funds Closing equity shareholders funds , On behalf of the Board Sir Anthony O Reilly Donal J Buggy

55 53 Group Balance Sheet Fixed Assets Audited Audited 31 December 31 December 31 December 31 December notes (Inc. mastheads) (Inc. mastheads) m m m m Intangible assets 10 1, , , ,346.2 Tangible assets Financial assets Investment in joint ventures Share of gross assets Share of gross liabilities (8.1) (7.0) (8.1) (7.0) Investment in associates Other investments Current Assets , , , ,793.1 Stocks Debtors (short and medium term) Cash at bank and in hand Creditors amounts falling due within one year 15 (369.5) (306.5) (369.5) (306.5) Net Current Assets Total Assets Less Current Liabilities 2, , , ,007.3 Creditors amounts falling due after more than one year 16 1, , , ,286.6 Provisions for Liabilities and Charges , , , ,359.1 Capital and Reserves Called-up share capital Capital conversion reserve fund Share premium account Revaluation reserve 20 (73.5) (73.7) 1, Other reserves 20 (240.6) (241.9) (240.6) (241.9) Profit and loss account Equity Shareholders Funds , Minority Interests Equity minority interests Non-equity minority interests , , , ,007.3 On behalf of the Board Sir Anthony O Reilly Donal J Buggy

56 54 Company Balance Sheet Fixed Assets 31 December 31 December notes m m Financial assets Current Assets Debtors Cash at bank and in hand Creditors amounts falling due within one year 15 (572.8) (549.1) Net Current Liabilities (67.5) (113.2) Net Assets Capital and Reserves Called-up share capital Capital conversion reserve fund Share premium account Other reserves Profit and loss account Equity Interests On behalf of the Board Sir Anthony O Reilly Donal J Buggy

57 55 Group Cash Flow Statement Year ended Year ended 31 December December 2003 notes m m Net cash inflow from operating activities (before restructuring payments) Restructuring payments 23 (36.8) (19.1) Net cash inflow from operating activities Dividends received from joint ventures Returns on investments and servicing of finance 24 (129.9) (134.2) Taxation 24 (50.2) (37.2) Capital expenditure and financial investment 24 (77.8) 11.6 Acquisitions and disposals Equity dividends paid (51.2) (40.8) Cash (outflow)/inflow before management of liquid resources and financing (13.4) Management of liquid resources Financing 24 (52.3) (14.9) (Decrease)/increase in cash in the year 25 (65.7) On behalf of the Board Sir Anthony O Reilly Donal J Buggy

58 56 Notes to the Financial Statements 1. Group Financial Statements The audited financial statements of the holding Company and its subsidiary undertakings, for the year to 31 December 2004, are incorporated in the Group financial statements. The Group s share of profits/(losses) of joint ventures and material associates is based on their audited financial statements for the year/period to the end of December In 2004, the Group has continued to apply the transitional arrangements in relation to the implementation of Financial Reporting Standard No. 17 on Retirement Benefits and, accordingly, the disclosures, as required by this standard are set out in note 33 to the financial statements. The comparative notes to the financial statements have been restated for consistency of classifications adopted in 2004.

59 57 Notes to the Financial Statements (continued) 2. Profit on Ordinary Activities Before Taxation Continuing Continuing Discontinued Operations Operations Operations Total m m m m Turnover: Group and share of joint ventures & associates 1, , ,470.7 Less: share of joint ventures turnover (22.4) (17.3) (17.3) share of associates turnover (79.4) (65.2) (65.2) Group turnover 1, , ,388.2 Cost of sales (825.6) (740.9) (12.6) (753.5) Gross profit Distribution costs (101.6) (94.6) (1.9) (96.5) Administration costs (146.4) (139.5) (3.5) (143.0) Other operating expenses (including exceptionals) (221.5) (237.4) (0.7) (238.1) Group operating profit Share of operating profit/(loss) in: Joint ventures Associates 3.8 (3.0) (3.0) 7.6 (0.7) (0.7) Operating profit from operations Exceptional items (note 3) Profit on ordinary activities Interest receivable and similar income: Group Joint ventures Associates Interest payable and similar charges: Group (98.6) (98.5) Joint ventures (0.2) (1.4) Associates (1.6) (1.4) (100.4) (101.3) Net interest charge (80.4) (84.1) Exceptional finance charge (2.9) (8.0) Profit on ordinary activities before taxation

60 58 Notes to the Financial Statements (continued) 2. Profit on Ordinary Activities Before Taxation (continued) m m Group interest charges (including finance lease charges) were in respect of: Borrowings wholly repayable within five years Borrowings not wholly repayable within five years Group finance lease charges included above amounted to Profit on ordinary activities before taxation has been arrived at after charging/(crediting): Depreciation Amortisation of goodwill Group Joint ventures Associates Amortisation of mastheads, radio licences, transit and electronic systems and brands Group Amortisation of product development expenditure Group Operating lease rentals Plant & equipment Other assets Auditors remuneration Audit services PricewaterhouseCoopers Other than PricewaterhouseCoopers Audit related services PricewaterhouseCoopers Non-audit services PricewaterhouseCoopers Income from listed and unlisted investments (0.1) (0.4)

61 59 Notes to the Financial Statements (continued) 3. Exceptional Items m m Included in profit on ordinary activities before taxation are the following: Continuing operations Restructuring charges (56.0) Exceptional start-up and product development costs (13.2) (16.6) Other rationalisation charges and asset write-downs (2.6) (9.7) (15.8) (82.3) Gain on sale of assets of UK regional newspapers 51.7 Gain on sale of tangible fixed assets 16.4 Gain on sale of investment in Lusomundo Media 3.7 Write-down of investment in Chorus Communications (9.9) Other exceptional gains/(charges) 2.5 (4.2) Exceptional finance charge (2004: redemption of sterling bond) (2.9) (8.0) Total exceptional items (16.2) (32.6) Tax credit on exceptional items Minority interest share of exceptional items 0.5 (0.2) Exceptional items net of taxation and minority interests (note 9) (14.8) (29.2)

62 60 Notes to the Financial Statements (continued) 4. Taxation Based on profit on ordinary activities for the year: m m Irish corporation tax (primarily 10%) South African corporation tax (primarily 30%) Australasian corporation tax (primarily 30%/33%) Deferred tax (18.7) (19.5) Share of tax of: Joint ventures (primarily 30%) Associates (primarily 30%) Under provision in previous years: Corporation tax (primarily overseas tax) Corporation tax Parent and subsidiary undertakings Joint ventures Associates Deferred tax Parent and subsidiary undertakings (Origination and reversal of timing differences) (18.7) (19.5) The Irish corporation tax charge is reduced by 1.0m (2003: 0.4m) due to manufacturing relief. The tax assessed for the year is different from the standard rate of corporation tax in Ireland of 12.5% (2003: 12.5%). The differences are explained below m m Profit on ordinary activities before taxation Profit on ordinary activities multiplied by standard rate of corporation tax in Ireland of 12.5% (2003: 12.5%) Effects of: Income subject to higher rate of tax than Irish statutory rate Exceptional items with no tax effect Income subject to lower rate of tax than Irish statutory rate (2.1) (1.7) Expenditure not deductible for tax purposes Adjustments to tax in respect of previous years Timing differences between capital allowances and depreciation (1.5) 0.8 Other timing differences

63 61 Notes to the Financial Statements (continued) 5. Employees The average number of persons employed by the Group during the year was as follows: Printing, publishing, distribution and commercial printing 8,778 9,386 Radio 1,199 1,137 Outdoor advertising ,479 11, m m Staff costs are comprised of: Wages and salaries Social welfare costs Pension costs

64 62 Notes to the Financial Statements (continued) 6. Segmental Report The Group operates mainly in Ireland, the United Kingdom, South Africa and Australasia. The following is an analysis of the Group s results by geographical market. (A) By Geographical Segments Turnover (By origin): Group and share of joint ventures and associates 1, ,470.7 Less: Share of joint ventures turnover (22.4) (17.3) Share of associates turnover (79.4) (65.2) Group turnover 1, ,388.2 Turnover Operating Profit Net Assets m m m m m m Ireland United Kingdom continuing operations discontinued operations South Africa Australasia , , , , , ,051.9 Exceptional items* (14.0) (78.3) Group share of joint ventures Group share of associates (3.0) Common costs (13.1) (12.3) Unallocated net liabilities (1,165.6) (1,177.9) Exceptional items (note 3) Net interest charge (80.4) (84.1) Exceptional finance charge (note 3) (2.9) (8.0) Group profit on ordinary activities before taxation and minority interests Total net assets 1, *The exceptional items have not been split by geographical region in order to protect the Group s commercial position. Turnover by origin has been shown above and does not differ materially from turnover by destination. Turnover significantly relates to external customers. The minority interest share of operating profit for the financial year is 101.2m (2003: 77.3m) and the minority interest share of total net assets is 746.0m (2003: 715.1m).

65 63 Notes to the Financial Statements (continued) 6. Segmental Report (continued) Unallocated net liabilities consist mainly of the Group s interest bearing liabilities net of such assets (including bank loans and overdrafts, net of investments and cash at bank and in hand). Unallocated net liabilities also include liabilities, net of assets, of non-operating subsidiary undertakings. (B) By Class of Business The Group has three main classes of business: Printing, publishing and distribution of newspapers and magazines and commercial printing Radio Outdoor advertising The following is an analysis of the Group s results by class of business. Turnover: Group and share of joint ventures and associates 1, ,470.7 Less: Share of joint ventures turnover (22.4) (17.3) Share of associates turnover (79.4) (65.2) Group turnover 1, ,388.2 Turnover Operating Profit Net Assets m m m m m m Printing, publishing, distribution and commercial printing continuing operations 1, , , ,616.7 discontinued operations Radio Outdoor advertising , , , ,051.9 Exceptional items* (14.0) (78.3) Group share of joint ventures Group share of associates (3.0) Common costs (13.1) (12.3) Unallocated net liabilities (1,165.6) (1,177.9) Exceptional items (note 3) Net interest charge (80.4) (84.1) Exceptional finance charge (note 3) (2.9) (8.0) Group profit on ordinary activities before taxation and minority interests Total net assets 1, *The exceptional items have not been split by class of business in order to protect the Group s commercial position. The minority interest share of operating profit for the financial year is 101.2m (2003: 77.3m) and the minority interest share of total net assets is 746.0m (2003: 715.1m).

66 64 Notes to the Financial Statements (continued) 6. Segmental Report (continued) Unallocated net liabilities consist mainly of the Group s interest bearing liabilities net of such assets (including bank loans and overdrafts, net of investments and cash at bank and in hand). Unallocated net liabilities also include liabilities, net of assets, of non-operating subsidiary undertakings. 7. Profit Dealt with in the Holding Company Profit of 100.4m (2003: 36.9m) has been dealt with in the financial statements of which as permitted by Section 3(2) of the Companies (Amendment) Act, 1986 are not presented in these financial statements. 8. Dividends m m Dividends on equity shares: Paid: Interim ordinary dividend of 0.03 per share on 740,494,551 shares (2003: per share on 734,815,200 shares) Cash Issued as scrip Proposed: Final ordinary dividend of 0.06 per share on 744,261,724 shares (2003: per share on 737,785,086 shares) * Total dividends on equity shares The proposed final dividend represents the amount to be paid either by way of cash or new ordinary shares, at the election of shareholders, under the scheme for the issue of ordinary shares in lieu of dividends (scrip dividends). *The portion of the 2003 final dividend which was paid by way of scrip dividend amounted to 5.1m.

67 65 Notes to the Financial Statements (continued) 9. Earnings Per Share m m Profit attributable to Exceptional items net of taxation and minority interests (note 3) Amortisation of mastheads/goodwill/development expenditure Fully diluted profits before exceptional items and amortisation Weighted average number of shares in issue during the year 739,713, ,208,464 Effect of: Conversion of options 3,972,264 1,320,360 Fully diluted number of shares 743,685, ,528,824 Earnings per share 10.90c 6.81c* Fully diluted earnings per share 10.84c 6.81c* Fully diluted earnings per share before exceptional items and amortisation 14.15c 12.63c Earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. For fully diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive options over ordinary shares. The cumulative exchangeable preference shares were not dilutive in either 2004 or Fully diluted earnings per share before exceptional items and amortisation is presented in order to give a better indication of the underlying performance of the Group. *Earnings per share and fully diluted earnings per share in 2003 are identical because the exercise of share options was not dilutive on the result from continuing operations.

68 66 Notes to the Financial Statements (continued) 10. Intangible Assets Group Mastheads, Radio Licences, Transit Product and Electronic Development Systems and Brands Goodwill Expenditure Total m m m m Cost At 31 December , ,725.3 Additions Exchange movements 12.9 (5.3) (0.3) 7.3 At 31 December , ,750.4 Amortisation At 31 December Charge for year Exchange movements (0.2) (1.0) (0.1) (1.3) At 31 December Net book amount At 31 December , ,662.4 At 31 December , * 9.0 1,676.8 *Net of negative goodwill of 10.9m (2003: 11.3m). The Directors are satisfied that, in spite of the trading losses incurred by The Independent and The Independent on Sunday titles in the UK, the carrying value of these mastheads is fairly stated in the financial statements as at 31 December Included in Mastheads, Radio Licences, Transit and Electronic Systems and Brands is 272.2m (2003: 267.2m) in respect of leased assets.

69 67 Notes to the Financial Statements (continued) 11. Tangible Assets Group Plant, Land Equipment & Buildings & Other Vehicles Total m m m m Cost or valuation At 31 December 2003 Valuation Cost Exchange movements Additions Reclassification 9.4 (9.4) Disposals (4.0) (11.1) (1.4) (16.5) At 31 December Accumulated depreciation At 31 December 2003 (17.3) (243.7) (5.0) (266.0) Exchange movements (0.4) (3.5) 0.2 (3.7) Charge for year (2.9) (37.3) (1.2) (41.4) Reclassification (1.9) 1.9 Disposals At 31 December 2004 (21.4) (273.2) (4.7) (299.3) Net book amount At 31 December At 31 December 2004 Valuation Cost Accumulated depreciation (21.4) (273.2) (4.7) (299.3) (i) Certain of the Group s premises were valued by Jones Lang LaSalle, Chartered Surveyors, Dublin, as at 30 November 1981 at open market value on an existing use basis. Land & buildings would have been included on an unmodified historical cost basis as follows: Group m m Cost Accumulated depreciation (21.0) (17.0) The Group adopted Financial Reporting Standard No. 15 Tangible Fixed Assets in 2000 and has followed the transitional provisions to retain the book amount of land and buildings, certain of which were last revalued in Accordingly, the Group no longer adopts a policy of revaluation.

70 68 Notes to the Financial Statements (continued) 11. Tangible Assets (continued) (ii) Included in tangible assets are amounts in respect of land, vehicles, buildings, computer equipment and plant and machinery leased by Group companies as follows: m m Cost Accumulated depreciation (4.9) (4.5) Net book amount Depreciation for year (iii) The estimated useful lives of tangible assets by reference to which depreciation is calculated are as follows: Leasehold land Buildings Plant, equipment & other Vehicles 50 years years 3 25 years 4 6 years (iv) Finance costs of 0.9m (2003: Nil) were capitalised within tangible assets during the year.

71 69 Notes to the Financial Statements (continued) 12. Financial Assets Group Joint Ventures & Associates Trade Investments Share of Net Assets/ Liabilities Premium on (excluding Acquisition Premium on of Joint Acquisition of Listed/ Unlisted/ Ventures and Joint Ventures Quoted Unquoted Associates and Associates)* Loans Shares Shares Total m m m m m m Cost At 31 December Exchange movements (0.1) (0.3) 0.6 Additions (net) Share of increase in net assets** Dividends (1.2) (1.2) Transfer to debtors (3.3) (3.3) Reclassification (1.9) 6.7 (4.8) Amortisation (3.2) (3.2) At 31 December Provision for diminution in value At 31 December 2003 and at 31 December 2004 (5.2) (0.3) (26.3) (31.8) Net book amount At 31 December At 31 December * Share of net assets/liabilities (excluding premium on acquisition of joint ventures and associates) includes post acquisition realised losses of 7.7m (2003: 23.2m) and post acquisition unrealised reserves of 24.6m (2003: 24.6m). ** Share of increase in net assets comprises share of profits/losses after taxation of joint ventures and associates, net of minority interests.

72 70 Notes to the Financial Statements (continued) 12. Financial Assets (continued) Market Values The carrying values and market values of shareholding interests in joint ventures and associates and investments held by the Group which are Stock Exchange quoted at the balance sheet date are as follows: Group Joint Ventures & Associates Trade Investments m m m m Carrying value Market value Company Subsidiary Undertakings Unlisted/ Unquoted Shares m Cost At 31 December Disposals (1.0) At 31 December Stocks Group m m Newsprint Work in progress Consumable stores Finished goods In the opinion of the Directors, the replacement cost of stock does not differ significantly from the amounts shown above.

73 71 Notes to the Financial Statements (continued) 14. Debtors m m Group Due within one year Trade debtors Trade balances owed by joint ventures Trade balances owed by associates Prepayments and accrued income Value added tax recoverable Tax recoverable Due after more than one year Loans to employees Deferred taxation (note 17) Other Company Due within one year Loans owed by subsidiary undertakings Creditors amounts falling due within one year m m Group Bank advances (note 18) 44.7 Trade creditors Trade balances owed to joint ventures Trade balances owed to associates Creditors for taxation and social welfare Accrued liabilities Dividends (note 8) Capital lease liabilities (note 18) Creditors for taxation and social welfare included above are as follows: Income tax deducted under PAYE Other income tax deducted at source Pay related social insurance Value added tax payable Corporation tax Company Loans owed to subsidiary undertakings Creditors for taxation and social welfare Accrued liabilities Dividends (note 8) Creditors for taxation and social welfare included above are as follows: Income tax deducted under PAYE

74 72 Notes to the Financial Statements (continued) 16. Creditors amounts falling due after more than one year Group m m Bank advances (note 18) Capital lease liabilities (note 18) Convertible notes* Other , ,286.6 *Convertible notes represent A$250m 7.25% convertible unsecured notes issued by APN News & Media Limited (APN). The notes are convertible into ordinary shares of APN at the option of the noteholder on a number of pre-determined dates between 31 October 2003 and 31 October All notes that remain outstanding at 31 October 2008 will be redeemed on that date. The number of ordinary shares to be issued for each convertible note will be one APN ordinary share. 17. Provisions for Liabilities and Charges Group Deferred Restructuring Other Taxation Provision Provisions Total m m m m At 31 December Exchange movements Profit and loss charge Utilised during year (39.0) (11.4) (50.4) At 31 December Other provisions primarily include provision for holiday entitlements and libel. More detailed analysis on provisions is not included in order to protect the Group s commercial position. (i) Analysis of Deferred Taxation Deferred Deferred Taxation Taxation Liability included Asset in Provisions included for Liabilities in Debtors and Charges Total m m m At 31 December (2.9) 42.8 Exchange movements (0.6) (0.6) Profit and loss credit/(charge) (note 4) 19.3 (0.6) 18.7 At 31 December * (3.5) 60.9 *note 14 A portion of the deferred tax asset relates to tax losses carried forward in the United Kingdom, as they are expected to be utilised in the short term. The Group has further tax losses carried forward in respect of which it has not recognised a deferred tax asset.

75 73 Notes to the Financial Statements (continued) 17. Provisions for Liabilities and Charges (continued) (ii) Analysis of Closing Deferred Taxation Balance m m Accelerated capital allowances (20.2) (18.3) Tax losses carried forward Other timing differences Creditors Bank Advances and Capital Lease Liabilities Bank Loans Capital Lease Bank Loans Capital Lease & Overdrafts Liabilities & Overdrafts Liabilities Group m m m m Repayable as follows: Between one and two years Between two and five years More than five years Total due after one year Due within one year or on demand Total borrowings Split of total borrowings between: Secured Unsecured Total borrowings Split of total borrowings between: Amounts due other than by installments after more than five years Amounts due by installments which in part fall due after more than five years Amounts wholly repayable within five years Total borrowings The following are included in Bank Loans & Overdrafts: 42.9m (Stg 30.3m) representing 9.25% fixed rate bonds repayable in June 2005; 125.0m representing 8.0% subordinated fixed rate bonds repayable in December 2008; 200.0m representing 5.75% fixed rate bonds repayable in May 2009; 370.0m under a 480.0m multicurrency bank facility repayable up to December 2009; and 222.5m (A$389.2m) representing syndicated bank loans repayable up to November Capital lease liabilities include the liability relating to the semi-annual royalty payments on the Wilson & Horton masthead licencing agreement. The term of the masthead licencing agreement is 7 years, ending in November 2008, with a weighted average coupon rate of 7.057%. The capital lease liabilities, other than those relating to the masthead licencing agreement, are secured over the related fixed assets.

76 74 Notes to the Financial Statements (continued) 18. Creditors Bank Advances and Capital Lease Liabilities (continued) Undrawn Facilities The Group has various borrowing facilities available to it. The undrawn facilities available to it at the year-end in respect of which all conditions precedent have been met at that date were as follows: m m Expiring in less than one year Expiring in more than one but less than two years 5.0 Expiring in more than two years Share Capital Authorised Shares Allotted and Fully Paid Shares Number m Number m Ordinary Shares of 0.30 each At 31 December ,000,000, ,785, Ordinary Shares of 0.30 each At 31 December ,000,000, ,261, During the year, 4,695,294 Ordinary Shares were issued in lieu of dividend payments to those shareholders who chose this option. The balance of the shares issued during the year related to the exercise of share options. Issued Share Capital Conversion Capital Share Premium Reserve Fund Total m m m m m m m m At beginning of year Share issues Profit on sale of treasury shares Movement during year At end of year

77 75 Notes to the Financial Statements (continued) 19. Share Capital (continued) There are options over the Ordinary Shares of 0.30 of as follows: No. of options Exercise price per share Exercisable up to (a) 492, September 2005 (b) 1,296, December 2005 (c) 726, March 2006 (d) 2,983, July 2006 (e) 1,257, July 2006 (f) 680, December 2006 (g) 1,676, June 2007 (h) 2,951, December 2007 (i) 399, June 2008 (j) 554, October 2008 (k) 362, March 2009 (l) 5,559, September 2009 (m) 593, September 2010 (n) 2,904, December 2010 (o) 4,921, November 2011 (p) 55, May 2012 (q) 27, May 2012 (r) 55, June 2012 (s) 2,860, December 2013 (t) 100, June 2014 (u) 60, July 2014 (v) 50, November 2014 (w) 9,000, December 2014 Further details of the share option scheme are set out on page 40 of the Report of the Directors. 20. Reserves Group Share Capital Profit Premium Revaluation Conversion Other and Loss Account Reserve Reserve Fund Reserves Account Total m m m m m m At 31 December (73.7) 4.5 (241.9) Issue of new shares (note 19) Exchange rate adjustments (note 21) Profit for year Dividends paid and payable (note 8) (66.9) (66.9) At 31 December (73.5) 4.5 (240.6) Company At 31 December Issue of new shares (note 19) Profit for year Dividends paid and payable (66.9) (66.9) Transfer to capital reserve 24.6 (24.6) At 31 December The Revaluation Reserve represents a net short term unrealised revaluation deficit. Other Reserves of the Group represent cumulative unrealised exchange differences.

78 76 Notes to the Financial Statements (continued) 21. Exchange Rate Adjustments m m Currency translation differences on foreign currency net investments 6.3 (28.0) Currency losses of 0.3m (2003: gains of 8.5m) relating to foreign currency borrowings to finance investments overseas have been included within the currency translation movement taken to reserves. Net exchange gains on short term monetary transactions of 2.4m (2003: losses of 3.7m) have been dealt with in the profit and loss account during the year. 22. Minority Interests in Subsidiary Undertakings Equity Non-Equity Total m m m m m m At beginning of year Exchange and other movements (1.1) 19.6 (2.1) 8.9 (3.2) 28.5 Share of profits after taxation Dividends and other payments (56.4) (33.4) (7.3) (14.8) (63.7) (48.2) Acquisitions (3.2) (3.2) New issues/redemptions (65.8) Conversion of non-equity interest to equity interest 64.2 (64.2) At end of year Non-equity minority interests at 31 December 2004 comprise the following: Cumulative Exchangeable Preference Shares (CEPS) issued by News & Media NZ Limited (NM NZ) in May The rights of the NM NZ CEPS are summarised below: The NM NZ CEPS are entitled to a fixed cumulative annual preferential dividend of 8.75% per annum. The shares carry the right to receive notice of, attend, speak but with no right to vote (other than in the event that there has been a default in the payment of a dividend or in other specific situations) at general meetings of NM NZ. At the election of the holders of NM NZ CEPS, the CEPS may be exchanged into ordinary shares of (INM) on 30 November 2007, at the rate of one ordinary share of INM (subject to any adjustment in accordance with the terms of the issue) for each NM NZ CEPS held ( the exchangeable consideration ). As an alternative to the exchangeable consideration, holders of NM NZ CEPS may elect to be released in cash by NM NZ (as long as INM is then legally able to do so and INM and all its subsidiaries have sufficient distributable profits to cover such payments or INM raises additional funds through a fresh issue of shares) at NZ$4 for each share in respect of which they have so elected. On entry of NM NZ into liquidation, whether voluntary or otherwise, each holder will be entitled to receive from NM NZ NZ$4 for each CEPS held (as long as NM NZ is then legally able to make such payments).

79 77 Notes to the Financial Statements (continued) 23. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities m m Operating profit from operations (note 2) Non-cash operating exceptional items 43.6 Operating profit (net of non-cash exceptional items) Share of profit of joint ventures (3.8) (2.3) Share of (profit)/loss of associates (3.8) 3.0 Depreciation and amortisation charges Decrease in stocks (Increase)/decrease in short term and medium term debtors (6.3) 3.7 Increase in creditors Net movement in provisions (excluding restructuring payments) Effects of foreign exchange rate changes (6.8) (3.3) Net cash inflow from operating activities (before restructuring payments) Restructuring payments (36.8) (19.1) Net cash inflow from operating activities

80 78 Notes to the Financial Statements (continued) 24. Analysis of Cash Flows Returns on investments and servicing of finance m m Interest received Group Interest paid Group (97.5) (96.5) Dividends and other payments to equity minority shareholders (40.3) (23.4) Dividends and other payments to non-equity minority shareholders (7.3) (14.8) Debt issue costs (1.7) (13.9) Net cash outflow from returns on investments and servicing of finance (129.9) (134.2) Taxation Taxation paid (50.2) (37.2) Net cash outflow from taxation (50.2) (37.2) Capital expenditure and financial investment Purchase of tangible fixed assets and titles (64.4) (22.1) Sale of tangible fixed assets, titles and investments Purchase of investments/advances to investees (0.6) (11.0) Increase in investment in joint ventures and associates (0.2) (2.3) Advances to/repaid by joint ventures and associates (9.3) (1.0) Other capital expenditure (10.4) (12.1) Net cash (outflow)/inflow from capital expenditure and financial investment (77.8) 11.6 Acquisitions and disposals Purchase of equity minority interests (3.2) Disposal of assets and business of subsidiary undertaking 77.0 Net cash inflow from acquisitions and disposals 73.8 Financing Issue of shares Share issue costs (4.8) Issue of equity minority interests Sale of treasury shares 19.5 Issue of non-equity minority interests 66.9 Redemption of non-equity minority interests (131.8) Receipt of long term loans Receipt of short term loans Repayment of long term loans (2.4) (510.2) Repayment of short term loans (61.5) (537.7) Capital element of finance lease rental payments (60.5) (33.7) Net cash outflow from financing (52.3) (14.9)

81 79 Notes to the Financial Statements (continued) 25. Analysis of Changes in Net Debt and Convertible Notes At 31 At 31 December Foreign December 2003 Cashflow Exchange Other* 2004 m m m m m Cash at bank and in hand (65.7) Loans due within one year 61.5 (106.2) (44.7) Loans due after one year (959.0) (62.6) (911.5) Finance leases (208.1) 60.5 (5.8) (153.4) 59.4 (978.2) (6.3) 2.0 (3.3) (985.8) Convertible notes (146.0) 4.3 (0.2) (141.9) (1,124.2) (6.3) 6.3 (3.5) (1,127.7) *Other primarily reflects the reclassification of loans due after one year to loans due within one year and debt issue costs. 26. Reconciliation of Net Cashflow to Movements in Net Debt and Convertible Notes m m (Decrease)/increase in cash in the year (65.7) Cash outflow from decrease in debt and lease financing (Increase)/reduction in net debt and convertible notes resulting from cash flows (6.3) Debt issue costs (net) (3.5) (4.6) Exchange movements 6.3 (32.1) (Increase)/reduction in net debt and convertible notes in the year (3.5) Net debt and convertible notes at the beginning of the year (1,124.2) (1,347.3) Net debt and convertible notes at the end of the year (1,127.7) (1,124.2) 27. Capital Commitments m m Group and share of joint ventures and associates Contracted but not provided for: Group Associates 7.8 Authorised by Directors but not contracted for: Group Associates 3.6 At end of year

82 80 Notes to the Financial Statements (continued) 28. Operating Leases At 31 December 2004, the Group is committed to making payments under non-cancellable operating leases in the forthcoming financial year of 17.3m (2003: 18.1m). These leases are due to expire in the following periods after 31 December 2004: Land & Land & Other Other Buildings Buildings Assets Assets Total Total m m m m m m Within one year Between one and two years Between two and five years After five years There are also annual rental commitments of 50.6m (2003: 52.1m) arising in the outdoor operations of APN News & Media Limited. 29. Treasury Information Objectives, Policies and Strategies Treasury Management The Group s treasury operations are managed by the Group Finance Department within parameters defined formally by the Board. Group Treasury s activity is reported to the Audit Committee and the Board. Financial instruments, including derivatives, are permitted to be used to manage financial risk arising from the Group s operations. The main financial risks faced by the Group relate to credit, interest and foreign exchange translation. The Board agrees policies for managing these risks as summarised below. Credit Risk The Board establishes the policy which Group Treasury follows in managing credit risk. Exposures within certain limits are permitted only with banks or other institutions meeting required standards as assessed normally by reference to the major credit rating agencies. Deals are authorised only with banks with which dealing mandates have been agreed. Foreign Exchange Risk Foreign exchange transaction exposure in the Group is limited due to the fact that trading companies in the Group tend to have the majority of their revenue and expenses in their functional currency. Foreign currency translation exposure arises from the retranslation of overseas subsidiaries profit and loss accounts and balance sheets into Euro. The Group s policy in regard to translation exposure is to use foreign currency borrowings and/or forward foreign currency contracts to hedge the impact of exchange rate movements on the Group s profit and loss account and balance sheet, when the Board considers it economically viable to do so.

83 81 Notes to the Financial Statements (continued) 29. Treasury Information (continued) Interest Rate Risk Interest rate risk arising from the Group s borrowings is managed by the issue of debt in a balanced portfolio which minimises the interest rate cost by the issue of fixed rate debt when circumstances are favourable, and also by the use of interest rate swaps when the Board considers this to be economically viable. The year-end position is consistent with the Group s treasury policy. (a) Currency and interest rate exposure of financial liabilities Fixed Rate Financial Liabilities Weighted Floating Fixed Non-Interest Weighted Average Rate Rate Bearing Average Time For Financial Financial Financial Interest Which Rate Liabilities Liabilities Liabilities Total Rate is Fixed m m m m % Years At 31 December 2004 Currency Euro Stg Aus$ NZ$ Other Gross financial liabilities , At 31 December 2003 Currency Euro Stg Aus$ NZ$ Other Gross financial liabilities , Financial liabilities include the following: Bank loans Finance leases Bank overdrafts Deferred consideration Convertible notes Other long term creditors Interest on floating rate securities is based on national inter-bank rates in the relevant countries. Financial liabilities on which no interest is paid do not have predetermined dates of repayment.

84 82 Notes to the Financial Statements (continued) 29. Treasury Information (continued) (b) Currency and interest rate analysis of financial assets The financial assets of the Group are primarily represented by cash and other liquid funds which are placed on deposit at floating rates of interest. A currency analysis of the total cash balance is set out below: Currency m m Euro Stg Aus$ NZ$ SAR Other An analysis of the Group s other financial assets is not provided in order to protect the Group s commercial position. (c) Currency exposures The table below shows the Group s currency exposure, being those traded assets and liabilities (or non-structural exposures) that give rise to the net monetary gains and losses recognised in the profit and loss account. Such exposures comprise the monetary assets and liabilities of the Group that are not denominated in the functional currency of the unit involved. At 31 December 2004, these exposures were as follows: 2004 Net foreign currency monetary assets/(liabilities) Euro Stg NZ$ HK$ Other Total m m m m m m Functional currency of Group operations Aus$ (0.7) 13.6 Euro (2.3) (2.3) (2.3) (0.7) Net foreign currency monetary assets/(liabilities) Euro Stg NZ$ HK$ Other Total m m m m m m Functional currency of Group operations Aus$ Stg Euro (3.4) (3.4) 3.6 (3.4)

85 83 Notes to the Financial Statements (continued) 29. Treasury Information (continued) (d) Fair values of financial assets and financial liabilities The fair values of listed debt, convertible notes and quoted investments are measured using market values. The fair values of non-listed debt are measured by discounting cash flows at prevailing interest and exchange rates. The fair values of unquoted investments are measured using Directors valuations. The following is a comparison by category of book values and fair values of the Group s financial assets and financial liabilities as at the year-end. Non-derivatives Book Value Fair Value m m m m Assets Investments Cash and other liquid funds Loans to associates and joint ventures Liabilities Loans and leases (1,109.6) (1,167.1) (1,119.8) (1,167.3) Convertible notes (141.9) (146.0) (141.9) (146.0) Other (8.8) (8.1) (8.8) (8.1) Derivatives and other financial instruments held to manage currency and interest rate profile Interest rate swaps (2.2) 0.9 Forward foreign currency contracts (2.4) 1.5 (e) Unrecognised gains and losses on hedges The Group enters into forward foreign currency contracts and interest rate swap agreements to eliminate the exposure that arises from foreign exchange and interest rate fluctuations where economically viable. Changes in the fair values of instruments used as hedges are not recognised in the financial statements until the hedged position matures. An analysis of these unrecognised gains and losses is as follows: Total Net Gains/Losses m Unrecognised gains and losses on hedges at 31 December Gains and losses arising in previous years that were recognised in 2004 (4.4) Gains and losses arising before 31 December 2003 not recognised in 2004 (2.0) Gains and losses arising in 2004 that were not recognised in 2004 (2.6) Unrecognised gains and losses on hedges at 31 December 2004 (4.6) Of which: Gains and losses expected to be recognised in Gains and losses expected to be recognised in 2006 and later (5.0) (4.6) (f) The Group has availed of the exemption provided within Financial Reporting Standard No. 13 to exclude its short term debtors and creditors from the disclosures noted above.

86 84 Notes to the Financial Statements (continued) 30. Contingent Liabilities (i) Guarantees has guaranteed the bank advances and certain other obligations of subsidiary undertakings to a maximum of 878.8m (2003: 877.5m). and other Group companies have guaranteed certain other commercial obligations of joint ventures and associates. (ii) Litigation The Group, from time to time, is party to various legal proceedings. It is the opinion of the Directors that losses, if any, arising in connection with these matters will have no material adverse impact on the financial position of the Group. (iii) Other The Group continues to be engaged in a tax audit in New Zealand. The Group remains satisfied that it has complied with all relevant tax legislation. 31. Directors Remuneration Executive Directors Benefits Fees Salary Bonus in kind Pension Total Total Sir Anthony O Reilly ,317 1,226 DJ Buggy VC Crowley IG Fallon GK O Reilly , JJ Parkinson Total 151 3,091 1, ,494 5,317 Seconded Director BMA Hopkins ,475 1,072 Total ,475 1,072 Total for ,683 2, ,969 Total for ,581 1, ,389

87 85 Notes to the Financial Statements (continued) 31. Directors Remuneration (continued) Pensions Executive Directors (a) Benefits Under Defined Benefit Schemes The aggregate pension benefits attributable to existing executive Directors or executive Directors who have left service during the current financial year: Increase in Transfer value accrued pension of the increase in Total accrued Total accrued during the year accrued pension pension pension DJ Buggy VC Crowley GK O Reilly JJ Parkinson Total for Total for (b) Benefits Under Defined Contribution Scheme Pension contributions payable in respect of existing executive Directors and seconded Directors or Directors who have left service during the current financial year amounted to 228,000 (2003: 228,000). (c) Pensions payable to past Directors during the current financial year amounted to 7,000 (2003: 7,000). Non-Executive Directors Benefits Other Fees in kind remuneration Pension Total Total Dr. BJ Hillery LP Healy BC Bradlee 10 PM Cosgrove CU Daly JC Davy VA Ferguson DOF Gleeson HW Hamilton Senator MN Hayes Baroness M Jay Dr. IE Kenny JS McCarthy 10 B Mulroney F Murray AC O Reilly AJ O Reilly Jr BE Somers Total for ,137 Total for

88 86 Notes to the Financial Statements (continued) 31. Directors Remuneration (continued) DOF Gleeson, HW Hamilton and JJ Parkinson resigned from the Board on 28 June B Mulroney was appointed a non-executive Director on 28 June Pensions Non-Executive Directors Pensions payable to past Directors during the current financial year amounted to 30,000 (2003: 17,000). itouch plc itouch plc, an associate of the Group, paid the following remuneration to Directors of in 2004, which is additional to the Directors remuneration set out above. Fees: IG Fallon, Chairman BMA Hopkins, Director JJ Parkinson, Director (resigned 8 September 2003) 25 GK O Reilly, Director (appointed 8 September 2003) Further Information Total Directors remuneration (Group and itouch plc) for the year amounted to 8,305,000 (2003: 7,521,000). The Remuneration Committee, which is comprised solely of non-executive Directors of the Company, has determined the basis of the executive Directors remuneration and performance bonuses. Details of the Directors interests in share capital and share options are set out on pages 33 to 36 of the Report of the Directors and details of executive remuneration policy are set out on pages 40 and Related Party Transactions Transactions between the Group and its joint ventures and associates include both trade and loan transactions. Details of the Group s principal joint ventures and associates are provided in note 34 to the financial statements and balances due to/from joint ventures and associates are disclosed within notes 14 Debtors, 15 Creditors amounts falling due within one year and 12 Financial Assets. The value of goods and services bought from and sold to joint ventures and associates in the ordinary course of business was 28.4m (2003: 24.8m) and 30.9m (2003: 30.0m) respectively. Interest income from joint ventures and associates amounted to 0.4m (2003: 1.3m) during the year and provisions against amounts outstanding with joint ventures and associates amounted to 5.2m at 31 December 2004 (2003: 5.2m). The Group owns a 19.9% stake in PrimeLearning Group Limited, a company in which the Chief Executive, Sir Anthony O Reilly, has a beneficial interest. During the year, 0.4m (2003: 0.3m) was advanced by the Group to PrimeLearning Group Limited. The Group rented two properties from The Independent Newspapers (Ireland) Limited Contributory Pension Plan. The rents payable for the year were 0.6m (2003: 0.7m). The sale of one of the properties was completed during the year. As part of the sale agreement the Group surrendered the remaining term of its lease.

89 87 Notes to the Financial Statements (continued) 33. Pensions and Post-Retirement Obligations The Group operates a number of defined benefit and defined contribution pension schemes. Scheme assets are held in separate trustee administered funds. The total pension charge for the year amounted to 21.6m (2003: 18.8m), of which 12.2m (2003: 10.8m) was paid in respect of defined contribution schemes. The pension costs relating to the Group s defined benefit schemes are assessed in accordance with the advice of independent qualified actuaries. The projected unit credit method is used by all principal companies with the exception of two companies where the attained age method is used. The dates of the actuarial valuations ranged from July 2002 to July The assumptions which have the most significant effect on the results of the actuarial valuation are those relating to the rate of return on investments and the rate of increase in remuneration. It was assumed that the rate of return on investments would, on average, exceed annual remuneration increases by 2%. At the date of the most recent actuarial valuations, the market value of the Group s defined benefit schemes was 176.6m. After allowing for expected future increases in earnings and pension payments, the actuarial value of the schemes assets was sufficient to cover between 65% and 100% of the benefits that had accrued to the members of the various schemes. In line with the Group s accounting policy, actuarial surpluses/deficits are being spread over the remaining service lives of current employees. Where schemes are in deficit, the funding rate on those schemes will be increased in line with actuarial recommendations. In 2004, the Group has continued to apply the transitional arrangements in relation to the implementation of Financial Reporting Standard (FRS) No. 17 on Retirement Benefits and, accordingly, the disclosures, as required by this standard are set out below. The main assumptions used by the actuaries in calculating the net pension liability under FRS No. 17 are as follows: Rate of increase in salaries 3.7% 3.7% 3.6% Rate of increases in pensions in payment and deferred benefits 0.8% 0.9% 0.9% Discount rate on scheme liabilities 4.8% 5.3% 5.5% Inflation rate 2.3% 2.3% 2.3% The assets in the schemes and the expected rates of return were: Long-term Long-term Long-term rate of return rate of return rate of return expected at Value at expected at Value at expected at Value at 31 Dec Dec Dec Dec Dec Dec 2002 m m m Equities 7.4% % % Bonds 3.9% % % 27.3 Other 5.0% % % 23.6 Total market value of assets Present value of scheme liabilities (305.6) (265.0) (235.1) Deficit in the schemes (98.8) (79.6) (75.6) Related deferred tax asset Net pension liability (86.7) (69.6) (66.4)

90 88 Notes to the Financial Statements (continued) 33. Pensions and Post-Retirement Obligations (continued) If the above amounts had been recognised in the financial statements for the year ended 31 December 2004, the Group s net assets and profit and loss account reserve would be as follows: m m m Net assets excluding net pension liability Net pension liability (86.7) (69.6) (66.4) Net assets including net pension liability m m m Profit and loss reserve excluding net pension liability Net pension liability (86.7) (69.6) (66.4) Profit and loss reserve including net pension liability (14.3) The following amounts would have been recognised in the financial statements for the year ended 31 December 2004 under the requirements of FRS No. 17: (a) Analysis of the amount charged to operating profit is as follows: m m m Current service cost (10.3) (8.9) (7.4) Past service cost (0.1) (0.7) (10.4) (8.9) (8.1) (b) Analysis of the amount (charged)/credited to other finance income is as follows: m m m Interest on scheme liabilities (13.3) (12.3) (11.8) Expected return on scheme assets Net return (1.2) (1.9) 1.7 (c) Analysis of the movement in pension deficit during the year is as follows: m m m Deficit at beginning of year (79.6) (75.6) (16.6) Current service cost (10.3) (8.9) (7.4) Contributions Past service costs (0.1) (0.7) Other finance income (1.2) (1.9) 1.7 Settlements and curtailments 3.1 Exchange movements (1.8) Actuarial loss (22.2) (5.8) (62.9) Deficit at end of year (98.8) (79.6) (75.6)

91 89 Notes to the Financial Statements (continued) 33. Pensions and Post-Retirement Obligations (continued) (d) Analysis of the amount that would be recognised in the statement of total recognised gains and losses is as follows: m m m Actual return less expected return on scheme assets (49.2) Experience gains and losses (0.5) (4.0) (1.8) Changes in assumptions (26.7) (10.7) (11.9) Total actuarial loss (22.2) (5.8) (62.9) Difference between the expected and actual return on scheme assets: Amount 5.0m 8.9m ( 49.2m) Percentage of scheme assets 2% 5% (31%) Experience gains and losses on scheme liabilities: Amount ( 0.5m) ( 4.0m) ( 1.8m) Percentage of the present value of the scheme liabilities (0%) (2%) (1%) Total amount recognised in the statement of total recognised gains and losses ( 22.2m) ( 5.8m) ( 62.9m) Percentage of the present value of the scheme liabilities (7%) (2%) (27%) At the year-end, 2.0m (2003: 2.4m) was included in creditors in respect of pension liabilities and Nil (2003: 1.6m) was included in debtors in respect of pension prepayments. In general, actuarial valuations are not available for public inspection, however, the results of valuations are advised to members of the various schemes. At the balance sheet date, the Group had unfunded pension commitments of 0.5m (2003: 0.6m). Other Post-Retirement Obligations In 2004, the Group had post-retirement (healthcare) obligations in respect of certain current and former employees. The method of accounting for these obligations is similar to that used to account for pension obligations. The total amount charged in respect of these obligations during the year amounted to 3.1m (2003: 2.7m). Present value of scheme liabilities (included in creditors) 24.0m Details and the main assumptions used by the actuaries in relation to post-retirement (healthcare) obligations were as follows: Actuarial method Projected Unit Credit Method Actuarial date 31 December 2004 Discount rate 8.5% Medical cost inflation 6.0%

92 90 Notes to the Financial Statements (continued) 34. Group Companies Issued and Fully Paid Name Principal Activity Share Capital Holding Company Holding Company 744,261,724 ordinary shares of 0.30 each Subsidiary Undertakings (Wholly owned unless otherwise stated) Incorporated and operating principally in Ireland: Independent Newspapers (Ireland) Limited Newspaper Publishing 5,000,000 ordinary shares Talbot Street of 1.25 each Dublin 1 Independent Newspapers Marketing Limited Newspaper Publishing 100 ordinary shares Talbot Street of 1.25 each Dublin 1 Sunday Newspapers Limited Newspaper Publishing 80,002 ordinary shares of Newspaper House 1.25 each 18 Rathfarnham Road Dublin 6 Newspread Limited Newspaper and Magazine Distribution 3,600 ordinary shares 7 Goldenbridge Industrial Estate of 1.25 each Inchicore Dublin 8 Independent News & Media Finance (Ireland) plc Finance Company 40,000 ordinary shares 2023 Bianconi Avenue of 1 each Citywest Business Campus Naas Road Dublin 24 Incorporated and operating principally in the United Kingdom: Independent News and Media Limited Newspaper and Magazine Publishing 35,942,899,875 ordinary shares Independent House of Stg 0.01 each 191 Marsh Wall 415,200 deferred shares London E14 9RS of Stg 0.01 each Independent Newspapers (Finance) Plc Finance Company 50,000 ordinary shares Independent House of Stg 1 each 191 Marsh Wall London E14 9RS Incorporated and operating principally in South Africa: Independent Newspapers (Pty) Limited Newspaper Publishing 100 ordinary shares of 47 Sauer Street SAR1 each Johannesburg

93 91 Notes to the Financial Statements (continued) 34. Group Companies (continued) Issued and Fully Paid Name Principal Activity Share Capital Incorporated and operating principally in New Zealand: News & Media NZ Limited Investment Company 10,000,000 ordinary shares 46 Albert Street of NZ$1 each PO Box 32 56,249,884 cumulative Auckland exchangeable preference shares of NZ$4 each (0% interest) Incorporated and operating principally in Jersey: Independent News & Media (Finance) Limited Finance Company 10 ordinary shares 8 Church Street of 1 each St. Helier Jersey JE4 0SG Channel Islands Incorporated and operating principally in Australia: APN News & Media Limited Holding Company 482,490,599 ordinary shares Level 4 (Newspaper Publishing, of A$0.40 each 100 William Street Radio Broadcasting & (39.7% interest) Sydney NSW 2011 Outdoor Advertising) APN News & Media Limited (APN) is accounted for as a subsidiary undertaking because the Group Directors represent a majority of the Board of Directors of APN enabling the Group to exercise dominant influence. Associates Incorporated and operating principally in Ireland: Tribune Newspapers Plc Newspaper Publishing 2,884,064 ordinary shares 15 Lower Baggot Street of 1.25 each (29.99% interest) Dublin 2 70,519,027 4% redeemable preference shares of 0.32 each Incorporated and operating principally in the United Kingdom: itouch plc Mobile-commerce 406,747,594 ordinary shares Avalon House of Stg 0.01 each Scrutton Street (37.58% interest) London EC2A 4PF

94 92 Notes to the Financial Statements (continued) 34. Group Companies (continued) Issued and Fully Paid Name Principal Activity Share Capital Joint Ventures Incorporated and operating principally in Ireland: Independent Star Limited Newspaper Publishing 500 E ordinary shares Star House of 1.27 each (0% interest) 62a Terenure Road North 500 I ordinary shares Dublin 6W of 1.27 each 5,000 preference shares of 1.27 each Incorporated and operating principally in South Africa: Clear Channel Independent Outdoor Advertising 300 ordinary shares of (Pty) Limited SAR1 each (50% interest) 66 Peter Place Hurlingham Ext 5 Johannesburg The respective addresses are the companies registered offices. 35. Companies (Amendment) Act, 1986 Guarantees The Company has guaranteed the liabilities of its Irish registered subsidiary undertakings for the purpose of Section 17 of the Companies (Amendment) Act, 1986, as listed below, and as a result such subsidiaries have been exempted from the filing provisions of Section 7, Companies (Amendment) Act, Argus Newspapers Limited Independent Communications (Ireland) Limited Independent Communications (International) Limited Independent Communications Limited Independent Digital Limited Independent Directories Limited Independent Newspapers (Ireland) Limited Independent Newspapers Marketing Limited Independent Newspapers Property Limited Independent Printing Company Limited Independent Technologies Limited Internet Interaction Limited Newspread Limited Nutley Investments Limited Owendore Limited Sunday Newspapers Limited Terenure Printers Limited The Drogheda Independent Company Limited The Kerryman Limited The People Newspapers Limited 36. Approval of Financial Statements The Directors approved the financial statements on 25 April 2005.

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