Independent News & Media PLC

Transcription

1 1.0 Repositioned for Growth 2003 Preliminary Presentation 24 th March 2004 GLOBAL VISION LOCAL CONTENT

2 Introduction: GROUP DEVELOPMENT 1.1 FOCUS from active development to core operations in-fill acquisition capex upgrades core strategy recapitalisation innovation NPD corporate governance >market revenue growth Since 1992, Independent has invested over 1.6bn on strategic acquisitions and capital development rationalise asset base free cash-flow margin growth internal benchmarking cost efficiency enhance competitive position lower money cost PROGRESS new acquisition MANAGEMENT PRIORITIES: TIME HORIZON

3 Introduction: GUIDING PRINCIPLES 2004/5 1.2 Repositioned for Growth Restructured Balance Sheet Attack Legacy Operating Costs Drive Efficiencies Internal Benchmarking Build on Innovation/ new product development Target above-market revenue growth Produce patently superior products Vigorous marketing/ sales programmes whilst being the LOW cost operator

4 Introduction: GLOBAL DIVERSIFICATION 1.3 Proven Management Team Vincent Crowley CEO - Ireland Ivan Fallon CEO United Kingdom Sir Anthony O Reilly Executive Chairman Independent News & Media PLC is a leading international media group, operating in Australia, Ireland, New Zealand, South Africa and the United Kingdom, and holds a 39.7% stake in LSElisted, itouch plc. Brendan Hopkins CEO APN News & Media Tony Howard CEO South Africa Gavin O Reilly Chief Operating Officer Donal Buggy Chief Financial Officer

5 Introduction: GROUP OVERVIEW 1.4 ONE STOP MEDIA PLAY FOR NON-AMERICAN ENGLISH SPEAKING WORLD Radio 8.2% Interactive <1.0% Outdoor 7.5% MANAGING A GEOGRAPHICALLY DIVERSE PORTFOLIO OF MARKET- LEADING BRANDS Gross Assets of 3.4bn Turnover of 1.6bn Generating EBITDA of 292m Employing 11,500 worldwide Newspapers (165) Publishing 83.3% Turnover by Market Profit by Market South Africa 10% U.K. 7% Magazines Directories South Africa 12% U.K. 15% Ireland 30% New Media Distribution Printing Ireland 27% Australasia 53% Australasia 46%

6 Introduction: SHAREHOLDER INFORMATION 1.5 Share Price Performance (2003H2-4) Driving Shareholder Value Independent [ INWS ] is listed on the Dublin, London and New Zealand Stock Exchanges. Stock has appreciated by 93% in the past 12 months Current yield >3.5% Top-10 Shareholders & By Region (2003) Market Capitalisation ( 94 04) Market Cap has grown by compound 16% since ,750 1,500 1,250 O Reilly/ Board 28.1% Fidelity Investments 10.4% Bank of Ireland Asset Mgmt 7.8% Tweedy Browne 4.7% The Capital Group 4.7% Marathon Asset Mgmt 4.7% Barclays Global 2.9% KBC Asset Mgmt 2.5% Irish Life 2.1% AIM Fund Mgmt 1.9% 69.8% As per notifications at 15-Mar-04 USA 30% Europe 10% UK 14% O'Reilly/ Board 28% Ireland 18% 1, Market Capitalisation ( Millions) 2004

7 Introduction: STRATEGIC OBJECTIVES 1.6 Clear & Consistent Strategy To own and manage strong brand leadership positions, with a strong focus on our core competencies of publishing, radio and outdoor. To achieve consistent growth through geographical diversification and exposure to multi-economies, yielding an effective operating hedge. C.A.G.R. ( ) Turnover + 17% Operating Profit + 20% E.P.S. + 13% D.P.S. + 13% Main Markets: Australia, Ireland, New Zealand, South Africa and the United Kingdom with Northern and Southern Hemisphere operations tending to run counter-cyclically. No. 1 Publisher in Australasia, Ireland (North and South) and South Africa. No. 1 in Radio in Australasia. No. 1 in Outdoor in Australasia and South Africa. Margins have grown from 12.5% to 17.0% since the early 90s To focus on operating margins - with medium-term target of 20%+. To deliver double-digit EPS growth and enhanced Shareholder Returns '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

8 Introduction: TEN-YEAR TRACK RECORD 1.7 GROUP TURNOVER OPERATING CASHFLOW '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 OPERATING PROFITS (excl. Exceptionals) Clear Track Record '94 '95 '96 '97 '98 '99 '00 '01 '02 ' EARNINGS PER SHARE (excl. Exceptionals & Amortisation) '94 '95 '96 '97 '98 '99 '00 '01 '02 ' '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

9 FINANCIAL RESULTS

10 Financial : HIGHLIGHTS Focus on Efficient Financing Achieved EBIT & EPS consensus forecasts Recapitalisation completed in full ( 363 million) & target ( 315 million) exceeded Completed new club banking facility Issued subordinated bond & preference share Announced worldwide restructuring plan (to yield annualised savings of 18.9 million on a phased basis) Disposed of investment in Chorus DPS increased by 7.6%

11 Financial : GROUP P & L - SEGMENTAL 2.2 SUMMARY Turnover 1,388.2m Operating Profit 238.7m Operating Margin* 17.0% Independent News & Media PLC IRELAND UNITED KINGDOM SOUTH AFRICA AUSTRALASIA Turnover 379.2m 210.5m 159.5m 639.0m Op. Profit * 75.3m 18.2m 23.5m 130.7m Op. Margin * 19.9% 8.6% 14.7% 20.5% Operations Scope Market Positioning & Competitive Rankings No. 1 Newspaper Grp. National Newspapers. Regional Newspapers. No. 1 Distributor. No. 1 News Website. Commercial Printer. Directory Publisher. No. 1 Newspaper Grp in Northern Ireland. Leading Commercial Printer in Northern Ireland. Leading National publisher with The Independent & Independent on Sunday. Magazines (London). Internet & Mobile Data. No. 1 Newspaper Grp. Metro Newspapers. Magazines. No. 1 News Website. No. 1 Outdoor Advert. Commercial Publisher. Leading Community Newspaper Publisher. New Zealand No. 1 Newspaper Grp. National Newspapers. Regional Newspapers. Magazines & Directories. No. 1 Radio Operator. No. 1 News Website. Commercial Publisher. Australia No. 1 Regional Publisher. No. 2 Radio Operator. No. 1 Outdoor Advert. Growing Asian Outdoor. * Excluding share of results from Associates and Joint Ventures

12 Financial : CONSOLIDATED GROUP P & L / 2002 P & Ls Commentary Change millions millions % Group Turnover 1, , % EBITDA % Operating Profit * % Net Interest Charge (84.1) (94.2) -10.7% Profit Before Tax & Exceptionals % Net Exceptional Charges (32.6) (106.8) -69.5% Profit Before Tax % Taxation (14.6) (9.7) 50.5% Effective Tax Rate * 11.7% 7.5% Profit After Tax % Minority Interests (60.5) (54.0) 12.0% Net Profit/ (Loss) 46.9 (41.5) 213.0% Earnings per Share (EPS) ** % Dividend per Share (DPS) % Weighted Shares Outstanding (m) % * Before exceptional items ** Before exceptional items and amortisation UNDERLYING PERFORMANCE ( m) constant FX Change (%) Group Turnover 1, , % Operating Profit* % Total turnover up 5.9% (up 7.6% in constant FX). Operating Profit up 6.9% (8.2% in constant FX). Interest charge down 10.7%, following recapitalisation. Exceptional items detailed on next slide. Effective tax rate up to 11.7%, mainly due to increase in APN s rate. Minority interests up 12.0%, following APN share placement and issue of new NZ CEPs. EPS up 10.8% - in line with market forecast.

13 Financial : EXCEPTIONALS 2.4 Exceptional Items Rationalisation Costs (44.8) m m Fixed Asset Writedown (non-cash) (6.0) Worldwide Restructuring - announced 18-Dec-03 (50.8) 0.0 APN Outdoor Restructuring * (5.2) 0.0 itouch: share of losses & exceptionals ** (7.7) Product Development Initiatives (8.9) Start-Up/ Product Development Costs (16.6) (15.2) Other Exceptionals/ Rationalisation (9.7) (10.7) Gain on sale of Assets (UK Regionals, Lusomondo etc ) Writedown of Investments (Chorus etc ) (14.1) (80.9) Exceptional Finance Charge *** (8.0) 0.0 NET EXCEPTIONAL CHARGE Before Tax (32.6) (106.8) NOTES: * As per APN News & Media Preliminary 2003 announcement, 02-Mar-04; ** As per itouch Preliminary 2003 announcement, 16-Mar-04; *** As per INM Interim 2003 announcement, 10-Sept-03;

14 Financial : CONSOLIDATED GROUP P & L / 2002 P & Ls Geographic Segmentals Commentary Change millions millions % Turnover: Australasia % Ireland % South Africa % United Kingdom % Total Turnover 1, , % Operating Profit * Australasia % Ireland % South Africa % United Kingdom % LESS: Common Costs (12.3) (10.8) 13.9% Total Operating Profit % Operating Margin (%-age) Australasia 20.5% 20.4% Ireland 19.9% 20.5% South Africa 14.7% 14.5% United Kingdom 8.6% 8.8% Total Group Margin 17.0% 17.0% Strong operating performance in Southern Hemisphere Australasia & South Africa. UK down YoY due to adverse FX. Ireland increased turnover from low margin distribution business resulting in slightly lower margin. Overall total operating margin maintained at 17.0%. * Excludes share of results of JVs & associates

15 Financial : GROUP BALANCE SHEET 2003/ 2002 Balance Sheets Commentary Change millions millions millions Fixed Assets * 2,793 2,879 (86) Other Net Assets/ (Liabilities) (21) 7 (28) APN Convertible Notes (146) (124) (22) Net Debt ** (978) (1,223) 245 Recourse (644) (816) 172 Non Recourse (334) (407) 73 Total Net Assets 1,648 1, Share Capital & Reserves Minority Interests - Equity Non-Equity (55) Total Shareholders Funds 1,648 1, * Including the Revalued Elements of Mastheads ** including Capital Lease Liabilities Decrease in fixed assets due to sale of UK regionals, Lusomondo and adverse FX movements. Other net assets/ (liabilities) down mainly as a result of the worldwide restructuring provision. APN convertible notes movement due mainly to adverse FX. Total net debt down 245 million (20%), following completion of recapitalisation. Minority Interests: Non- Equity down due to redemption of million Preference share, partly offset by issue of NZ CEPs.

16 Financial : GROUP OPERATING CASHFLOW 2003/ 2002 Operating Cash Flow Statements Commentary Change millions millions millions Operating Cash Flow (15.4) LESS: Interest & Minority Dividends (133.3) (132.3) (1.0) Taxation (37.2) (17.5) (19.7) Capital Expenditure (22.1) (28.9) 6.8 Equity Dividends (40.8) (41.2) 0.4 Sub-Total: (28.9) Disposals & Investments (net) (39.0) Share & Note Issues Net Proceeds from NZ CEPs FX Movement & Other (14.8) 3.3 (18.1) Sub-Total: Redemption of Preference Shares (107.9) 0.0 (107.9) Reduction in Net Debt (in 12 months) Operating cash flow down on 02 due to receipt of S.A. pension surplus in Recapitalisation proceeds in 2003, reduced net debt by 245 million. Preference shares ( 107.9m) redeemed out of recapitalisation proceeds. Net Debt: EBITDA at 3.4x, ahead of target. 91.7% Cash flow Conversion Interest Cover Net Debt: EBITDA FINANCIAL RATIOS Total Net Debt * to EBITDA 3.4x 4.4x Interest Cover (EBITDA/ Interest **) 3.5x 2.9x * Net Debt including Capital Lease Liabilities ** Including APN Convertible Notes Interest

17 Financial : OTHER FINANCIAL MATTERS 2.8 International Financial Reporting Standards (IFRS) - The Group is currently assessing IFRS which become operational in Further updates will be made at the 2004 interim results announcement. Pension & Post-Retirement Obligations - The Group operates a number of defined benefit and defined contribution schemes. - The current status of the defined benefit pension schemes as at 31 st December 2003 is as follows:- Defined Benefit Pension Schemes Movement 2001 m m m m Assets Liabilities (265.0) (235.1) (29.9) (201.5) Scheme deficits (79.6) (75.6) (4.0) (16.6) Deferred tax asset Net Schemes Liabilities (69.6) (66.4) (3.2) (15.2) Total Pension Charge in P & L

18 Financial : EBITDA MARGINS % 28% Focus on Margins targeting 20% operating (EBIT) margins EBITDA Margins Independent EBIT Margins 28% 25% 23% 21% 21% 22% 24% 21% 23% 20% 18% 17% 16% 17% 15% 13% 10% 10% 11% 10% 8% Source: ABN AMRO estimates, Multex, Company reports; (e) = estimates INM EBIT INM EBITDA De Telegraaf (e) DMGT EMAP Fairfax Knight Ridder News Corp. New York Times Reuters Tribune Trinity Mirror Wegener (e)

19 OPERATING HIGHLIGHTS

20 Operations: 2003 OPERATING HIGHLIGHTS 3.1 Driving the Core Business 2004 Winner of the National Newspaper of the Year Good operating cost management: - discretionary costs held at below rate of inflation - newsprint pricing benign - headcount flat due to attrition/ non-replacement Successfully launched new products/ advertising platforms across all regions Successfully launched dual format ( broadsheet & compact ) editions in both London & Dublin Advertising rate card increases successfully implemented, with good advertising market share advances Interactive/ classified fully integrated back into publishing divisions Circulation cover price increases successfully implemented in spite of loss-making efforts of competitors Improved readership figures achieved

21 Operations Sectoral: PUBLISHING DIVISION 3.2 Publishing Division: Segmental P & L Change (constant FX) millions millions % Group Turnover 1, , % Operating Profit % Operating Margins 18.3% 17.9% Publishing Division: Continuing Operations (constant FX) Key Drivers (millions; constant FX) (% change) Total Publishing Revenues: 1, % Commentary Advertising Revenue UP 5.6% (constant FX) reversing negative trend seen in H and ending year on high. Circulation Revenues UP 7.0% (constant FX), building on prior year gains, reflecting strong yield management (+7.7%) and cover price increases in Strategic focus to reduce discounted sales and focus on effective yield per copy, and core full rate sale/ revenue generation. Significant on-going new product development in all regions to better position all titles in Total Newspaper Revenues: % Total Advertising: Yield: 5.6% 1.0% Volume: 4.6% Paging (incl. NPD): Readership 4.2% 1.0% Total Circulation: Yield: 7.0% 7.7% Volume: -0.7% 100% Full Rate Sale (%) 88.6% Total Print/ Distribution: % 2004 estimated Advertising AHEAD Circulation AHEAD

22 Operations Sectoral: PUBLISHING DVISION 3.3 NPD 2003 & Innovation new producing patently superior products UNITED KINGDOM IRELAND AUSTRALASIA SOUTH AFRICA

23 Operations Sectoral: PUBLISHING DIVISION 3.4 Same content Same price Launched 10 th st phase: Dublin/ Leinster (Feb); 2 nd phase: Munster (March - ongoing) Launched 30 th 0.60p 1 st phase: London/ M25 (Oct); national throughout Q4/Q1 Circa 14% Newstrade uplift in areas where compact launched Roll-out continues through 2004 Circa 25% Newstrade national uplift Saturday-only compact launched Feb Newspaper of the Year (March)

24 Operations Sectoral: PUBLISHING Compact (UK) , , ,000 Independent (Mon-Sat) Headline Sales ABCs since Jan 2002 February is the highest Headline ABC since 1997 compact +15% yoy 12% 11% Independent (Mon - Sat) Headline Market Share since Jan 2002 Highest market share since April , ,000 10% 210, ,000 Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 9% Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan UK Quality Market Newstrade sales YOY Performance (000s copies) Sept Feb Independent v The Guardian UK Newstrade Mon to Fri since late Jan Jan 26 th Feb 20 th Sep-03 Oct-03 Nov-03 Dec-03-2 Jan-04-3 Feb Independent Times Telegraph Guardian /01/ /01/ k 28/01/ /01/ /01/ /01/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/2004 Independent Guardian 11/02/ /02/ /02/ /02/ /02/ k 16/02/ /02/ /02/ /02/ /02/2004

25 Operations Sectoral: OUTDOOR DIVISION 3.6 Outdoor Division: Segmental P & L Change (constant FX) millions millions % Group Turnover % EBIT- subsidiaries % EBIT - share of assoc. & JVs % Total Outdoor EBIT: % Outdoor Division Profile Market leader in each of the main outdoor advertising categories. Following restructuring, trans-tasman network entity for transit, street furniture & supersites. Commentary Australasian outdoor (market share in excess of 60%) now restructured into 3 groups: Transit, supersites, & street furniture to provide unified approach to market. 60% millions millions Outdoor 2002/3 Profit including share of JVs & Associates APN Outdoor restructured (H2) South African JV continues to outperform, and now holds >56% of the S. African market %-owned CCI(SA) Adshel 56% 2004 estimated Advertising AHEAD

26 Operations Sectoral: RADIO DIVISION 3.7 Radio Division: Segmental P & L Change (constant FX) millions millions % Group Turnover % Operating Profit % Operating Margins 22.0% 23.8% Radio Division Profile 12 Australian stations in key Metro markets. 112 New Zealand stations by-end 2004; leading operators in Auckland, Wellington & Christchurch. Commentary Strong 2 nd Half compared with good comparable. Radio 2002/3 Profit Continued revenue market share growth and good growth in both agency and direct advertising. Australian target demographic on 2 streams ( Mix & Classic Hits ) paying dividends, with excellent 1 st 2004 survey results. A$ millions A$60.0 A$50.0 A$40.0 A$ % AUSTRALASIAN RADIO MARKET est. Annual Worth: > A$675 million Other 13% A$ APN largest share Source: Company estimates S. Cross 12% A$10.0 CanWest 12% A$.0 H1 H2 TOTAL Daily Mail 9% Austereo 24% 2004 estimated APN 30% Advertising AHEAD

27 Operations: GROUP RESTRUCTURING 3.8 The basis of the plan is to be geographically agnostic and view functional operations on a trans-regional basis. While the Group enjoys operating margins in the top-quartile of our peer group, the exercise confirmed certain legacy issues, cost anomalies and opportunities on a region by region basis. The restructuring plan will: drive profit growth and enhance market competitiveness deliver full year annualised savings of 18.9 million on a phased basis reduce permanent headcount (net) by 564 (or approx. 5% of total staffing) Leverage cross-operations scale and expertise Establish shared services/ finance back-office across operations Procurement activities across operations on a global basis Improve operational process technology and work flow Use existing technology to standardise editorial syndication/ archiving and copy sharing across all group publications Streamline editorial and pre-press processes Streamline Irish & South African distribution and circulation processes Eliminate poor working practices and high cost Eliminate inefficient legacy working practices/ manning levels Relocate to lower cost locations Better leverage outsourcing capabilities Use outsourced staff where appropriate Centralised call management services Booz Allen Hamilton

28 Summary: INDEPENDENT S STRENGTHS 4.1 STRONG MARKET POSITIONS INM enjoys exceptionally strong franchises and operates brand leader pricing strategies in both advertising and circulation, with a clear management focus on effective yield. Strong Market Positions DIVERSIFIED EARNINGS BASE INM s geographic diversification and focus on its core competencies means the group is not reliant on a solus market for sustainable growth and enjoys a natural operating hedge. Diversified Earnings Base Balanced Revenue Mix Fortified Financial Position BALANCED REVENUE MIX INM s strategic policy on cover pricing means it consistently derives a higher proportion of revenues (34%) from circulation than its peers, providing a buffer to the cyclical nature of advertising. FORTIFIED FINANCIAL POSITION The recapitalisation programme in which group recourse net debt has reduced by 50% in the past 3 years - has dramatically strengthened the group s capital structure allowing for more cost-effective financing for the future.

29 Summary: INDEPENDENT S STRENGTHS 4.2 MAJOR CAPEX COMPLETED Having judiciously spent 330m in the past 6 years and upgraded all production facilities - capital investment will be maintained at a minimum, save discreet capex projects with an extremely attractive payback. SOLID ASSET BACKING INM s uniquely strong cash generative franchises particularly with newspapers being the mass market medium of the future - command consistently high valuations and underpin net asset base/ share price. POSITIVE ADVERTISING OUTLOOK Proven Track Record Being the Low Cost Operator Positive Adv. Outlook Following a difficult 24 month period in global advertising, advertising forecasts point to an upturn in the cycle of which the group is already seeing greenshoots, augmenting the already double-digit growth in its Southern Hemisphere operations. BEING THE LOW COST OPERATOR Strong Market Positions Diversified Earnings Base Solid Asset Backing The recently announced restructuring and 5% headcount reduction will ensure that INM is the Low Cost Operator, and as such, will be geographically agnostic in the compilation and production of its products. Balanced Revenue Mix Fortified Financial Position Major Capex Completed PROVEN TRACK RECORD INM has grown EPS at 13% compound over the past 30 years, and management is committed to double-digit EPS growth and a further enhancement in operating margins to 20%.

30 Summary: OUTLOOK STATEMENT 4.3 After 12 weeks Positive start to 2004 Achieving budgeted revenue growth Restructuring programme on-track Continued focus on yield Trading in 2004 has started positively, and given a continuation of current trading conditions, the Board remains confident of further improvement in underlying profitability for * Certain statements (verbal and written) in the operating assumptions for 2004 may be deemed forward looking statements. The forward-looking statements (verbal and written) contained in this presentation, including the operating assumptions, are subject to a number of risks and uncertainties that could adversely affect the Group s ability to obtain the results predicted in the operating assumptions including, without limitation, the following factors: (a) increased consolidation among the major retailers or other events which may adversely affect business operations of major customers and depress the level of local, national or classified advertising; (b) a continued economic downturn in some or all of the Company s principal markets leading to decreased circulation or local or national advertising; (c) a decline in general newspaper readership patterns as a result of the competitive alternative media or other factors; (d) an increase in newsprint or syndication costs over the levels anticipated; (e) labour disputes which may cause revenue declines or increased labour costs; (f) acquisitions of new businesses or disposals of existing businesses; (g) rapid technological changes and frequent new product introductions prevalent in electronic publishing; (h) weakening exchange rates; (i) general economic, political and business conditions; and (j) an increase in interest rates etc...

31 Summary: OUTLOOK Key Drivers 4.4 Newsprint Headcount Other < C.P.I. LOW COST OPERATOR Editorial Compact ORGANIC REVENUES Advertising Rate Volume FINANCE Circulation 53-week year HIDDEN VALUE * Certain statements (verbal and written) in the operating assumptions for 2004 may be deemed forward looking statements. The forward-looking statements (verbal and written) contained in this presentation, including the operating assumptions, are subject to a number of risks and uncertainties that could adversely affect the Group s ability to obtain the results predicted in the operating assumptions including, without limitation, the following factors: (a) increased consolidation among the major retailers or other events which may adversely affect business operations of major customers and depress the level of local, national or classified advertising; (b) a continued economic downturn in some or all of the Company s principal markets leading to decreased circulation or local or national advertising; (c) a decline in general newspaper readership patterns as a result of the competitive alternative media or other factors; (d) an increase in newsprint or syndication costs over the levels anticipated; (e) labour disputes which may cause revenue declines or increased labour costs; (f) acquisitions of new businesses or disposals of existing businesses; (g) rapid technological changes and frequent new product introductions prevalent in electronic publishing; (h) weakening exchange rates; (i) general economic, political and business conditions; and (j) an increase in interest rates etc...

32 4.5 Repositioned for Growth DIARY DATE: Annual General Meeting 12 noon on Monday, 28 th June Citywest Hotel, Saggart, Dublin 24, Ireland. GLOBAL VISION LOCAL CONTENT