2018 Year-End Results - Independent News & Media PLC

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2018 Year-End Results - Independent News & Media PLC
2018 Year-End Results
2018 Year-End Results - Independent News & Media PLC
NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some statements in this announcement are forward-looking. They represent our
expectations for our business and involve risks and uncertainties. We have based these
forward-looking statements on our current expectations and projections about future
events. We believe that our expectations and assumptions with respect to these
forward-looking statements are reasonable. However, because they involve known and
unknown risks, uncertainties and other factors, which are in some cases beyond our
control, our actual results or performance may differ materially from those expressed or
implied by such forward-looking statements. These forward-looking statements speak
only as of the date of this document and no obligation is undertaken, save as required by
law or by the Listing Rules of Euronext Dublin and/or the UK Listing Authority, to reflect
new information, future events or otherwise.

                                                                 INM | YEAR END RESULTS 2018   2
CONTENTS

       1        INM at a glance

       2        Strategy

       3        Year End Results 2018

       4        Subsequent Events

   Murdoch MacLennan, Chairman, Independent News & Media PLC, said: “In 2018 we continued to
   make progress in implementing our new strategy with the full support of our new Board and our
   new Senior Executive Team. We have recorded a financial performance for 2018 ahead of market
   expectations and I can assure you that despite the challenges facing the industry the Board and
   Senior Executive Team of your Group are both determined and confident that we are heading in the
   right direction to build a sustainable business for the future and to create shareholder value.”

                                                                           INM | YEAR END RESULTS 2018   3
INM AT A GLANCE

                       “WE BELIEVE IN ENRICHING LIVES.
                  INFORMING, ENTERTAINING AND INSPIRING.
                     IN ALL WAYS, THE TRUSTED SOURCE”.

        Market leading media Group on the Island of Ireland – strong newspaper
        and digital presence.

        Largest wholesale newspaper distributor on the Island of Ireland which
        continues to show profitable growth.

        Managing gross assets of €192.3m – employing approx. 800 people.

        Headquartered in Dublin, Ireland; listed on Euronext Dublin and London
        Stock Exchange.

                                                      INM | YEAR END RESULTS 2018   4
ICONIC BRANDS

                INM | YEAR END RESULTS 2018   5
STRATEGY

The INM three year strategy, ‘INM@21’ was approved by the Board of INM in November
2018.

‘INM@21’ builds on a reinforced core, expands into customer-centric offerings, and aims
to future proof the business.

‘INM@21’ is based on three pillars underpinned by 11 workstreams involving; the
optimisation of revenues, reduction of costs, and building the capability to respond to the
changing needs of INM’s audience.

                                                             INM | YEAR END RESULTS 2018   6
STRATEGY – ‘INM@21’

          01                                       02                                        03

PROTECT & REINFORCE                  EXPAND & DEVELOP CUSTOMER-
                                                                                   ENABLE THE FUTURE
     THE CORE                             CENTRIC OFFERINGS

Maximise the revenue through          Leverage INMs existing reach and          Invest    in   customer-centric
continuous innovation to deliver      brand, and monetise through a             systems enabling us to put the
best in class products across all     range of digital offerings.               customer at the core of the
platforms.                                                                      business.
                                      Develop paid for membership
Achieve and maintain the most         content models.                           Implement        future     proof
efficient operating model, not                                                  organisational structure.
conflicting with longer terms         Consolidate existing position and
strategy.                             further expand into targeted Irish        Build processes and invest in IT
                                      and international verticals.              and data analytics to enable data
Consolidate print distribution and                                              driven decision making.
protect the network.                  Invest to build Reach Group while
                                      maintaining critical route to             Invest in our culture and people
                                      market for publishing titles.             to transform our business.

                                                                           INM | YEAR END RESULTS 2018         7
STRATEGY - IMPLEMENTATION

   • The Board and the Senior Executive Team have been refreshed to provide
     the foundation for implementation.

   • Implementation underway across the 3 pillars of our Strategy as follows:

            Protect & Reinforce the Core: executing operational efficiencies.

            Enable the Future: investing in technology, data, analytics,
             customer and digital resources.

            Expand & Develop Customer-Centric Offerings: utilising
             aforementioned investment to develop and monetise a range of
             digital offerings.

                                                        INM | YEAR END RESULTS 2018   8
YEAR-END RESULTS 2018

           The Group generated a profit before tax of €24.1m1, ahead of expectations

           Key Highlights:

           •    Total revenue of €191.0m2 was down 2.1% on the prior year (restated under IFRS 15).

           •    Profit before tax, whilst ahead of expectations, decreased by 15.4% to €24.1m1.

           •    Total operating costs1 decreased by a net €0.1m in the year. This reflects a reduction in the
                Group’s cost base largely offset by costs associated with two acquisitions and investment in
                the INM strategy, as well as meeting our risk, legal and regulatory requirements (e.g. cyber-
                security and GDPR).

           •    Total net exceptional charge of €13.3m.

           •    Balance sheet strengthened, net assets of €89.7m.

           •    Cash of €81.7m. Continued cash generation offset by once-off cash outflow related to
                €13.9m funding of BT pension deficit.
1 Before exceptionals
2 The adoption of IFRS 15 has changed the presentation of the revenue from distribution of third party news and magazine titles from a gross presentation to a net presentation

                                                                                                                        INM | YEAR END RESULTS 2018                       9
SUMMARY OF RESULTS
 REVENUE                                            PROFIT BEFORE TAX (before exceptional items)
      300                                              40

                           293.0                              41.8
            323.4                           284.1             18.5
€’m

                                                      €’m
      200                                                                  28.5
            161.6                                                                     24.1
                           195.0            191.0
        0                                                0
            FY16           FY17             FY18               FY16        FY17        FY18
             Turnover (pre IFRS 15 restatement)
             Turnover (post IFRS 15 restatement)

 NET ASSETS                                         RETIREMENT BENEFIT OBLIGATIONS LIABILITY
  100                                                 100    97.3
                                                                       77.5
                                            89.7             55.6              50.6
      €’m

                           76.1                        €’m             39.8
            62.3                                                                         DC
                                                                               33.3
                                                             41.7                        DB
                                                                       37.7
        0                                               0
                                                                               17.3
            FY16           FY17             FY18               FY16        FY17       FY18

                                                                     INM | YEAR END RESULTS 2018   10
FINANCIAL HIGHLIGHTS – FY 2018

           TOTAL REVENUE 1                                       PROFIT BEFORE TAX2                                                NET ASSETS

           €191M                                                    €24.1M                                                   €89.7M
                                2.1%                                                    15.4%                                                      €13.6m

          Total Advertising Revenue
                                                                  Reported Op Costs 2                                        Retirement Benefit
                                                                                                                             Obligations Liability
                         8.8%                                             by €0.1M
                                                                                                                                       €26.9M
            Circulation Revenue                                  Net Exceptional Charge
                                                                          €13.3M                                                   Cash Balance
                          6.3%                                              (See slide 13)
                                                                                                                                    €81.7M
          Distribution Revenue             1

                          26.5%

1 The adoption of IFRS 15 has changed the presentation of the revenue from distribution of third party news and magazine titles from a gross presentation to a net presentation
2 Before exceptionals

                                                                                                                       INM | YEAR END RESULTS 2018                     11
• Revenues are restated under IFRS
                                                                                                                15 - no impact on net profit or net
INCOME STATEMENT                                                                                                assets of the Group. Total revenues
                                                                                                                of €191.0m down 2.1% year on
                                                                                                                year.
                           Year Ended 31 December 2018             Year Ended 31 December 2017
                                                                                                              • Total operating costs decreased by
                                                                                                                a net €0.1m in the year. This
                                                                   Before                                       reflects a reduction in the Group’s
                           Before                                  Exceptional   Exceptional
                           Exceptional   Exceptional
                                                                                                                cost base largely offset by costs
                                                                   Items         Items           Total
                           Items         Items                                                                  associated with two acquisitions
Euro Millions                                          Total       (restated)    (restated)      (restated)
                                                                                                                and investment in strategy, GDPR
Revenue                      191.0             -         191.0        195.0            -           195.0        and cyber-security costs.

Operating costs              (167.4)        (14.6)       (182.0)      (167.5)       (12.0)        (179.5)     • Profit before tax of €24.1m, whilst
                                                                                                                ahead of expectations, decreased
Operating profit/(loss)       23.6          (14.6)        9.0          27.5         (12.0)         15.5         by 15.4% on the prior year.

Share of results of                                                                                           • Net tax charge of €1.3m relates to
associates & joint                                                                                              a deferred tax charge of €1.8m
ventures                       0.4             -          0.4           0.9          (0.1)          0.8         arising from planned pension
                                                                                                                payments during the year and a
Finance income                 0.1            0.8         0.9           0.1            -            0.1
                                                                                                                release of UK deferred tax assets
Profit/(loss) before                                                                                            based on a reassessment of
taxation                      24.1          (13.8)        10.3         28.5         (12.1)         16.4         forecast profits in Northern Ireland
                                                                                                                and an exceptional tax credit of
Taxation (charge)/credit      (1.8)           0.5         (1.3)        (3.9)           -           (3.9)        €0.5m on redundancy and other
Profit/(loss) for the                                                                                           restructuring costs.
year                          22.3          (13.3)        9.0          24.6         (12.1)         12.5
                                                                                                              • Net exceptional charge of €13.3m
                                                                                                                primarily including a non-cash
                                                                                                                €7.0m impairment (Northern
                                                                                                                Ireland assets), a restructuring
                                                                                                                charge of €4.1m and legal expenses
                                                                                                                of €3.5m.

                                                                                                   INM | YEAR END RESULTS 2018               12
EXCEPTIONALS

The Group recorded a total net exceptional charge of €13.3m, which included:

                             Euro Millions     Description
Impairments                       (7.0)        Tangible and intangible assets in Northern Ireland.

Restructuring charge              (4.1)        Primarily redundancy costs in the Island of Ireland.

Legal expenses                    (3.5)        ODCE/DPC/Inspectors and related matters.

Exceptional finance income         0.8         Re-measurement to fair value of the Group’s pre-existing
                                               50% interest in Reachmount DAC upon obtaining control.
Exceptional tax credit             0.5         Related to redundancy and other restructuring costs.

Total                             (13.3)

                                           €13.3m
                                  Non cash charge of €8.1m,
                                    cash charge of €5.2m

                                                                     INM | YEAR END RESULTS 2018      13
• Intangible Assets increase driven by
STATEMENT OF FINANCIAL POSITION                                additions of €9.7m mainly relating to two
                                                               acquisitions and computer software,
                                                               offset by amortisation charge and FX of
                                                               €3.4m and impairments of €2.2m.

                                                             • Decrease in tangible assets of €6.5m
                                 31 Dec    31 Dec              primarily due to an impairment of
Euro Millions                    2018      2017      Δ         property, plant and equipment in the
                                                               Newry print facility.

                                                             • Taxation movement due to reduction of
Intangible Assets                  37.7     33.6     4.1
                                                               €1.8m in net deferred tax asset and
Tangible Assets                    33.6     40.1     (6.5)     €0.3m in corporation tax recoverable.
Taxation                           6.6       8.7     (2.1)
                                                             • Cash balance decrease largely driven by
Cash and Cash Equivalents          81.7     91.5     (9.8)     retirement benefit obligations payments
                                                               and costs associated with the two new
Retirement Benefit Obligations    (50.6)    (77.5)   26.9      acquisitions.
Other Net Liabilities             (19.3)    (20.3)   1.0
                                                             • Movement in retirement benefit
Net Assets                         89.7     76.1     13.6      obligations primarily driven by deficit
                                                               repair/special contribution pension
                                                               payments of €21.9m (annual payments of
                                                               €8.0m and once-off payment re BT of
                                                               €13.9m) and remeasurement gains of
                                                               €5.1m.

                                                                    INM | YEAR END RESULTS 2018       14
CASH FLOW

Euro Millions                                                                 31 Dec 2018   31 Dec 2017 • EBITDA down €3.5m to €30.3m.
EBITDA                                                                            30.3          33.8        • €4.0m movement in
                                                                                                              provisions/working capital as a
Movement in provisions/working capital                                            (4.0)         (5.0)         result of inventory increase due
                                                                                                              to acquisitions and timing of
Retirement benefit obligations deficit repair/special contribution payments      (21.9)        (14.1)         supplier payments.

Exceptional expenditure                                                           (5.2)         (3.9)       • Deficit repair/special
                                                                                                              contribution pension payments
Cash flows from other operating activities                                        0.5           (0.9)         of €21.9m (annual payments of
                                                                                                              €8.0m and once-off payment re BT
Cash (used in)/generated by operating activities                                  (0.3)         9.9           of €13.9m).

Cash flows from investing activities                                                                        • Exceptional expenditure relates
                                                                                                              to legal costs (ODCE, DPC,
Acquisition of subsidiary, net of cash required                                   (5.3)           -           inspectors and related matters)
                                                                                                              along with restructuring costs.
Cash flows from other investing activities                                        (4.1)         (2.4)
                                                                                                            • Acquisition of subsidiary relates
(Decrease)/increase in cash and cash equivalents                                  (9.7)         7.5           to the acquisitions of the trading
                                                                                                              business and certain assets of
Foreign exchange losses                                                           (0.1)         (0.8)         Hegadon Ltd and Reachmount
                                                                                                              DAC.
Net (decrease)/increase in cash and cash equivalents                              (9.8)         6.7
                                                                                                            • Cashflows from other investing
Balance at the beginning of the year                                              91.5          84.8          activities primarily relates to
                                                                                                              capital expenditure on tangible
Cash and cash equivalents at end of the year                                      81.7          91.5          and intangible assets.

                                                                                                      INM | YEAR END RESULTS 2018        15
SUBSEQUENT EVENTS

  • In January 2019, Ms. Kate Marsh was appointed to the Board as an
    independent non-executive director.

  • The former Chief Financial Officer, Mr. Ryan Preston, departed the Group
    by mutual consent at the end of January 2019. INM is currently engaged
    in a process to appoint a successor to Mr. Ryan Preston and this
    appointment will be announced in due course.

  • There were no other events since the year end that would require
    disclosure or adjustment in the financial statements.

                                                      INM | YEAR END RESULTS 2018   16
SUMMARY

                               Revenue reported under IFRS 15, no impact on net
                          01
                               profit or net assets.

                          02   Profit before Tax €24.1m1 ahead of expectations.

                               Net assets increase to €89.7m with a cash balance
                          03
                               of €81.7m.

                               Retirement benefit obligations managed down from
                          04   €97.3m at the end of 2016 to €50.6m at the end of
                               2018.

                          05   New refreshed Board and appointments to the
                               Senior Executive Team (“SET”).

                               New Corporate Strategy being implemented with
                          06   investment in technology, data, analytics,
                               customer and digital resources.
1 Before   exceptionals

                                                                             INM | YEAR END RESULTS 2018   17
Q&A
Thank You
 Q&A

            INM | YEAR END RESULTS 2018
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