“We see many catalysts in the near future with potential for capital returns and a rerating as structural concerns ease,” Merrion Capital analyst, Darren McKinley said yesterday in reaction to a positive trading update from INM.
That update showed a first revenue increase in eight years, with total group revenues up 1.1%, on a year-on-year basis, in the 10 months to the end of October.
The increase was helped by new distribution contracts, including one for the Irish Times.
While circulation revenue was down by 3.2% year-on-year, total advertising revenue for the period grew by 3.7%, with digital advertising revenue up by 43.6%.
“Having come through a period of significant restructuring, Independent News & Media is very happy to see this continuing positive performance in 2015,” said group CEO Robert Pitt said.
“It is good to see that the growth in income is now expanded beyond advertising and circulation sales to also include distribution.
INM made no comment about its cash plans, but Mr McKinley suggested the group is well-placed to make a first dividend payment to investors next year, for the first time since 2008.
He said he expects management to give guidance, in this regard, at the publication of annual results next March.
Mr McKinley gave “a conservative estimate” of a dividend next year at a yield of 2.5%-3%, along with a one-off special dividend payment at 5%-10% of the group’s share price.
He added that there could be 20%-30% upside to the INM stock in the next six months. INM’s shares were trading at 17c yesterday unmoved from the previous day’s close.
“The group is expected to report an increase profit before tax as cost control measures and top line growth both start to deliver,” Mr McKinley said.
“INM is also benefiting from the lower interest costs as the balance sheet has now moved to a significant net cash position from a net debt position post the APN (News and Media) stake sale earlier this year.
“Although circulation revenue continues to decline, the pace of the decline is easing and the circulation costs are falling as they leverage their distribution channel across other newspapers.”