High Court ready to rule on INM inspectors

By Geoff Percival

The president of the High Court will decide on Tuesday whether or not the Office of the Director of Corporate Enforcement can employ inspectors to investigate the business affairs of Independent News & Media.

Notification of the decision date was posted hours after INM published earnings for the first half of the year.

Those figures showed that INM incurred further legal costs of €1.9m during the period, relating to its challenge against the State watchdog’s attempts to investigate the group’s affairs.

A decision has been pending for some time from the High Court, over whether or not the ODCE can appoint inspectors to investigate an alleged data breach at INM and the details of its previously proposed purchase of radio station Newstalk, which is owned by INM’s major shareholder, Denis O’Brien.

The Data Protection Commissioner is also investigating the alleged data breach matter at the group.

In total, INM incurred exceptional costs of €2.1m in the first half of the year, on top of the legal costs, helping drag down pre-tax profits for the period by 22.8%, year-on-year, to €11.5m. The charges also covered €100,000 in acquisition-related expenses and €1.3m in restructuring costs, which mainly covered redundancy costs.

INM’s total revenue for the first six months of the year amounted to €95m, a 4.1% drop on the corresponding period last year. Within that, circulation revenues fell by 6.2%, digital revenues fell 2.9%, and advertising revenues tumbled by 10.5%.

INM said its digital revenues are coming under ongoing pressures from the presence of Google and Facebook in the market. However, it said new offerings such as CarsIreland.ie offset that to a degree by delivering double-digit revenue growth.

“The media industry continues to experience challenging trading conditions, while the group must also contend with uncertainty as a result of the ODCE’s attempt to have inspectors appointed to look into a number of events that took place in recent years and the ongoing DPC investigation of alleged data breaches within INM,” chairman Murdoch MacLennan said.

“Despite the challenges facing INM, the group generated a profit before tax of €11.5m, in line with expectations, while our full-year forecast remains unchanged.”

Mr MacLennan also said INM’s balance sheet remains strong and the group is exploring “new avenues” to develop profitable revenue streams.

“While our industry continues to face many challenges, INM anticipates a full-year EBIT [earnings before interest and tax] performance in line with market expectations,” said chief executive Michael Doorly.

In terms of those “market expectations”, analysts are anticipating INM posting pre-tax profits of around €22m for 2018 — down from €28.5m for 2017 — and they were lukewarm in their prognosis.

“Given the longer-than-anticipated time in reaching an ODCE decision, plus the DPC investigation — both of which could incur material costs — we are moving our recommendation to ‘neutral’ from ‘under review’,” said Davy analyst Joseph Quinn.

Goodbody analyst Rachel Fox said while INM’s interim figures were “broadly” in line with expectations, “given the continued weakness in print advertising and the now declining digital revenues, we remain very cautious on INM”.

INM’s share price — down by over 25% in the last 12 months — closed up by nearly 2.4% yesterday after the High Court news, having been flat for most of the day.