INL Consolidated Net Profit Up 45 Per Cent

INDEPENDENT NEWSPAPERS LIMITED

INL Consolidated Net Profit Up 45 Per Cent To $37.8 M

For release 15 August 2002

Independent Newspapers Limited (INL) announced today a consolidated net profit after tax of $37.8 million – a 45 per cent increase on the prior year.

The result includes both INL’s publishing business and its 66.25 per cent shareholding in Sky Network Television.

The company will pay a steady final dividend of 4.5 cents a share, after paying an interim of 4.0 cents a share. Full imputation credits attach to these dividends.

INL Executive Chairman Mr Ken Cowley said the consolidated result reflected a pleasing improvement in Sky’s financial performance, with Sky on track to break even in the second half of calendar 2003. Sky’s net operating loss was cut by 29 per cent to $30.2 million on the back of increased subscriber numbers and higher average revenues per unit.

Mr Cowley said INL Publishing’s operating EBITDA continued at recent highs, down slightly (1.1 per cent) on the prior year to $119.5 million.

He said most of INL’s publications had posted advertising and circulation revenue gains during the year. However, a declining performance by Wellington Newspapers had dragged down the overall result.

“Overall, the company’s EBITDA margin declined slightly from 23.2 per cent to 22.6 per cent, but if we exclude Wellington, EBITDA margin rose 0.9 per cent” Mr Cowley said.

“We have addressed this underperformance in Wellington with our decision to merge the two Wellington daily newspapers into The Dominion Post,” he said.

“The shift to a single, stronger paper has allowed us to reduce costs significantly and pursue advertising and revenue growth.”

Launched on July 8, The Dominion Post is enjoying strong reader and advertising support. In its first month, The Dominion Post averaged daily sales of more than 100,000, with most advertisers converting to the new paper.

Across the publishing group, total circulation revenue had increased by 2.3 per cent, with The Geelong Advertiser having the strongest circulation gain in the group following its November 2001 switch to tabloid. Average net paid sales increased by nearly 1 per cent, an encouraging improvement on the overall decline of 2.3 per cent in the prior year.

Total advertising revenue was also up by 2.3 per cent, or $7.7 million. Again, the adverse Wellington results suppressed advertising volume and yields on the daily newspapers, but this was offset by strong revenue growth in community newspapers (up 8.7 per cent) and weeklies (up 3.1 per cent).

INL Magazines performed strongly while the Gordon & Gotch distribution business was impacted by lost volume and INL Interactive’s business, stuff.co.nz halved its net losses.

Total costs increased by $7.8 million (1.8%), primarily attributable to a $4 million rise in newsprint expense due to higher circulation and increased newsprint prices. Group permanent full-time and part-time staff numbers declined from 3,302 to 3,214 and following already announced decisions will be further reduced to 2,980 by the September quarter 2002, 2,640 of which will be full time.

The results include a one-off charge of $8.4 million covering The Dominion Post restructuring, a further $1.3 million charge from restructuring at the Christchurch Press and other severance charges of $4.1 million around the Group. Non-cash one-off items comprised $2.7 million, including amortised goodwill and written off asset values following the sale of buildings in Australia and minor publications in New Zealand.

Despite funding a $36 million share buy-back, debt attributable to the publishing division reduced $10 million to $452 million due to strong operating cashflows from the publishing division, up $5 million, reduced capital expenditure, down $5m, and sharply lower income tax expense because of the transfer of Sky TV’s tax losses on consolidation.

INL’s out-going CEO, Mr Tom Mockridge, said the overall result was that INL had funded an increase in its investment in Sky TV while increasing net profit 45%, an outcome much more favourable than that anticipated by the Independent Assessor when the acquisition was first contemplated last year.

Subsequent to balance date, INL completed the sale of its two smaller Australian newspapers, further reducing the publishing division’s debt from $452 million at 30 June to $430 million at 30 July.

On a fully consolidated basis, INL’s EBITDA rose 75% to $218.6 million and net debt increased from $740.8 million to $779.9 million.

Looking to the challenges ahead, INL’s Executive Chairman, Mr Ken Cowley, said INL’s focus would remain on margin improvement.

“We will achieve this by continuing to capture synergies across the publishing business and with Sky, by targeting growing circulation, improving advertising yields and maintaining a tight control on expenses.”

Books close for the dividend payment on 18 October 2002.

ENDS

Independent Newspapers Limited is New Zealand’s largest media company, publishing nine daily newspapers in New Zealand and one in Australia, plus New Zealand’s two Sunday newspapers and the news and information website www.stuff.co.nz. In addition INL publishes a range of other weeklies and national magazines, including TV Guide and NZ House & Garden, operates New Zealand’s largest magazine distribution business and publishes over 60 community newspaper titles in New Zealand and Australia. INL also holds a 66% interest in Sky Network Television Limited, New Zealand’s pre-eminent pay television service. INL had total assets as of December 31 2001 of approximately $NZ2.1B and total annual revenues of approximately $NZ850M.

INDEPENDENT NEWSPAPERS LIMITED
ANNUAL RESULT FOR YEAR ENDED 30 JUNE 2002

2002 % change 2001 % change 2000

Group revenue 873,502 58.9% 549,831 5.2% 522,876

Publishing continuing operations
Revenue 527,718 1.5% 520,164 0.8% 516,023
Expenses (408,202) 2.2% (399,238) 1.4% (393,570)
Operating EBITDA 119,516 -1.1% 120,926 -1.2% 122,453
Severance (4,136) (3,519) (2,943)
Restructuring (9,686) - -
EBITDA 105,694 -10.0% 117,407 -1.8% 119,510

SKY (consolidated from June 2001)
Revenue 343,230 26,781
Expenses (228,600) (19,213)
EBITDA 114,630 7,568

Discontinued operations
Revenue 2,554 2,886 6,853
Expenses (4,311) (2,956) (7,564)
EBITDA (1,757) (70) (711)

Group trading profit before depreciation and interest 218,567 75.0% 124,905 5.1% 118,799
Depreciation and amortisations (117,638) 361.3% (25,500) 35.9% (18,759)
100,929 1.5% 99,405 -0.6% 100,040

Interest (61,002) 108.8% (29,219) 21.6% (24,027)
39,927 -43.1% 70,186 -7.7% 76,013

Goodwill amortised (1,416) (810) (1,165)

Non trading items
Write down of publishing title on closure or sale (243) (602)
Loss on sale of surplus properties (1,102) 0 (313)
Loss on sale of subsidiary companies (1) (2,668) 0
Superannuation transfer payments 0 (328)
Total non-trading items (4,013) (930) (313)

Profit after non-trading items 34,498 -49.6% 68,446 -8.2% 74,535
Income tax (2,287) (23,835) (26,360)
32,211 -27.8% 44,611 -7.4% 48,175

Minority interest 5,483 633 (188)
Share of operating surplus of associate companies 121 (19,133) (13,350)
Profit after tax 37,815 44.8% 26,111 -24.6% 34,637

(1) Football Kingz and Southcom.

ENDS

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