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Inl Half Year Consolidated Net Profit Up 43%

INL HALF YEAR CONSOLIDATED NET PROFIT UP 43 PER CENT TO $38.8 MILLION

Independent Newspapers Limited (INL) announced today a consolidated net profit after tax of $38.8 million for the six months to 31 December 2002 – a 43 per cent increase on the same period in the prior year.

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

INL Chairman Ken Cowley attributed the strong result to an improved performance by both the core INL publishing business and Sky.

Mr Cowley said Sky had continued to grow its subscriber base and reduce losses. Its EBITDA was up 33 per cent to $71.6 million in the six months to 31 December 2002.

INL Publishing’s EBITDA was $63.1 million, up 7.8 per cent on the same period in 2001.

Consolidated net debt had been reduced by $47.5 million over the past six months, with INL Publishing and Sky both reducing their debt levels.

INL Chief Executive Peter Wylie said Publishing’s total revenue from continuing operations increased by 3.5 per cent on the equivalent period, largely buoyed by strong growth in advertising revenue.

Advertising revenue among INL’s publications rose 5.9 per cent. If adjusted for the impact of merging Wellington’s two dailies in July 2002, the increase was 8.1 per cent. Community papers were up six per cent and the Sundays made a gain of 12.6 per cent.

Retail advertising accounted for most of the revenue growth, reflecting high levels of consumer confidence and strong regional economies.

Mr Wylie said this positive trend had continued into the second half, in keeping with a worldwide pick-up in advertising spending. Page 1 of 4
He noted that Australian media publishing and television companies had recently revised up their forecasts on the back of an anticipated strong recovery in advertising revenues.

“For INL newspapers, major international sporting events such as the Rugby World Cup are likely to drive increased readership and advertising revenues throughout this year.”

Mr Wylie said national advertising volume was down although there were encouraging signs of a recovery in this segment.

Additionally, recent initiatives by INL were designed to capture a greater share of national advertising: “In November, INL established its own Advertising Network to sell individual space and national packages in The Dominion Post, Waikato Times and The Press. Early indications are that this service is proving popular with advertisers.”

Overall, the paid circulations of INL’s newspapers were steady. INL’s flagship metropolitan dailies, The Press and The Dominion Post, had both performed well.

“The Dominion Post’s audited average daily sales of around 101,000 (Audit Bureau of Circulation November 2002) exceeded our expectations, and compared favourably with the unduplicated net circulation of 103,000 for the two legacy titles prior to their merger in July,” Mr Wylie said.

The Sunday newspapers had also increased circulation and readership and the company had just announced plans to broaden the appeal of the Sunday Star Times with a view to lifting circulation further.

“The Sunday Star Times is a good paper and we want to build on its recent years of circulation growth by giving readers more value,” Mr Wylie said.

“Overall, the paper will be 20 per cent bigger with new sections and features to appeal to women and younger readers.

“The new-look paper will be on sale this Sunday (February 23), featuring a new lifestyle and entertainment liftout as well as a new section dedicated to Auckland news.”

INL Publishing’s total costs of continuing operations were just $2.6 million (1.3%) ahead of last year. Staff costs were down $2.6 million (3.2%) on last year because of reduced staff numbers arising from the merger of The Dominion and Evening Post. Newsprint costs increased by 6.2 per cent, reflecting higher international prices and the flow-on effect of producing larger newspapers on the back of a lift in advertising.

Each of INL’s operating divisions improved their profit margins. The performance improvements enhanced INL Publishing’s overall EBITDA margin from 23 per cent to 25 per cent.

Page 2 of 4
There was a marked improvement in the performance of stuff.co.nz. This division virtually halved its losses on the back of increased advertising revenues.

Mr Wylie said the overall result was further confirmation that INL was on track to increase earnings by focusing on circulation growth, higher advertising yields and a firm control of expenses.

In December 2002, INL announced three transactions that signalled the company’s ongoing commitment to further earnings growth.

The acquisition of Cuisine magazine in December 2002 entrenched INL as New Zealand’s number one lifestyle magazine publisher. Cuisine was established 17 years ago, and has won international awards for the quality of its design, and food and wine writing. It has a circulation of 88,000 in New Zealand and Australia.

INL also announced in December 2002 the sale of Te Puke Times to W&H Newspapers Limited. In a separate transaction, INL has taken up a full shareholding in Taupo Times Limited, increasing its holding from 68 per cent to 100 per cent by acquiring the balance held by W&H Newspapers Limited. Taupo Times is published three times a week and delivered to all homes in Taupo and the surrounding townships. It has a circulation of 15,600 per issue.

INL will pay a fully imputed interim dividend of 4.5 cents per share on 28 March 2003 to shareholders on the register at 14 March 2003. Current year earnings represented an earnings per share rate of 9.2 cents per share, which compared favourably to 6.4 cents per share in the prior half year.

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