The chairman and CEO of Independent News & Media (INM) have both railed against Ireland’s punitive libel regime, as the group announced a sharp drop in profits in the first half of the year.
The financial results were published ahead of today’s annual general meeting (AGM) in Dublin and show INM’s profit before tax fell by 19.5pc to €14.9m in the first six months of the year. Revenue fell 8.4pc compared to the same time last year to €148.1m for the six months.
The group ended the period with a cash balance of €95.7m. INM benefited from a deal with pension trustees to wind up its defined benefit pension schemes.
But, the business was also hit with €2.5m of exceptional costs including for historic libel actions and costs associated with the aftermath of a high profile board level dispute between chairman Leslie Buckley and CEO Robert Pitt.
In relation to libel, Mr Buckley said it was among a number of areas in need of reform along with the need for media businesses to gain a greater share of revenues when tech giants use their content online.
"The operating environment in the media industry remains challenging. We believe that issues need to be addressed, such as consolidation in the industry, the high level of libel awards and the need for traditional publishers to pursue stronger rights to demand payment for the use of their content from digital giants Google and Facebook," he said.
INM CEO Robert Pitt said: “The continued challenging trading conditions from the decline in circulation and publishing advertising have been magnified by the impact of a very punitive defamation regime and legal costs. Whilst digital revenues have grown, the growth is at a lower rate than previously envisaged. Despite this, the group still operates a strong underlying business with profit before tax of €14.9m and strong cash generation.”
The fall in first half profits was primarily due to continued revenue challenges, the company said. However, the business was also hit with €2.5m of exceptional costs.
“Operating costs were negatively impacted by the level of recent awards in libel cases, particularly those relating to historic Sunday World cases. This, coupled with costs associated with the independent review and meeting the requirements of the Office of the Director of Corporate Enforcement ("ODCE"), impacted operating costs by c.€2.5m in the six months to 30 June 2017.” INM said.
The board level dispute is understood to have stemmed from a disagreement between the CEO and chairman over the potential price INM might pay to buy the Newstalk radio station in a deal mooted last year, but that didn’t go ahead.
It has prompted INM’s own board to commission an independent review to examine the issues around the situation and a separate probe by the Office of the Director of Corporate Enforcement (ODCE).
In a note to the financial results for the first half of the year, the company said the board has now received a report from the confidential independent review, which is currently being considered by the directors.
The company said it continues to comply with requirements from the ODCE and is taking all necessary steps to meet the ODCE’s requests. It said it does not intend to comment further regarding the situation.
It remains unclear ahead of today's AGM whether Robert Pitt, who is a shareholder in INM, will vote in favour of the re election of his fellow directors, including the chairman. Mr Pitt is not up for re-election at today's meeting.