Sky drags INL's profit down

By SIMON HENDERY

Publisher INL has suffered a worse than expected drop in its annual profit a result it blames on lifting its stake in loss-making Sky TV, the weak Australian economy, and its expensive internet presence.

Independent Newspapers yesterday reported a bottom-line profit of $26.11 million for the year to the end of June, down 25 per cent from last year ($34.6 million) and about $5 million short of analysts' predictions.

Revenue was $549.8 million, up 5.2 per cent from last year.

The result was dragged down by INL's 66 per cent subsidiary Sky Network TV, which also reported its full-year result yesterday a $42.3 million loss.

INL said its New Zealand publishing operations which include the Sunday Star-Times, theDominion, Evening Post and Press newspapers had produced a record result, driven mainly by growth in classified advertising, especially situations vacant.

But the company, 44 per cent owned by Rupert Murdoch's News Corp, said its Victorian businesses were stung by the sluggish Australian economy, although its largest division, the Geelong Advertiser, was showing signs of recovery by the end of the financial year.

In New Zealand, INL was also hit by what it called its "expensive" investment in its flagship Stuff website.

Chief executive Tom Mockridge would not say how much the company spent on its Stuff website last year, but said it now had a good foothold in the market, although it would continue to lose money this financial year.

While INL was "one hundred per cent, unquestionably" committed to the website, it would spend only half as much on it this year and had recently cut about 5 of Stuff's 20 staff.

Because of the group's ongoing consolidation, redundancy costs were no longer being treated as extraordinary or abnormal items on the books, said the company's managing director, publishing, Rick Neville.

New Zealand advertising revenue was up in the early part of the new financial year, although it was "a case of overs and unders", with a stronger performance in the provinces, as advertisers targeted the affluent rural sector.

Mr Mockridge, who also chairs the Sky board, said Sky's record growth in subscriber numbers over the past year put the pay television company, and INL, in a strong position going forward.

"There is no other company in Australasia that has a balanced exposure with investments in traditional television and exciting new areas like interactive TV and pay-per-view, all backed by sustained cash flow from publishing."

Sky's losses would have a "significant impact" on INL's tax position next year, although the exact spread of tax credits between the two companies was still being worked through.

The company will pay a 4.5 cent per share end-of-year dividend on November 6. Its shares closed down 5c at $3.41 yesterday.