iSERVICE

How INM "harvested" Independent Newspapers in SA

MWASA submission to Treasury on a case study of foreign direct investment gone wrong (Sept 2011)

Submission by the Media Workers Association of South Africa to the National Treasury on Independent News & Media of South Africa in response to the document ‘A review framework for cross-border direct investment in South Africa', August/September 2011

In February this year (2011) National Treasury released a discussion document entitled ‘A review framework for cross-border direct investment in South Africa'.  The focus of that discussion document is on the acquisition by foreign enterprises of ‘existing South African businesses'. At the time the document was released National Treasury called for submissions from interested parties.

Media Workers Association of South Africa (Mwasa) welcomes this opportunity to present the Irish-owned Independent News & Media plc (INM plc) as a case study that highlights some of the concerns that should be addressed in any review framework that the SA government considers establishing in relation to cross-border direct investment into SA.

This case study covers the entry of INM plc into South Africa as well as the subsequent restructuring of Argus Newspapers and the ever-increasing focus on generating higher profits for the Irish shareholders. It attempts to highlight the constant pressure to repatriate profits to Ireland regardless of the trading conditions prevailing in South Africa.

In essence what appears to have happened during the period of foreign ownership is an effective ‘harvesting' of 100+ years of investment undertaken by the various operations that currently comprise the Independent News & Media. The harvesting of that investment, which involved the creation of powerful titles, has been for the benefit of foreign shareholders.

Some 18 years after that initial investment in SA it would be hard not to conclude that INM's ownership of the largest newspaper group in the country has made few of the contributions that are expected from foreign direct investment. Specifically the initial net investment of an estimated R560 million to R725 million has been dwarfed by the possible outflow of much of the local operations' profits.

While this outflow was limited to dividends as well as any management fees and interest payments during the period that the local company had a listing on the Johannesburg Stock Exchange, the scope for repatriation of profits to Ireland was considerably enhanced in 1999 when the Irish parent bought out all of the minority shareholders and the local company was delisted.

In the period between 1999 and 2010 operating profits are estimated to be in the region of a total R4 billion. During that period operating margins were increased from 12.5 percent in 1999 to 21.1 percent in 2010. (The figures for financial 2011 brings the total operating profit to around R4.5 billion.)

In addition there has been little indication of technological benefits arising from the INM plc ownership that would not have been available to an independently owned SA newspaper group. Furthermore, far from boosting employment opportunities, the ownership by INM has been accompanied by a significant reduction in employee numbers.  From a high of 5 223 at the time of the initial transaction in 1994, employee numbers have been reduced steadily to a current level of around 1 500.

It is also important to point out, as was highlighted by National Treasury's discussion document, that print media is one of the sectors where governments across the globe are most likely to regulate foreign investment. Indeed, MWASA is unaware of any other instance in which the largest newspaper group in a country is owned 100 percent by foreign interests. (Ironically INM plc was only able to acquire a controlling stake of an Australian newspaper group because certain of INM's controlling shareholder, the O'Reilly family, are Australian citizens.)

In preparing this case study we were constantly aware of the difficulty of accessing information. Thus the staggered nature of the acquisition, from an initial 31 percent stake in Argus Newspapers purchase in February 1994 to 100 percent of an enlarged Argus Newspaper Holdings, meant that it was impossible to attribute, with certainty, a total figure to the money spent by the Dublin-based Independent News & Media. INM plc has never revealed what the total cost of its purchase was.  Media comments attributed to the group's chief executive and controlling shareholder at the time, Tony O' Reilly pointed to a figure of around R560 million.

The limited information that has been available to the public since the SA operation was delisted in 1999 also makes it impossible to determine how much tax was paid to the SA Receiver after 2004 when the parent company, INM plc inexplicably stopped publishing a geographic breakdown of its tax payments. In the period between 1999 and 2004 the tax rate vacillated, again inexplicably, between a low of 2.9 percent in 2000 and a high of 24.8 percent in 2004.

In addition, after its' delisting from the JSE in 1999, no details are provided in the parent company's Annual Report of the number of employees at INMSA.  Mwasa is aware of the steady stream of retrenchments throughout much of the period between 1999 and 2010. It has not been possible to get a figure verified by management for the purposes of this report but it does seem that the number of employees at INMSA is currently approximately 1 500.  However management does stress that it provides additional employment opportunities through the use of labour brokers. Thus some employees who at one stage had worked full time for INMSA are now working for INMSA through labour brokers.  No precise figures were made available.

INDEPENDENT NEWS & MEDIA PLC INVESTS IN SA

Between 1994 and approximately 1999 the Dublin-based Independent Newspaper Group (Plc) (INM plc) acquired 100 percent of what had been known as the Argus Newspaper Company. The purchase price was staggered, starting with an initial investment reported to have been just over R120 million for 31 percent of Argus Newspapers in February 1994.  This purchase price attributed a total value for the group of R400 million.

The sellers were Anglo American, and subsequently its associate JCI. It was reported at the time that, in anticipation of a change in the investment environment, AA was keen to dispose of its non-mining assets and that it had been looking for a buyer for its media assets for around two years.

The INM acquisition, led by high profile Tony O'Reilly, was welcomed in 1994 as indication of positive international investor sentiment towards South Africa. O'Reilly was believed to have close ties with Nelson Mandela and this is thought to have paved the way for the transaction. (Ironically during questioning at INM plc's 2009 annual general meeting in Dublin, shareholders were told that non-executive director Brian Mulroney - former prime minister of Canada - received fees from INM for his networking and ability to keep the board abreast of activities in South Africa.)

It is apparent from annexure 1 that INM plc was not the only party interested in acquiring the Argus Newspaper.

Over the next few years INM plc increased its stake from 31 percent to just over 70 percent. It had made an offer of R13 a share to lift its stake from 31 percent to at least 60 percent. At this stage O'Reilly indicated that ‘black institutions' would be offered a maximum of 20 percent of the company, if INM plc could secure a 60 percent stake for itself. Commenting on shares for the ‘black institutions' O'Reilly said, "We have to ensure some egalitarianism and justice or we will reap a whirlwind, we're acting out of enlightened self-interest."

In 1999 INM plc acquired all of the remaining minority shareholders with an offer of R26.50 a share.

It has not been possible to establish the precise amount paid by INM plc for 100 percent of Argus Newspapers; as noted above one newspaper report refers to O'Reilly indicating that the total price tag was in the region of R560 million. An alternative valuation - using R13 a share for a 40 percent stake and R26.50 a share for 30 percent - points to an acquisition price of around R725 million. It is important to point out that in the mid-1990s the Rand was much stronger against the Irish punt than it is currently against the Euro. But it should also be pointed out that INM plc was able to use the Finrand to effect its acquisition.

THE EARLY YEARS

In the lead up to the acquisition of 100 percent of Argus Newspapers, the controlling shareholders (namely INM plc) implemented a number of strategic transactions. A critical early step was the acquisition (by Argus Newspapers) in March 1994 of Natal Newspapers, Pretoria News and the Cape Times from JCI/AA. Although the transaction gave Argus Newspapers a virtual monopoly over the English-language print media, in particular in Cape Town, at the time the Competition Board gave its approval on the grounds that JCI and AA had previously controlled the media.

Naspers with a black economic empowerment group headed by Mustaq Brey and Fred Robertson had failed in their bid to acquire the Cape Times.

At the time O'Reilly talked of plans to develop journalistic excellence and implement affirmative action. "We look to the twin goals of better product and more efficiency to produce a profitable and expanding business and provide employment opportunities." O'Reilly also talked of being able to provide mobility for journalists as they worked at INM plc's various operations in Ireland, New Zealand, Australia and South Africa. "...so people get an opportunity to move between companies and understand other political systems and cultures..."

The Argus Newspaper Company's annual report for 1994 reveals that the SA business, which now included the former Argus operations plus Natal newspapers, Pretoria News and Cape Times, had 5 223 employees at end December 1994.

In July 1994 the Argus Africa News Service was closed.  Management stated, "New arrangements will be made to cover the continent."  The Africa News Service had been operating for 38 years.

In September 1994 The Pretoria News became a morning paper and its printing press moved to The Star's premises in Johannesburg. The move resulted in scores of job losses chiefly amongst printers but also journalists and administration staff.

 In October 1994 The Financial Mail described how the Argus Newspaper's restructuring plans had been a blow for those who had expected O'Reilly to pump more resources into the "ailing" newspaper sector. Leading journalist Ken Owen remarked that the ‘Irish are right, newspapers must be returned to profitability; they used to generate good profits but were used to acquire an industrial empire for Anglo American, and were neglected'.  This ‘neglect' was reflected in what Owen described as, ‘bloated' staff numbers and operating margins of just 7 percent at Argus Newspapers in 1994 when it was acquired by the ‘Irish'.

In June 1994 The Star's circulation was 204 000, by December circulation had dropped to 191 000. The Cape Times circulation was 60 000 and the Argus was over 100 000.

In December 1994 Richard Steyn, the editor of The Star resigned, citing differences with Argus Newspapers' chief executive John Featherstone over editorial independence.  Steyn told a meeting of journalists that he did not believe that requiring editors to report to regional managing directors was a ‘good thing'.

One of Argus Newspapers' executives remarked that O'Reilly's concern was to get a return on his investment. "He wants a lean, mean ship". The MD of Natal Newspapers said O'Reilly wanted operating margins of 25 percent.

In June 1995 the company's name was changed to Independent Newspaper Holdings. The group was restructured and publishing rights and titles were revalued. A separate management services company was established at this time.

STRONG GROWTH PROSPECTS

The next few years were exciting times for the newly created Independent Newspaper Holdings with the launch of Business Report, the Sunday Independent and Personal Finance and the closure of the Sunday Star and the Weekend Argus. Investment was also undertaken in editorial IT capacity.

The Business Report was launched in March 1995 and achieved profitability in September of that year.  It is arguable that the launch of Business Report was inevitable once Anglo American/JCI no longer had a controlling stake in both Argus Newspapers and SAAN (which has become Avusa). SAAN had a strong business paper.

Prospects for the group looked good with increasing levels of literacy across the country expected to lift sales. However some media analysts warned that the group's products lacked mass market appeal and were out of touch with the needs of the market.

In 2002 INMSA launched the Zulu-speaking Isolezwe following the cancellation of a joint venture operation with a KwaZulu-Natal partner. Isolezwe has been INMSA's most successful titles in terms of circulation.

It was around this time that The Voice was launched in Cape Town with the objective of securing the sort of success enjoyed by The Daily Sun, which was an extremely popular tabloid paper that had been launched a few years earlier by Naspers.

In annexure 2 Mwasa provides a brief analysis of the annual financial performance of the group between 1996 and 2010. 

One item that is not included in the reported figures used for this analysis is the repatriation (to Ireland) in the late 1990s of an estimated R200 million, which was deemed to be a pension fund surplus.

What is also not revealed in any publicly available documents are details of a loan of R1 billion from INM plc to the South African company. This loan was referred to by INMSA's current chief executive, Tony Howard during discussions with representatives of the Company's trade unions in July 2011. Howard said that the loan had been in place "since inception". He also noted that INMSA had no local debt on its balance sheet and was cash generative. This raises the question of why an inter-company loan of R1 billion is deemed necessary, particularly in view of the limited capital investment undertaken by INMSA.

RECENT DEVELOPMENTS

The collapse of Lehman Brothers in 2007, which precipitated a global financial crisis, exposed the highly geared nature of INM plc's balance sheet and in 2009 necessitated a substantial restructuring of the group's debt and equity base.  For years the company had paid out extremely generous dividends to its largely Irish-based shareholders. It had also spent tens of millions of Euros buying back its own shares (at highs of Euro3 a share; after a massive rights issue and a subsequent share consolidation the INM plc share is currently trading at around 28c Euro) in a seeming bid to thwart a hostile bid for control by Denis O'Brien. In addition INM plc had raised debt to acquire media assets across the globe.

One of those acquisitions was the purchase in early 2008 of the remaining 50 percent of Clear Channel that it did not already own. This acquisition, which was subsequently renamed INM Outdoor, appears to have cost Euro 87 million. Without sight of an INMSA balance sheet it is impossible to determine how the purchase was funded but it is likely to have involved the use of debt raised by INMSA.

Although the purchase of the remaining 50 percent of Clear Channel helped to boost operating margins it very soon became clear that the debt crisis facing INM plc necessitated the immediate liquidation of non-core assets. During 2009 100 percent of INM Outdoor was sold for Euro 98 million. This sale price - for 100 percent - was just Euro 11 million more than INMSA had paid for 50 percent in 2008.  It represented a huge opportunity cost for INMSA, which faced no debt problems of its own. Given that the proceeds from the sale were needed to repay INM plc's debt, it is unclear what happened to any debt that might have been raised by INMSA to acquire the asset in the previous year.

The ongoing severe pressure to repay debt owed by INM plc ensures that operating margins remain under considerable pressure in South Africa as profits generated by INMSA are used to repay the Irish debt. This situation is merely an extreme version of the 18-year old practice of extracting profits from South Africa regardless of what was appropriate for the South African trading environment.

THE BENEFITS FOR SA

The story of INM SA over the past 18 years has overwhelmingly been one of cutting costs and lifting operating margins.

To consider whether the acquisition of 100 percent of South Africa's largest printing and publishing company by a foreign investor represented a positive or negative development for the country requires consideration of the impact of these actions.

 It is hard to dispute the contention that in the apartheid era it suited Anglo American to maintain a ‘bloated' under-managed media asset.  It is equally hard to dispute the fact that tighter management was needed to create a company that would withstand the uncertainty of the past 18 years while also being able to take advantage of the vast opportunities created by that same uncertainty. However there is much evidence to suggest that INMSA's cost cutting has been taken to extreme. It is now questionable whether INMSA has the capacity to cope with a rapidly changing environment.

The significant fall-off in circulation of many of the group's daily papers (with the notable exception of Isolezwe) is attributed, by management, either to economic conditions or to the onslaught of products based on internet/mobile phone technology. A well-resourced South African company, keen to protect and develop its own market with an eye to long-term sustainability, might not have been so aggressive in cutting costs or so focused on increasing margins for the benefit of a cash-needy controlling shareholder.

Given the evidently strong cash-generating ability of the company INMSA should have been well-placed to undertake the necessary investments to deal with the double challenge the industry has been facing for over a decade namely the tough economic conditions and the far-reaching changes in technology.

There is no question that the cost cutting has had significant benefits for INM plc over much of the past 18 years. The enormous operating profit that has been repatriated to Ireland over that period has helped the controlling shareholder to fund an overly generous dividend policy that benefited the predominantly Irish-based shareholders. More recently it has helped to release some of the debt pressure faced by the Irish parent.

PERSPECTIVE FROM THE NEWSROOM

By contrast from the perspective of the company's newsrooms the prolonged cost-cutting has seriously damaged INMSA's growth potential.  The following are some of the concerns that have been raised by Mwasa members in recent years:

*Under our Irish owners we have witnessed the slow demolition of our capacity to deliver quality journalism -

*Newsroom posts have been frozen or stripped away. Reporters are routinely doing several stories a day, often resorting as a result to telephone journalism, which means that the voices heard in our papers are increasingly those of the powerful, those who can afford communications consultants and those who offer journalists easy access.

*We rely far more than we should on cadet reporters and interns, taking risks we should not be taking.

*The poor salaries we offer and the long promotion processes make it hard to retain top journalists, especially if they are black.

*Our regrade systems are appalling: photographers with decades of experience are stuck on D1 grades. At present, all regrades have been frozen until further notice in the interests of cost savings.

*We have been outbid on some of the country's best cartoonists and columnists who have moved to rival titles though they would have preferred to stay with Independent because of the reach we can offer.

*Some of our titles have NO supplements or features editors or even writers. 

*Our freelance budgets for special news correspondents, arts and books reviews, and opinion pages are absurdly low.  We turn away good contributions (copy and pictures) because we cannot afford them.

*We are printing fewer colour pages in order to cut costs.

*Retrenchments in production mean that pictures are now scanned automatically, with loss of quality, and extra tasks have been passed on to our subs (soft-proofing for instance), copytasters and editors. Many of these tasks are not difficult but very time-consuming, involving dozens of additional keystrokes by people who are already hardpressed.

*We have no travel budgets to speak of.

*Critically, with the exception of Business Report and Personal Finance, ALL the so-called synergy projects put in place to save money have been a failure. Though the journalists who staff it do their best under impossible conditions, our political bureau is unable to meet the needs of all our titles. Reporters and editors are forced to ridiculous measures in order to supply copy to morning, afternoon and weekend papers. Comment is mixed with news, information is constantly held back from one stream in order to service another.

*The Independent Production unit, which stripped subs of their affiliation to individual titles has inevitably led to a drop in quality in spite of the efforts of those involved. The styles which make each paper unique hve been lost, making nonsense of our careful attempts to niche our papers in their markets. Local knowledge is no longer prized and subs have very little time to work on witty or unusual headlines.

*We have lost access to essential wire service pictures and copy in a bid to cut costs.

* Our online arm, IOL, is too short staffed to be able to offer newspapers much help with their websites. Responsibility for the sites' development has been handed back to the print editors, and as a result our offerings are far behind those of our competitors.

IOL relies on the printed papers for material. Instead of adding value to our print editions (audio, video, etc), IOL is cannibalising them. We are barely able to put up opinion pieces, extra photographs on our sites in addition to the news.

Yet the editorial platform on which we work was bought - we were told - because of its easier interface between print and online.

 And not only are we behind on the internet, we are not developing new platforms such as cellphone news technology which is arguably far more useful as a medium in South Africa than the internet.

 And yet we are constantly raising our cover prices in order to make quick revenue grabs.

PROPOSED SALE OF NEWSPAPER HOUSE IN CAPE TOWN

The depletion of the asset base referred to by Mwasa's members was echoed - albeit possibly unintentionally - by INMSA's management recently in regard to the proposed sale of the company's landmark head office in Cape Town. The general manager of INMSA's Cape division, Ishmet Davidson told journalists that the decision to sell the building, which has been the site occupied by the Cape Times since 1857 followed the company's decision to outsource its printing requirements rather than replace "ageing printing machines".  Davidson said that the age of the building and the associated maintenance costs were another reason behind the decision to sell.

At one stage more than 1 300 people were employed at Newspaper House. "Today we are down to about 300 people," Davidson said. He added, "Renovations to the building, which would include parking, new lifts and improved air-conditioning, is simply too costly and the building is no longer practical for our purposes."  Mwasa notes that its members have long suffered the consequences of the failure to undertake proper maintenance of the building.

Mwasa believes that mismanagement and lack of investment were the key considerations in the decision to outsource the Cape printing facilities. In this regard it is significant that a recent investigation into the print media industry in KwaZulu-Natal highlighted the importance of print media companies having control over printing capacity.  This is particularly the case when the print media company is a major player in the industry. The decision to outsource the Cape's printing requirements, which helped to lift margins in the current reporting period, leaves INMSA vulnerable to third party pricing demands.

(Note- The Cape Times office and a warehouse in downtown Cape Town were sold during 2011 generating income of just  over Euro 9 million for the Irish parent.)

CONCLUSION

The contention that foreign ownership of South Africa's largest print media group did not benefit South Africa involves the presumption that a South African shareholder, other than Anglo American, would have generated greater returns for South Africa than INM plc has. At the very minimum this presumption merely requires that a South African shareholder spent or invested the proceeds of the 18 years of profits in South Africa, that employment numbers were not decimated and, that adequate tax payments were made to SARS.

Above this minimum presumption it is possible that South African ownership might also have ensured the involvement of a black economic empowerment shareholder as well as the creation of a media group that was well placed to deal with the complex and volatile future facing the media industry. An additional, somewhat ironic, consideration is the shortage of publicly available information on this important South African business. The lack of information extends to the remuneration packages that have been awarded to SA executives during this process.

By its very nature, the conclusions of this case study are tentative. However Mwasa hopes that it is helpful in drawing attention to issues that should be considered by government as it looks to drawing up regulations governing foreign direct investment in non-greenfields' projects.

ANNEXURE 2

Financial performance of The Independent News & Media, South Africa between 1994 and 2010.

The new management at Argus Newspapers/Independent Newspaper Holdings achieved significant improvements in profitability within a relatively short period. Between 1991 and 1994 the turnover of Argus Newspapers increased from R525.7 million to R733.7 million; trading profit increased from R31.3 million to R59.3 million with margins increasing from 5.9 percent to 8 percent.  The tax rate varied from a high of 54 percent in 1991 to 48 percent in 1993. No dividends were paid until 1994 when a dividend of 20c a share was paid - it was 2.6 times covered by earnings.

In 1996 turnover was R992 million, operating margins increased to 12.5 percent from 11.7 percent in 1995; the tax rate was 37.4 percent (equivalent to R46.5 million), a dividend of 90c a share was paid and there were 4 728 employees.

In 1997 turnover was just over R1 billion and operating profit was R137.4 million, with operating margins of 12.6 percent; the tax rate of 33.2 percent was equivalent to R58.5 million. A dividend of 120c a share was declared which was 2.1 times covered by earnings. During 1997 the company sold its 42.5 percent stake in The Sowetan, it also reduced its stake in Allied Publishing Ltd Newspaper Distribution to 33 percent from 70 percent.  The sale of part of its stake in Allied was behind the reduction in employee numbers to 3 946.

Independent Newspaper Holdings' 1997 Annual Report reveals that INM plc had increased its stake in the SA company to 70 percent and that operating margins had increased to 14.7 percent from 8 percent in financial 1994.

In 1997 and 1998 the company benefited from pension fund holidays.  During this period the Irish parent company also benefited from the repatriation of an estimated R200 million pension fund surplus from the SA company. 

A report issued by stock brokers Merrill Lynch during 1999 noted that the Irish owners had managed to reduce distribution costs from 18 percent of total costs to closer to the international norm of 9 percent. "Over the past few years Independent Newspaper Holdings has made major strides in making its distribution more efficient through franchising out distribution. This has taken place mainly in Cape Town and is evident in the reduction in staff complement", said Merrill Lynch. From 1999 distribution was also going to be franchised out in KwaZulu-Natal. "This and staff reductions due to wide-ranging restructuring initiatives - new production technology, streamlining advertising and finance functions and expanding the use of electronic editorial systems to improve editorial synergies - could result in about 400 job losses.  This should result in significant cost-savings," said Merrill Lynch.

In 1998 turnover was just over R1.1 billion, operating profit was R146 million, operating margin was 13.2 percent. The tax rate of 38 percent was equivalent to R61.5 million. The dividend of 130c a share was 1,7 times covered by earnings. Employee numbers had dropped to 3 450. The annual report states that the company was continuing to upgrade its eleven presses and that moves were being taken to reduce the ‘high level of fixed expenditure'.

During financial 1999 the Irish parent bought out all of the minority shareholders in Independent Newspaper Holdings at a price of R26.50c as share. The company was then delisted from the Johannesburg Stock Exchange. This meant that the information relating to the SA operation that was available to the public was restricted to what was made available in the INM plc annual report.

The situation has been made more complicated by the fact that INM plc has tended to vary its disclosure policy over the years. Thus for a number of years it provided a geographic breakdown of tax payments. This policy was terminated for no reason in 2005.

It does not give a geographic breakdown of its employees. It did not provide details of turnover from its Clear Channel operation in SA until the year that company was sold. It did not provide a geographic breakdown of capital additions and depreciation until 2003.

A further significant consideration is that from 1999 the financial information relating to SA is only available in Euros. This complicates analysis because it appears that the group's annual report does not contain details of the R/Euro exchange rate that was used to convert the financial data from SA. (For the local management it also means that the impact of the exchange rate, over which they have absolutely no control, plays a greater apparent role in their performance.)

In 1999 turnover at the now wholly owned SA operation was Euro 177.3 million; operating profit was Euro 22.2 million. The tax payment of Euro5.4 million was equivalent to a tax rate of 24 percent. The operating margin dipped to 12.5 percent.  According to the Merrill Lynch employee numbers had dropped to 3 050 during 1999.

In 2000 turnover increased to Euro189.1 million; operating profit was Euro23.7 million equivalent to an operating margin of 12.5 percent; the tax payment of Euro 0.7 million was equivalent to a tax rate of 2.9 percent on operating profit.  There was no indication from the INM plc annual report why the SA tax rate was so low. Tony Howard, chief executive of INM South Africa has recently said that INM SA received a R1 billion loan from the Irish parent, which "has been there from inception". However it has not been possible to trace that loan in any of the information that is available to the public. In addition while interest payments on a R1 billion loan would have impacted tax payments it would not fully explain the very low charge. Even taking into consideration the possible payment of management fees to INM plc, the low tax charge is difficult to explain. Certainly MWASA members are not aware of a capex programme that would have significantly impacted INMSA's tax liability. 

In 2001, although turnover increased in Rand terms, the significant weakness in the Rand during that year saw turnover drop to Euro 161.5 million; operating profit was Euro 22.5 million reflecting operating margins of 13.9 percent. The tax payment of Euro 1.2 million implied a tax rate of 5.3 percent. Again there was no apparent explanation for the low tax charge. During 2001 INMSA, which holds 33.3 percent of outdoor advertising company, Clear Channel, bought control of Corpcom in conjunction with Clear Channel. At that stage Clear Channel had 55 percent of the outdoor advertising market in SA and operated in 16 other African countries.

In 2002 Tony Howard was appointed CEO of INMSA,  he had previously been finance director. 2002 was characterized by tough economic and trading conditions, with increasing inflation rates and interest rates. Again, as with 2001, reporting in Euros reflected the impact of a considerably weaker Rand. Thus although in Rand terms turnover and operating profit were up, in terms of Euros turnover dropped to Euro 136 million and operating profit was down to Euro 19.7 million. Operating margin increased to 14.5 percent. The tax payment was Euro 2.1 million equivalent to a tax rate of 10.6 percent.

A key development during the year was the launch of Isolezwe in KwaZulu-Natal. This was in reaction to the cancellation, by its KZN partner, of a joint venture to publish a Zulu language daily paper. Isolezwe reached a daily circulation level of 38 000 in 2002.

During 2002 The Star became SA's largest selling daily paper, overtaking The Sowetan.

In 2003 turnover was Euro 159.5 and operating profit Euro 23.5 million for an operating margin of 14.7 percent. The tax payment was Euro 3.6 million equivalent to a tax rate of 15.3 percent. INMSA performed very well on the back of a much improved economic and trading environment which was assisted by lower inflation, lower interest rates and a stronger Rand. Isolezwe increased its circulation to 55 000 daily sales. IOL.co.za was reported to be attracting 1.4 million unique visitors per month.

In 2004 turnover increased to Euro 198.1 million and operating profit was up to Euro 31 million reflecting operating margins of 15.6 percent. The tax payment was Euro 7.7 million, equivalent to 24.8 percent of operating profit. This is the first year that INM plc's annual report includes a geographic breakdown of capital additions; it shows that INMSA spent Euro 2.7 million on capital additions.  The trading environment for 2002 was described as ‘robust'.  IOL.co.za was reported to be attracting 2 million unique visitors per month.

Explaining the improvement in margins in SA the INM plc annual report notes, "The ongoing focus on cost containment included the reorganization and rationalization of the group's production and distribution activities and enhanced operational efficiency."

In 2005 turnover was Euro 222.2 million and operating profit was Euro 41.8 million for an operating margin of 18.8 percent. The INM plc annual report stopped providing a geographic breakdown of its tax payments, it provided no explanation for this decision.

Capital additions at INMSA amounted to Euro5.3 million.

During 2005 INMSA was the star performer of INM plc, helped by the strong SA economy and the benefits of "strong cost containment initiatives". In March 2005 The Daily Voice was launched in response to Naspers' very successful Sun. Isolezwe's daily circulation increases to 86 000.  INM's stake in Clear Channel has increased to 50 percent. IOL.co.za is reported to have 2 million unique visitors per month.

In 2006 turnover was Euro 262.8 million and operating margin was Euro 55.2 million reflecting an operating margin of 21 percent. Capital additions amounted to Euro 1 million. The strong trading environment and the benefits of "a number of cost saving initiatives" contributed to the impressive results. Circulation of each of the group's main titles increased. Isolezwe achieved daily circulation of 92 000. IOL.co.za achieved ‘well over' two million unique visitors per month.  SA management noted "The rollout of a new editorial system across all regions has enabled a more streamlined automation of content generation for the newspaper title websites, which are proving to be excellent marketing channels for the newspaper division".

In 2007 turnover dipped to Euro 234.7 million but operating profit increased to Euro 59.1 million for an operating margin of 25.2 percent.  Capital additions amounted to Euro 3 million. The weakness in the Rand negatively impacted the results in Euro terms. SA management reported good advertising performance and strong circulation was achieved, in particular for Isolezwe and the Daily Voice. IOL.co.za is delivering almost three million unique visitors per month.

In 2008 turnover dipped to Euro 212.5 million in what management described as a ‘challenging economic and trading environment'. However operating profit surged to Euro 72.2 million reflecting margins of 34 percent. The strong margins were attributed to the acquisition of the remaining 50 percent of high margin business, Clear Channel (which became INM Outdoor). Management also attributed the strong operating margins to "ongoing focus on business improvement initiatives leveraged off new operating structures and upgraded newspaper production technology".

Circulation revenue increased 4.9 percent, helped by "aggressive cover price increases on certain titles" and sales growth by Isolezwe, which recorded daily circulation of 98 448. Advertising revenue dipped 2.4 percent. Management noted that the "online and newspaper divisions have been integrated to better leverage the group's content". With the launch of IOLproperty.co.za the IOL.co.za website now comfortably delivers well in excess of 2 million unique visitor per month. During 2008 capital additions totaled Euro 93.7 million some Euro 87.3 million of which was attributable to the acquisition of the remaining 50 percent of Clear Channel.

In 2009 turnover dropped to Euro 209.5 million and operating profit slumped to Euro 47.8 million reflecting margins of 22.8 percent. In rand terms the drop in turnover was 4.7 percent and appears to have been largely attributable to the sale of 100 percent of INM Outdoor during the year. The sale of INM Outdoor, which was necessitated by the debt crisis at the parent company INM plc, also impacted negatively on INMSA's operating margin. During this year circulation revenue increased 3.6 percent in rand terms due to cover price increases. Isolezwe daily sales reached 100 000 and Sunday Isolezwe achieved sales of 60 000. Advertising revenue dropped 11 percent. Management noted that the pressure on profits from the squeeze on publishing revenue was cushioned by "the positive impact of strict cost containment measures and the introduction of a number of further business improvement initiatives".  Management also noted that the online operations "was successfully integrated into the publishing division in order to better leverage the group's content and maximize efficiencies". IOL.co.za now comfortably delivers over 2 million unique visitors per month. Capital additions totaled Euro 7.7 million.

The INM plc annual report reveals that the sale of 100 percent of INM Outdoor realized R1.1 billion, equivalent to Euro 98 million.  This is just Euro 10.7 million more than INM SA paid for 50 percent of the company a year earlier.

In 2010 turnover dipped to Euro 206.2 million and operating profit was down to Euro 43.5 million revealing operating margins of 21.1 percent.  Capital additions totaled Euro 1.4 million. The weaker figures again reflect the negative impact of the sale of INM Outdoor during financial 2009.  Management noted that the "performance was assisted by the positive impact of strict cost containment measures and the introduction of a number of further business improvement initiatives..."

IOL.co.za, which now includes IOLproperty and IOLjobs, now comfortably delivers more than 3.5 million unique visitors per month.

In the INM plc 2010 annual report Gavin O' Reilly stated, "Thanks to the foresight of Anthony O'Reilly and Liam Healy, INM first invested in South Africa in 1994 in advance of the first ever free and democratic elections. Financially it is a decision that is vindicated each and every year."

Undoubtedly for INM plc the decision has been vindicated each and every year. In the years since INMSA became a wholly owned subsidiary of the Irish company the cumulative operating profits, which are available for repatriation, have been in excess of R4 billion, dwarfing the investment of between R560 million and R725 million. 

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