INDEPENDENT NEWS Media (INM) has cancelled its final dividend, scrapped the sale of its stake in APN News Media in Sydney, declared plans to sell “non-strategic” assets and says it will raise a new bond to meet the maturity this year of a €200 million bond.

The firm, in a market update published in response to a drastic cut in its share price last week, said the decline was “unwarranted”. INM said its market capitalisation did not fairly reflect the true value of its underlying assets, its trading performance or the “inherent profitability” and cash generative nature of its operations. More than 33 per cent of its revenues did not depend on advertising, the company said.

INM shares, down almost 88 per cent in 12 months, gained 36 per cent to close last night at 25.9 cent after it forecast pre-exceptional operating profits of some €275 million for 2008.

This is down from €349.2 million in 2007 and marks the first time since 2004 that operating profit has not exceeded €300 million. Pre-exceptional diluted earnings per share will come in about 12 cent, down from the 14.5 cent mooted when INM warned in October of weaker earnings due to economic decline in New Zealand, Ireland and Britain. The equivalent figure was 18.8 cent in 2007.

After wage cuts in Ireland and Britain and efforts to contain newsprint and discretionary costs, operating profit this year is forecast to contract to €240-€270 million, “providing advertising and credit markets do not materially deteriorate further”.

INM has forecast a 3 per cent drop in revenue to a figure above €1.4 billion in constant currency terms for 2008 and said revenues this year are forecast “to be only marginally down” on that sum.

INM secured a four-year €105 million bank facility last August to fund repayment of a €125 million bond that fell due near the end of 2008.

The firm has engaged Merrill Lynch and Davy to raise a private subordinated bond to meet the maturity of a €200 million 5.75 per cent senior bond due in May.

With debts totalling €1.4 billion, INM had hoped to cut its debt to less than €600 million by selling its 39.1 per cent stake in APN. This sale is not proceeding.

“While there was significant interest in the APN stake (and its individual divisions), the deteriorating state of credit markets made it difficult for interested parties to put together a fully financed bid for APN at an appropriate value that would have been acceptable to both INM and to the other APN shareholders,” INM said.

INM has identified potential asset sales, although it did not name the assets in question.

However, attention centres on its 49 per cent stake in online utility price comparison firm Verivox and its 20 per cent stake in online casino software firm Cashcade.

INM said it will eliminate any loss-making businesses, leading to speculation that the London Independenttitles may be sold.

Asked about those titles and whether there was any threat to the operations of the Sunday Tribune, of which INM owns 29 per cent, a spokesman said: "The company has nothing to add to today's comprehensive statement."

Huge loss of income for O'Reilly, O'Brien

SIR ANTHONY O’Reilly will be the biggest loser in the move by Independent News Media (INM) to scrap its final dividend, a decision which will inflict no less fiscal pain on his rival Denis O’Brien.

In addition to the massive erosion in the value of their equity interest in the firm after the collapse in its shares, this presents a huge loss of income to both men.

INM’s final dividend payout for 2007 was €60.2 million. Sir Anthony, a 28 per cent shareholder, received more than €10 million in interim dividends for 2008 last November. Mr O’Brien, who now has 26 per cent of INM, received €9.5 million.

Having failed to offload its APN stake, INM is preparing to market to private investors a new bond to meet the maturity in May of a €200 million bond. With banks all but out of the market and many wealthy investors nursing big losses in the current turmoil, INM will have to pay a steep coupon to get the issue away.

In adverse markets, INM wants to sell “non-strategic core assets”. This may herald the disposal of loss-making London Independent, a sacrifice that would yield but a small return up front but which would ease pressure on profits.

Sir Anthony has already lost €400 million with his brother-in- law in the demise of Waterford Wedgwood. Now he has a big task on his hands to restore market confidence in INM by de-risking its balance sheet and reducing its €1.4 billion debt.

Mr O’Brien, down €500 million on his INM adventure, must hope he can succeed. This campaign has turned badly sour for him.