Independent News & Media (INM) has reported relatively strong half year results in a challenged industry. But it needs to find suitable digital acquisition targets and execute buyouts, fast, if investors are to stay interested in its story.
Its results for the six months to the end of June show cash balances of €62.4 million, up by a whopping 76 per cent since this time last year. Fully one-third of its market value is attributable to cash, and at the current rate of generation, this could top 50 per cent early next year unless it finds buyout deals.
Challenges
Given the challenges facing the newspaper industry, to be frantically looking for ways to spend your cash to drive future revenues is, in relative terms, a bit of a first world problem. But it is a still problem.
Stock market investors don’t buy into media companies to get a one-third slice of its bank account. That’s a boring story. They want a growth story instead, and INM needs digital acquisitions to deliver it.
But if INM appears too desperate to dig out suitable acquisitions and deploy its cash, it may end up overpaying on its targets.
It is a delicate balancing act for Robert Pitt, INM's chief executive who joined the group from Tesco. He indicated on Friday it has now widened its search for digital acquisition targets beyond the UK. In Ireland, it also wants to mop up smaller print assets.
Competition
Pitt also provided some colour on the type of digital businesses it wants to buy: “We are not looking for small start ups. We are not looking for turnarounds. We want to buy businesses that will have a positive impact on the bottom line as well as the top. They must be well defined [but not niche].”
In other words, Pitt is targeting, in the UK and elsewhere, the same sort of value-accretive digital media businesses that every other traditional publisher with an eye on the future wants to buy. INM has competition for those assets.
The longer the group sits on its hands waiting for the right type of acquisition target at the right price to present itself, the less bang it will get for its buck as other media companies swarm the same pool, driving up prices.
