Independent News & Media Regulatory News (INM)

INM REPORTS REVENUES OF €272.2 MILLION AND OPERATING PROFIT OF €25.4 MILLION

Ticker: (Bloomberg) INM.ID/INM.LN and (Reuters) INME.I/INME.L

Dublin/London 31 August 2012: The Board of Independent News & Media PLC ('INM' or the 'Group') today announced the Group's results for the six months ended 30 June 2012. A detailed presentation on these results is available on the Group's website inmplc.com.

SUMMARY

§ Revenues of €272.2 million, down 2.6% in constant currency

§ Operating Profit, pre-exceptionals, of €25.4 million, down €9.1 million versus H1 2011

§ EBITDA of €39.1 million (including dividends received of €8.0 million) for H1 2012

§ Operating Costs were reduced by 1.3% to €246.8 million despite inflationary cost increases in South Africa in excess of 7%

§ Operating Margin of 9.3%

§ Continued progress in digital, with revenue growth of 15.2% partially driven by the successful rollout of GrabOne in the Island of Ireland

§ International House Dublin performing ahead of expectation following successful integration with Independent Colleges

§ Net exceptional charges after tax totalled €163.7 million driven mainly by non-cash asset impairments in APN and Island of Ireland

§ New Board appointments deliver appropriate balance of skills/experience

§ Strategic review of South African business progressing - a number of third party approaches received, with focus now on ascertaining if a disposal is deliverable on attractive terms

INTERIM MANAGEMENT REPORT

- PERFORMANCE OVERVIEW -

The Group reported an Operating Profit before Exceptionals for the first six months of 2012 of €25.4 million, which was €9.1 million behind the same period last year. Group Revenue in constant currency fell by 2.6%, with reductions of 2.9% and 2.1% in the Island of Ireland and South Africa respectively. The Island of Ireland continues to be adversely affected by both the weak domestic market conditions and the ongoing Eurozone financial crisis. South Africa was impacted by fragile consumer and business confidence. Group advertising revenue in constant currency was down 4.1%, while circulation revenue was down 1.9% in constant currency.

During the first half of 2012, operating costs were reduced by a net €3.3 million. This includes a range of recent cost saving initiatives including the closure of the Head Office in Citywest and consolidation into the Talbot Street city centre offices in Dublin where the Irish operations are based. The Group also closed its London office at the end of June. The position of COO, previously held by the Group's current CEO, has not been back-filled. The Group has successfully completed a voluntary redundancy scheme in the Sunday World which was oversubscribed. In Belfast, we also successfully repositioned the newspaper to an AM Edition, which resulted in the closure of the dayshift in the Belfast printing plant. These savings were partially offset by the impact of significant inflationary pressures in South Africa and acquisitions/launches. The full benefit of these cost saving initiatives plus the benefit of additional cost savings identified in H2 2012 will deliver further cost savings in the second half.

While we are committed to producing and delivering our market leading products more efficiently each and every day, we continue to appropriately balance this focus with some investment in editorial, marketing and digital to underpin our market-leading franchises. In particular, we will continue to develop an increasingly diverse revenue stream through enhanced focus and measured investment in digital. INM titles are profitable and have maintained or enhanced their market leading positions in 2012.

Net Exceptional Charges After Tax totalled €163.7 million. These primarily related to non-cash impairment charges on intangible assets in APN relating to New Zealand mastheads (INM share €99.3 million) and in the Island of Ireland (€10.4 million) relating primarily to Belfast, an impairment charge arising on property, plant and equipment in the Island of Ireland (€34.5 million) and a non-cash charge on the write off of goodwill on the Group's investment in APN (€23.9 million). These non-cash charges were somewhat offset by a gain arising on APN's disposal of its 50% interest in the Outdoor division (INM share €19.0 million).

Commenting on these results, Vincent Crowley, Group Chief Executive Officer, said:

"The first half of 2012 offered no respite from the difficult trading conditions in which INM operates. While advertising revenue in South Africa was broadly similar to the prior year in constant currency terms, advertising revenue in the Island of Ireland experienced a decline of almost 10% compared to the same period in 2011.

"Weak economic conditions prevailed in the Island of Ireland, while the South African economy experienced multi-year lows in both consumer and business confidence.

"However, in these difficult conditions, INM delivered an EBITDA of €39.1 million, reduced operating costs by €3.3 million and delivered further Net Debt reduction.

"Early trading in H2 suggests a continuation of the trends experienced in H1. Forecasting operational performance for the latter half of 2012 is challenging as visibility is very short term.

"INM has a strong portfolio of market-leading and profitable titles and a growing digital revenue stream. Despite unprecedented operating conditions, and an ever-competitive media landscape, the Group's franchise is resilient, relevant, and profitable. INM has a well invested and increasingly efficient asset base, with no significant medium-term capital expenditure requirements.

"A key focus in H2 will be on continuing to develop our deleveraging strategy, further cost efficiencies and addressing our pension deficit."

- 2012 OPERATIONS REVIEW -

ISLAND OF IRELAND

The Group's Island of Ireland business combines all of INM's operations in the North and South of Ireland and is the largest media operation across the 32 counties. Revenue of €178.8 million was down 2.4% versus H1 2011 in what continues to be a very subdued market.

Weak economic conditions across the island of Ireland and the impact of the ongoing Eurozone financial crisis, resulted in a €2.6 million reduction in operating profits during the first six months of the year compared to the first six months of 2011. In this challenging environment, continued cost vigilance again insulated the Group from a large percentage of the revenue reduction, with costs down €1.8 million, despite the year-on-year cost increases associated with the newly launched Grabone.ie and recently acquired International House business.

The advertising market continued to decline in 2012, albeit at a lower rate than 2011. INM's market-leading publishing brands (Irish Independent, Sunday Independent, Belfast Telegraph, Evening Herald, Sunday World, Sunday Life, 13 regional titles and digital brands) experienced a 9.2% reduction in advertising revenues in constant currency. With the exception of digital, inserts, property and motors, which performed ahead of last year, all other advertising categories tracked behind the prior year. Display revenues were impacted by reduced spend in the retail, travel and finance categories.

Against the backdrop of a most challenging retail environment and in what continues to be an extremely competitive market, circulation revenues in constant currency for the Island of Ireland were down 2.9% on 2011. The benefit of H2 2011 cover price increases across most titles, with the exception of the Belfast Telegraph and the Evening Herald (which saw a cover price reduction), partly mitigated the impact of a reduction in sales volumes across all titles (other than the Evening Herald which saw newstrade volumes held at prior year levels, a remarkable performance for an evening newspaper) and moving the Carlow People to a freesheet.

Overall the Group's titles grew their market share in the first six months of 2012. The Irish Independent remains the clear No. 1 quality daily newspaper with an ABC[1] figure of 125,986 copies and average daily readership of 465,000[2]. It continues to dominate the quality morning market, with a readership that remains in excess of the combined readership of its two closest competitors. Its value in the marketplace was further underlined in 2012 through product investment which included the redesign of Day & Night, the expansion of Health & Living and the launch of the glossy Fit magazine. The Evening Herald remains the No. 1 read daily title in the very important Dublin market with a total ABC1 figure of 61,179 copies and attracted 223,000 readers2 in 2012 reinforcing the strength of its brand.

Ireland's largest selling Sunday quality newspaper, the Sunday Independent, continues to be the Republic of Ireland's most read newspaper, recording an ABC1 figure of 238,798 copies and attracting a readership of 914,000 readers2 every Sunday. It continues to deliver by far the largest regular audience in Ireland across any advertising medium, thereby presenting advertisers with the most compelling route to market on the Island of Ireland.

The Sunday World continues to be Ireland's No. 1 tabloid newspaper, with an ABC1 figure of 226,932 copies and attracting 802,000 readers2 every Sunday.

The Belfast Telegraph Group continues to be the dominant player in the Northern Ireland newspaper market, with the Belfast Telegraph, the clear No. 1 daily newspaper, recording an ABC1 of 53,847 copies and 174,000 readers[3] per issue, whilst the Sunday Life recorded an ABC1 of 48,746 copies and achieved 215,000 readers3. The move of the Belfast Telegraph fully into the morning market during April 2012 has positioned the paper well for the future, thereby increasing its shelf-life for both advertisers and readers.

The trading conditions experienced by the Group's 12 paid-for weekly and one free regional titles (in counties Cork, Kerry, Dublin, Louth, Wexford, Wicklow, Carlow and Sligo) continued to be more demanding than that of the Group's national business due to the ongoing difficult economic backdrop prevalent in regional Ireland. Despite these difficult conditions, the Group's titles continue to show their resilience, with each of the Group's regional operations continuing to be profitable.

The Independent Digital suite of online sites, that includes the market leading independent.ie, plus 15 local news brands/ titles, continued to make excellent progress in the first 6 months of 2012, with average monthly page impressions of 41.9 million and just under 4 million unique users, achieving year-on-year growth of 13.2% and 19.5% respectively. Throughout the first 6 months of 2012, independent.ie continued its market-leading performance and delivered its best ever ABCe audited result in March, by continuing to drive user engagement and innovation and in improving advertising return with a number of first to market ad formats, across a variety of publishing platforms. Mobile devices now account for over 20% of all browser traffic, a 22% increase since January. Downloads of the Independent Digital suite of specific mobile applications continues to grow, amounting to over 233,000 at the end of June 2012, with independent.ie accounting for 75% of the total. In July 2012, independent.ie was ranked as Ireland's number 1 read online news publishing site according to comScore Media Metrix Newspaper Category report.

The Group also owns Northern Ireland's largest online newspaper portal, with its award-winning website, belfasttelegraph.co.uk (with an average of 1.9 million monthly unique users and 15.5 million monthly page impressions in the first 6 months of 2012) and the leading classified portals: PropertyNews.com; NIjobfinder.co.uk; and NIcarfinder.co.uk.  It is the only publisher in Northern Ireland to provide its content on 4 separate platforms - print, browser, tablet and mobile. Ongoing development has seen all three classifieds sites re-launched with a host of new features and functionality, with all sites now available in mobile format, improving access and resulting in improved audiences and a record ABC audited figure for NIjobfinder.co.uk for February 2012.

GrabOne.ie, the Group's e-tailing brand, has performed very well in its first full year of trading and has become the largest Irish-owned online deals business with a presence in seven distinct geographic markets - Dublin, Cork, Belfast, Limerick/Shannon, South East, Kerry and Galway. A new GrabOne Escapes offering was launched early in 2012, which focuses on accommodation and holiday/leisure activities. The Group's joint venture operation, CarsIreland.ie, exceeded expectations in the first six months of 2012 and provides the Group with a strong and growing presence in the fast growing online motors classified space.

Newspread, Ireland's largest wholesale distributor of Irish and UK newspapers, magazines and periodicals, delivered a very strong result in 2012 with operating profit up 26.3% on the comparative period last year, despite the challenging distribution market within which it operates. This was partially as a result of the ongoing development of various new business lines, which it delivers through its extensive network to retail outlets across the whole island and a continued innovative approach to its cost base.

Independent Colleges continued to expand its student offering in H1 2012 with new Business and Accountancy programmes including Diplomas and Advanced Diplomas in Marketing, Business Studies, Commercial Management and an Association of Chartered Certified Accountants (ACCA) Diploma in Accounting and Business. The acquisition of International House Dublin ('IHD') in late 2011 and subsequent relocation to Independent Colleges's premises has allowed IHD to increase its class sizes and range of programme offerings. IHD has performed ahead of targets set at time of acquisition. The full portfolio of accredited College degrees is also being prospected to language students and the established IHD Agents network worldwide.

SOUTH AFRICA

The South African economy, along with most global economies, remained weak and continued to experience subdued consumer spending and generally weaker trading conditions during H1 2012 as the global recession continued to have a negative impact on both consumer and business confidence, which are currently at 4 year and 12 year lows respectively.

Revenue of €93.4 million was 7.9% down on 2011 and was negatively impacted by an unfavourable foreign currency movement. Revenues in constant currency terms were 2.1% down year-on-year, which was primarily driven by an 18.0% reduction in commercial printing revenue, due mainly to the closure of the company's Cape Town printing plant.

Advertising revenues, in constant currency were broadly in line with last year (up 0.1%), with classified advertising volumes down as activity in the recruitment, legal notices and property sectors, in particular, remained soft in response to slower business. National/brand and agency retail advertising also contracted largely on the back of reduced spending by some large organisations. Features and some smaller categories recorded strong volume growth in the period partially offsetting the shortfalls in the categories above.

Circulation revenues, in constant currency increased by 0.6%, largely on account of cover price increases across all titles in late 2011. The newspaper market remained very competitive during the first half of 2012, and the Group's volume sales declined in aggregate terms due to weak retail sales and its continued strategy to remove costly bulk copies. Despite this, the Group's titles collectively continued to outperform the market. In particular, the circulation performance of the Isolezwe brand (our Zulu language newspapers in KwaZulu-Natal), continues to show sustained, strong growth.

The Isolezwe franchise, which following the launch of a separate title into the Saturday market, now successfully provides a seven-day offering to readers and advertisers. Average ABC (January to June 2012) sales of all three titles reflect strong growth - with the daily (Monday to Friday) at 115,526 copies up 4.8% on the comparative 2011 period, the Sunday edition performing very strongly - now selling an average of 87,834 copies per edition or 10.8% ahead of 2011 and the new Saturday edition, launched in September 2011, averaging 72,911 copies for the January to June period, far exceeding all expectations. During the first half of 2012, we successfully re-launched the Cape Argus in compact format and extended the reach of The Star newspaper by adding a compact edition aimed at the emerging and commuter markets surrounding central Johannesburg. Although at an early stage both these initiatives have been well received by the market.

The Operating Profit of €11.4 million produced an operating margin of 12.2%, and on a constant currency basis was down 34.5% year on year. On a constant currency basis, Operating Costs increased by 5.4%, a good performance given inflationary cost increases in excess of 7%, which were experienced across the board. The local management team continue to aggressively manage costs, mitigating some of the impact of inflationary increases.

Condé Nast Independent's high-end niche magazine titles, performed well in the first half of 2012, with profit up 4.6% in constant currency. Despite the tough general trading environment and the reduced spending from major brand advertisers, the improved performance was assisted by the successful launch of niche product extensions - GQ Style and Glamour Hair - leveraged off the main titles. The two new products launched in the first half of the year have been well received by advertisers and readers with positive contributions in both advertising and circulation revenues. The websites of both GQ and Glamour continued to build traffic, attracting advertising from national brands.

Digital revenues were up 10.3% in constant currency, supported by rapid audience growth coupled with aggressive sales, inventory and yield management as well as the addition of new revenues from content syndication. The average number of unique browsers increased from 2.1 million in 2011 to 2.5 million in the same period of 2012, while the number of page impressions went up from 31.2 million to 33.7 million. In addition to the 43 sites and sections in the Group's South African stable, IOL has also successfully launched iPad apps for the Gauteng titles. 

- BOARD AND SENIOR MANAGEMENT CHANGES -

During the first half, Bengt Braun, Baroness Margaret Jay, Lothar Lanz and David Reid-Scott stepped down from the Board. The Group's former CEO, Gavin O'Reilly, also resigned in April and INM's Chief Operating Officer (COO), Vincent Crowley, was appointed as his successor. In addition, James Osborne (former Group Chairman) and Donal Buggy, Group Chief Financial Officer, were not re-elected to the Board at the Group's AGM in June.

Following these changes, the Group appointed Allan Marshall and Terry Buckley as new independent, non-executive Directors to the Board on 14 June and 5 July respectively.

Since the end of the period, INM also announced that the Group's Chief Financial Officer, Donal Buggy will leave the Group in October 2012 and will be replaced by Eamonn O'Kennedy, currently Finance Director of the Group's Island of Ireland operations.

On 27 August, shareholders elected four new Directors to the Board. These new Directors are Leslie Buckley, Jerome Kennedy, Triona Mullane and Len O'Hagan. The Group's Board now comprises ten Directors; six of whom are independent, non-executive Directors.

The appointment of these six new Directors to the INM Board this year now equips the Group with the appropriate balance of skills, experience, independence and knowledge to address the challenges facing INM and to enable ongoing constructive engagement with all of the Group's key stakeholders.

A new Chairman (Leslie Buckley) and Senior Independent Director (Jerome Kennedy) were appointed on 27 August and the key Board sub-committees were reconstituted.

- SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES -

The Group's Associates and Joint Ventures mainly comprise of its 29.5% shareholding in APN, its 50.0% shareholding in the Irish Daily Star, and its 33.3% shareholdings in metro herald and CarsIreland.ie.

APN reported a revenue decline of 6% to A$477.1 million for the period. EBIT was down 15% to A$55 million and Net Profit After Tax (NPAT) before exceptional items was down 12% to A$19.1 million. APN incurred a non-cash impairment charge of A$485 million, associated with APN's New Zealand publishing assets. This non-cash charge follows an extensive review of carrying values by the APN Board of Directors and reflects the impact of prevailing industry conditions in that market. APN continues to make operational improvements within its publishing business in New Zealand and remains confident of its ongoing strong contribution to the Group.

During the first half of the year, APN announced that it had formed a joint venture with Quadrant Private Equity to target expansion within the Outdoor advertising segment in Australia, New Zealand and Asia. The Outdoor joint venture, has retained the name APN Outdoor, and incorporates all of APN's wholly-owned Outdoor businesses in Australia and New Zealand as well as APN's 50% interests in Rainbow Premium Outdoor, in Indonesia. An exceptional gain of A$80 million was reported in relation to this transaction whilst the net proceeds to APN on the formation of the Outdoor joint venture were A$173 million, which were applied to Net Debt reduction.

APN declared a partially franked interim dividend of A$0.015 per share (A$0.005 franked), payable on 26 September 2012 (dividend payable to INM of A$2.9 million) and announced that a new Chairman, Peter Hunt, will commence on 3 September.

- DELEVERAGING -

Further deleveraging was achieved in H1 2012 with Net Debt reduced by €3.5 million in the period. The Group also continues to engage in constructive discussions with its lenders with a view to refinancing its bank debt well in advance of its maturity in May 2014. As outlined in note 1, as part of these discussions the Group's banks have provided sufficient headroom on covenants and liquidity to manage our business.

The Board announced in July that it was conducting a strategic review of its South African business and that it had appointed Hawkpoint and Investec to assist it with that review. INM has received a number of approaches from third parties interested in acquiring the entirety of the South African business on a basis potentially in the interests of both INM and the South African companies. INM is therefore focusing the review on ascertaining whether such a disposal is deliverable on attractive terms.

- PENSION -

The Group's Irish pension schemes are in significant deficit, despite additional contributions from both staff and the Group in recent years. This deficit has increased in H1 2012 due mainly to a c. 1% reduction in bond yields. The Group is examining all options to provide certainty to those contributing to the various schemes and to secure a reasonable pension expectation for all participants within the timelines and parameters recently announced by the Irish Pensions Board.

- DIVIDENDS -

The Directors do not propose recommending an interim dividend for 2012 and believe there is currently greater scope to create shareholder value through continued debt paydown.

- ENDS -

For further information, contact:

INDEPENDENT NEWS & MEDIA PLC

CONDENSED INTERIM GROUP FINANCIAL STATEMENTS

GROUP INCOME STATEMENT (unaudited)

* Note 4

The notes to the condensed interim Group financial statements on pages 14 to 24 form an integral part of this financial information.

GROUP STATEMENT OF COMPREHENSIVE INCOME (unaudited)

The notes to the condensed interim Group financial statements on pages 14 to 24 form an integral part of this financial information.

GROUP BALANCE SHEET

The notes to the condensed interim Group financial statements on pages 14 to 24 form an integral part of this financial information.

GROUP STATEMENT OF CHANGES IN EQUITY (unaudited)

* Other relates to cash flow hedging reserve of €1.6m.

The notes to the condensed interim Group financial statements on pages 14 to 24 form an integral part of this financial information.

GROUP CASH FLOW STATEMENT (unaudited)

The notes to the condensed interim Group financial statements on pages 14 to 24 form an integral part of this financial information.

NOTES TO THE INTERIM STATEMENT (unaudited)

1. Basis of Preparation and Going Concern

The condensed interim Group financial statements for the six months ended 30 June 2012, which should be read in conjunction with the 2011 Annual Report, have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Irish Financial Services Regulatory Authority and in accordance with International Accounting Standard 34, Interim Financial Reporting (IAS 34) as adopted by the European Union.

The Condensed interim Group financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future.

The Group's Bank Debt Facilities (the 'Bank Facilities'), which were entered into in 2009, based upon a 4½ year maturity of May 2014, contain certain covenant tests, which have to be assessed quarterly, relating to Debt to EBITDA, EBITDA to Net Interest and Cashflow Cover. Amounts of €441.8m in respect of these Bank Facilities are included within borrowings at 30 June 2012 (note 8). Failure of a covenant test would render the facilities in default and repayable on demand at the option of the banks if an amendment or waiver is not granted by the banks in advance. The Group was compliant with its banking covenants during the first half of 2012.

The Board has undertaken a detailed review of the Group's anticipated future results and working capital requirements. These detailed, bottom-up financial forecasts have been prepared by, and reviewed with, each of the Group's major business units. The extent of this review reflects the still-uncertain economic outlook, and the weakness in advertising revenues which continue to be experienced. The forecasts reflect key assumptions, based on information available to the Directors at the time of release of these condensed interim Group financial statements.

Further to the amendments to the Bank Facilities provided earlier this year which provided for financial covenant headroom up to and including June 2013, and rescheduling of €28m of the December 2012 facility reduction, the Group has engaged with its Lenders to extend the timeframe of covenant headroom to September 2013 and to reschedule €21m of debt repayments which would otherwise have been due in June 2013 so that they will now be payable in September 2013. All of the Group's banks have agreed to these amendments to the Bank Facilities. The Directors expect that the Group will meet these amended covenants under the Bank Facilities and consider that there is sufficient liquidity available to the Group for a period of at least one year from the date of release of this financial information.

Separately, with the engagement of all its banks, the Group is now considering its future refinancing requirements (including the rescheduled capital repayments falling due in September and December 2013 and relevant covenants for the period post September 2013), with the ultimate objective of refinancing the Bank Facilities well in advance of their scheduled maturity in May 2014. Given the current uncertain economic environment, the Directors recognize that there is a level of uncertainty with respect to the Group's ability to meet its future covenants and to continue to access financing facilities on commercially acceptable terms.

While there can be no certainty that refinancing discussions with the banks will be successfully concluded, the Group's banks continue to be supportive, with ongoing constructive discussions taking place as evidenced by the recent amendments. The Directors are of the opinion that sufficient options and time are available to the Group to enable a satisfactory refinancing of the Bank Facilities.

After making due enquiries, the Directors have a reasonable expectation that the Group and Company will be able to operate within the terms and conditions of the Group's financing facilities and has and will have adequate resources to continue operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing this financial information.

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

1. Basis of Preparation and Going Concern (Cont'd)

Accounting Policies

The accounting policies and methods of computation and presentation adopted in the preparation of the condensed interim Group financial statements are consistent with those applied in the Annual Report for the year ended 31 December 2011 and are described in those financial statements on pages 51 to 61.

The following interpretations or amended standards are mandatory for the first time for the financial year beginning 1 January 2012, and are either not relevant to the Group or they do not have any significant impact on the condensed interim Group financial statements:

·; IFRS 7 Financial Instruments: Disclosures (Amendment);

·; IFRS 1 (Amended) First-time Adoption of International Financial Reporting Standards; and

·; IAS 12 Income Taxes (Amendment) Deferred Tax.

The condensed interim Group financial statements for the six months ended 30 June 2012 and the comparative amounts have not been audited or reviewed by the auditors. The condensed interim Group financial statements are not the statutory accounts of the Company. A copy of the statutory accounts is required to be annexed to the Company's annual return to the Companies Registration Office in Ireland in respect of the year ended 31 December 2011 and has been so annexed.

2. Risks and Uncertainties

The principal risks and uncertainties facing the Group were detailed in the Directors' Report and in note 32 to the 2011 Annual Report and these continue to be considered the most likely to influence the performance of the Group. The key risks remain those that relate to liquidity risk and the general economic outlook for the global advertising markets within which the Group operates.

Liquidity

As detailed in note 1, the Group's Bank Facilities contain certain covenant tests, which have to be assessed quarterly. Failure of a covenant test would render the facilities in default and repayable on demand at the option of the banks if an amendment or waiver is not granted by the banks in advance. While the Group has successfully renegotiated certain elements of its Bank Facilities in 2012, to ensure that sufficient financial covenant and liquidity headroom is available to the Group for a period of at least one year from the date of approval of this financial information, the Group is engaged in ongoing discussions with the Group's banks in relation to its ongoing refinancing requirements thereafter including capital repayments in September and December 2013 and the maturity of the Bank Facilities in May 2014. The Group recognises that the current uncertain economic environment gives rise to a level of uncertainty with respect to the Group's ability to meet its future financial covenants and to continue to access financing facilities on commercially acceptable terms.

However the Directors are working on a pro-active basis with the banks, with the objective of refinancing the Bank Facilities well in advance of its maturity in 2014. While there can be no certainty that refinancing discussions with the banks will be successfully concluded, the Group's banks continue to be supportive, with ongoing constructive discussions taking place as evidenced by the recent amendments. The Directors are of the opinion that sufficient options and time are available to the Group to enable a satisfactory refinancing of the Bank Facilities.

Advertising

The global advertising environment continues to be depressed due to weak economic activity. It is uncertain when the economies in which the Group operates will emerge from the current economic recession and therefore the outlook for consumer advertising in the Group's markets remains uncertain.

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

3. Segmental Reporting

Segment information is presented on the same basis as that used for internal reporting purposes. Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ('CODM'). The CODM has been identified as the Board of Directors. The reportable segments based on the internal reporting information provided are listed in the table on the following page. The key performance measure that is reviewed for these segments is operating profit/(loss) before exceptional items. Exceptional items are reviewed at a level higher than these operating segments and appear as a reconciling item from the key performance measure reviewed by the CODM to the IFRS result. Interest income and expense, share of result of associates and joint ventures and taxation are reviewed and considered by the CODM at a Group level only.

The Group continues to report its revenues and operating profit before exceptional items by geographical areas with a further analysis of the geographical areas by class of business also provided. The Group's subsidiaries operate in two geographical areas: Island of Ireland and South Africa. The components of the Group that are considered by the CODM, whose operating results are regularly reviewed by the Board of Directors to make decisions about the allocation of resources, and in performance assessment are contained in the table on the following page. The Group's global diversity helps insulate total Group revenues from the impact of seasonality.

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

3. Segmental Reporting (Cont'd)

* Island of Ireland - Non-Publishing contains the Education business.

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

3. Segmental Reporting (Cont'd)

APN's revenues for the six months ended 30 June 2012 were €379.7m (2011: €374.1m) and APN's operating profit before exceptional items for the six months ended 30 June 2012 was €43.7m (2011: €47.7m).

The taxation charge for the period comprises a charge of €nil (2011: €nil) in respect of Irish taxation and a charge of €2.4m (2011: charge of €1.3m) in respect of overseas taxation.

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

4. Exceptional Items

Exceptional items are those items of income and expense that the Group considers are material and/or of such a nature that their separate disclosure is relevant to a better understanding of the Group's financial performance.

* The 2011 figures have been restated to reclassify a non-cash deemed disposal loss of €1.2m on APN from impairment of assets to share of associates and joint ventures exceptional items.

(i) 2012

Primarily relates to the following:

a. €34.5m due to a non-cash impairment charge arising on property, plant and equipment in the Island of Ireland; and

b. €10.4m non-cash impairment charge arising on intangibles assets in the Island of Ireland.

2011

Primarily relates to a €10.8m impairment arising on intangible assets mainly in Belfast.

(ii) 2012

Relates to restructuring charges arising in Island of Ireland (€3.1m), Common Costs (€3.5m) and South Africa (€0.6m).

2011

Relates to restructuring charges arising in Island of Ireland (€1.6m) and South Africa (€0.4m). It also includes a credit of €1.9m in relation to negative past service costs/curtailment gains arising on the Group's retirement benefit obligations.

(iii) 2012

Relates to costs incurred during the period in relation to the Group's renegotiation of its financing arrangements. These costs primarily comprise (i) professional fees incurred in respect of professional advice received by the Group during the renegotiation process and (ii) professional fees paid by the Group on behalf of and under the instruction of the Group's Banks (as the Group is obligated by the Banks to cover costs incurred by their legal and financial advisers for the duration of the refinancing negotiations).

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

4. Exceptional Items (Cont'd)

(iv) 2012

The exceptional finance costs of €1.2m incurred relates to fees paid to the Group's Banks as part of the renegotiation of financing arrangements in March 2012.

(v) 2012

The net charge of €108.0m includes a €99.3m non-cash impairment charge and a €19.0m disposal gain arising in APN News & Media Limited (APN). The impairment charge arises on APN's New Zealand mastheads. The impairment of the New Zealand assets is a result of a number of factors including the economic weakness facing the New Zealand economy and the structural changes in that advertising market. The disposal gain arose on the disposal by APN of 50% of its interest in APN Outdoor Group Pty Limited. The charge of €108.0m also includes a €3.7m non-cash deemed disposal loss and a €23.9m goodwill write off on the Group's investment in APN.

2011

Mainly relates to a non-cash impairment charge arising in APN. This charge arises on APN's New Zealand mastheads, which reflects an impairment charge on these assets in line with prevailing international benchmarks and current market conditions. This impairment is as a result of a number of factors, including the impact of the Christchurch earthquakes on the New Zealand economy, the slower than expected recovery of the advertising markets and the ongoing impacts of the global financial crisis. It also includes a €1.2m non-cash deemed disposal loss on the Group's investment in APN.

5. Earnings Per Share

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

5. Earnings Per Share (Cont'd)

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

For diluted earnings per share, the weighted average number of ordinary shares outstanding is adjusted to assume conversion of all potential dilutive options over ordinary shares once the adjustment does not reduce a loss per share.

Basic and diluted earnings per share before exceptional items are presented in order to give a better understanding of the Group's financial performance.

6. Reconciliation of Operating Profit before Exceptional Items to Cash Generated by Operating Activities

7. Other Items

a. Retirement Benefits

The retirement benefit obligations as at 30 June 2012 in the Balance Sheet have increased by €40.8m to €187.8m compared to €147.0m at 31 December 2011. This comprises a defined benefit pension obligation of €163.0m (2011: €95.4m) and a medical aid liability of €24.8m (2011: €31.7m). This increase in the retirement benefit obligations is primarily driven by a decrease in the discount rate used in valuing the pension obligations. The discount rate used at 30 June 2012 was 4.1% versus the discount rate of 5.0% used at 31 December 2011.

b. Statement of Comprehensive Income

A positive currency translation adjustment of €7.8m has been booked in the Group Statement of Comprehensive Income for the half year to 30 June 2012. This has arisen due to the strengthening of the South African Rand, Australian Dollar and Sterling Pound exchange rates at 30 June 2012 compared to the rates at 31 December 2011 used in the translation of the Group's investments in subsidiaries and associates with a functional currency different to that of the Parent Company.

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

7. Other Items (Cont'd)

c. Dividends

The Directors are not proposing an interim dividend for 2012. There was no dividend paid in 2011.

d. Tax Effect on Items in Statement of Comprehensive Income

8. Borrowings

Included in Loans and Overdrafts is €441.8m drawn under the 2009 multicurrency term and revolving bank facilities* repayable up to May 2014.

* Certain material subsidiaries in the Group, as defined in the Senior Bank Debt Facilities, have granted fixed and floating charges over certain Group assets in connection with the above facilities. An Intercreditor Agreement also exists in relation to these facilities. This agreement provides that, in a liquidation situation, all intergroup debt within those companies which have signed up to the agreement is subordinated to the Senior Bank Debt Facilities until such time as this debt has been discharged in full. All subsidiaries with material intergroup debt within the Group have signed up to this Intercreditor Agreement, with the exception of any Group company incorporated in South Africa.

9. Intangible Assets/Investment in Associates and Joint Ventures/Property, Plant & Equipment

Intangible Assets

The carrying value of the Group's intangible assets decreased by €7.8m from €175.9m at 31 December 2011 to €168.1m at 30 June 2012. This decrease is driven by a €10.4m impairment charge (see note 4) and by favourable foreign exchange rate movements in the period.

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

9. Intangible Assets/Investment in Associates and Joint Ventures/Property, Plant & Equipment (Continued)

Impairment Reviews and Supplementary Non-IFRS Information

The Group's indefinite life intangible assets (including goodwill) are tested annually for impairment or whenever there is an indication of impairment. As at 30 June 2012, due to indications of impairment, certain mastheads were tested for impairment, and as a result an impairment charge of €10.4m (2011: €10.8m) arose in Island of Ireland, of which €9.4m arose in Belfast Publishing and €1.0m arose in Sligo Champion. When testing for impairment, the recoverable amounts for the Group's cash-generating units (CGUs) are measured at their value in use by discounting future expected cash flows. These calculations use cash flow projections based on management approved projections which reflect management's current experience and future expectations of the markets in which the CGU operates. The detailed methodology (updated for changes in any of the key assumptions to reflect past experience and also consistent with external sources of information) as used by the Group for impairment testing is as outlined in the 2011 annual report.

The Balance Sheet reports the carrying value of newspaper mastheads at their acquired cost. Where these assets have been acquired through a business combination, cost will be the fair value allocated in acquisition accounting. The value of internally generated newspaper mastheads or post-acquisition revaluations are not permitted to be recognised in the Balance Sheet in accordance with IFRS and, as a result, no value for certain of the Group's internally generated newspaper mastheads (e.g. the three main Irish titles, the Irish Independent, the Evening Herald and the Sunday Independent) is reflected in the Balance Sheet.

While impairment charges have been recorded during the current and prior periods on certain of the Group's intangible assets, the Directors are of the view that the Group has many other intangible assets which have substantial value that is not reflected on the Group's Balance Sheet. This is because these intangible assets are carried in the Group's Balance Sheet at a nil value or a value which is much less than their recoverable amount. The Directors are of the view that if these intangible assets were allowed to be carried on the Group's Balance Sheet then the Group's intangible assets would be greater than currently reported.

Investments in Associates and Joint Ventures

Included in exceptional items (note 4) is a charge of €108.0m in relation to exceptional items arising in respect of the Group's associates and joint ventures. This charge includes a €99.3m non-cash impairment charge and a €19.0m disposal gain arising in APN News & Media Limited (APN). The impairment charge arises on APN's New Zealand mastheads. The impairment of the New Zealand assets is a result of a number of factors including the economic weakness facing the New Zealand economy and the structural changes in that advertising market. The disposal gain of €19.0m arose on the disposal by APN of 50% of its interest in APN Outdoor Group Pty Limited. The charge of €108.0m also includes a €3.7m non-cash deemed disposal loss and a €23.9m goodwill write off on the Group's investment in APN as explained below.

During the period, the Group booked an impairment of A$0.16 per share held (€23.9m) on its investment in APN. As a result of this impairment, INM now carries its investment in APN at an amount of A$1.00 per APN share held (€154.8m). However, at 30 June 2012 the APN share price as listed on the Australian Stock Exchange was only A$0.66 per share (value of INM stake was approx. €102m at 30 June 2012 and was A$0.39 (approx. €62m) at 30 August 2012). As APN is an associate of INM, under IFRS, the Group is required to compare the carrying value of its investment in APN to the recoverable amount of its investment in APN. Under IFRS, the recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. In this case, as the value in use of INM's investment in APN is higher than the fair value less costs to sell of APN, INM calculated the value in use of its investment in APN in accordance with

NOTES TO THE INTERIM STATEMENT (unaudited) (Cont'd)

9. Intangible Assets/Investment in Associates and Joint Ventures/Property, Plant & Equipment (Continued)

Investments in Associates and Joint Ventures (Cont'd)

the accounting standards. This value in use calculation showed that the value in use of INM's investment in APN was A$1.00 per share.

The above exceptional items primarily drove the decrease in the carrying value of investments in associates and joint ventures from €263.6m at 31 December 2011 to €157.3m at 30 June 2012.

Property, Plant & Equipment

The carrying value of the Group's property, plant & equipment decreased by €35.0m from €134.2m at 31 December 2011 to €99.2m at 30 June 2012. This decrease is driven by a €34.5m impairment charge in the Island of Ireland (see note 4).

10. Related Party Information

GK O'Reilly resigned as a Director and Chief Executive Officer with effect from 19 April 2012 and the Company paid GK O'Reilly €1,870,000 under the terms of a compromise agreement. The legal action in connection with this compromise agreement was settled on 20 July 2012.

Except for the above, there have been no other:

·; related party transactions that have taken place in the first six months of the current financial year that have materially affected the financial position or the performance of the enterprise during that period; and

·; changes in the related party transactions described in the last Annual Report that could have a material effect on the financial position or performance of the enterprise in the first six months of the current financial year.

STATEMENT OF DIRECTORS' RESPONSIBILITY FOR THE SIX MONTHS ENDED 30 JUNE 2012

The Directors are responsible for preparing this interim management report and the condensed interim financial information in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Irish Financial Services Regulatory Authority and with IAS 34, Interim Financial Reporting as adopted by the European Union.

The Directors (being the persons responsible within INM for making this statement) confirm that to the best of their knowledge:

(1) the condensed interim Group financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, being the international accounting standard applicable to interim financial reporting adopted pursuant to the procedure provided for under Article 6 of Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

(2) the Interim Management Report and the condensed interim Group financial statements include a fair review of:

(a) the important events that have occurred during the first six months of the financial year, and their impact on the condensed interim Group financial statements;

(b) the principal risks and uncertainties for the remaining six months of the financial year;

(c) related party transactions that have taken place in the first six months of the current financial year that have materially affected the financial position or the performance of the enterprise during that period; and

(d) any changes in the related party transactions described in the last Annual Report, that could have a material effect on the financial position or performance of the enterprise in the first six months of the current financial year.

On behalf of the Board

Leslie Buckley

Group Chairman

Vincent C Crowley

Group Chief Executive Officer