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Shareholder row looms over Independent News results

DUBLIN (Reuters) - A war of words erupted between Independent News & Media INME.I and its biggest shareholder on Thursday, overshadowing an upbeat earnings statement that propelled shares in the newspaper publisher 11 percent higher.

The owner of Britain’s Independent newspaper, the Irish Independent and the Belfast Telegraph, which also has extensive media interests in South Africa and Australasia, declared Irish telecoms billionaire Denis O’Brien a “dissident shareholder”.

"He's run around the place throwing hand grenades and hid behind his PR people," Independent News & Media INME.L Chief Operating Officer Gavin O'Reilly told reporters.

The response to O’Brien’s stakebuilding and his criticism of the company’s management last summer came after the group posted an 8 percent rise in underlying earnings per share to 18.8 cents thanks to 2.3 percent revenue growth and cost cuts.

Shares in the group, which have halved in value over the last 12 months, closed up 6.4 percent at 1.84 euros in Dublin off an earlier high of 1.92 euros after the company predicted further earnings growth this year and said it was well protected against recent currency swings.

O’Reilly told Reuters he expected percentage growth in underlying earnings this year to be in low to mid single digits.

Analysts currently expect a 4 percent rise to 19.6 cents this year, according to Reuters Estimates, although some had predicted they would be flat or may even fall as global economic uncertainty feeds into advertising markets.

Kevin McConnell, head of equity research at stockbroker Bloxham, said the guidance was in line with what he had been expecting but pointed out shares in the group had fallen quite sharply in the run-up to Thursday’s results.

“The tone of the analysts’ presentation was also generally pretty decent and the details on currency hedging should have put that worry to rest for another year,” McConnell said.

“ENOUGH IS ENOUGH”

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The decline in the group’s share price over the last year has also coincided with O’Brien’s share buying which has taken his stake from 5 percent to 22.15 percent.

Markets doubt he will launch a takeover bid given O’Reilly’s father, Executive Chairman Anthony O’Reilly, now has a 27.94 percent holding that would be big enough to block such a move. He raised his stake by buying another 10 million shares or 1.26 percent of the company on Thursday.

Indeed Gavin O’Reilly said on Thursday that while global market uncertainty was largely to blame for falls in the company’s share price, O’Brien’s allegations of cronyism among board members had done little to help sentiment.

“The purpose of the statement this morning was to indicate to our shareholders that enough is enough, we’re not going to allow this guy to continue to propagate the lies and innuendo that he has,” O’Reilly said at a news conference.

O’Brien retaliated in a statement, describing it as a “highly personal and unwarranted attack”.

“It ... appears to be designed to deflect attention away from the company’s disappointing stock performance,” he said.

The shares have also been hit after downbeat statements from UK rivals such as Trinity Mirror TNI.L and Johnston Press JPR.L compounded fears the company would be hit by slowing economies and advertising spending in its core markets.

AUSSIE & RAND HEDGED

But O’Reilly said group revenue had risen 2.7 percent in local currency terms in the first three months of 2008, with advertising revenue up 2.1 percent.

“Australia (advertising) up over 4 percent year to date, Ireland advertising down 4.7 percent but that is entirely property and in fact other categories are actually up,” O’Reilly said in a telephone interview.

“That will be somewhat of a surprise to the market because some people were talking about double-digit declines ... Ireland really is the laggard but it’s better than most people think.”

Chief Financial Officer Donal Buggy said in a joint interview that some analysts may also have overestimated the impact of recent weakness in the South African rand against the euro given the group’s insurance against currency fluctuations.

“It won’t hurt group earnings as much as people expect. We’ve hedged 75 percent of our rand exposure for this year at a very good rate of just above 10,” Buggy said, adding that 100 percent of the group’s exposure to the Australian dollar had been hedged at a rate of 1.63 against the euro.

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