IN&M profiting from contracting out services

Gavin O'Reilly, chief operating officer (pictured above) at Independent News & Media (IN&M), subscribes to very different views as to how labour and capital should be rewarded.

In the Irish Independent on Thursday 23 March, in a report accompanying the previous day's announcement of 2005 profits at Ireland's biggest media group, O'Reilly was quoted as worrying about rampant wage inflation in the Irish economy. He believes that it could undermine Irish competitiveness and reduce our ability to attract inward investment.

It can be presumed that O'Reilly includes his own company in those thoughts. After all, in recent years IN&M has made 200 administrative staff redundant at its Republic of Ireland operations and uses contractors to fulfil these necessary functions, at a lower cost to the company. It has also secured new printing contracts for its Belfast Telegraph plant, citing the lower costs of doing business in the North as the reason for investing in the plant there.

It would come as no surprise if, at some time during 2006, IN&M, which made operating profits of €90 million in the Republic last year, seeks to reduce its editorial costs. After all, the Irish Times is engaged in a second round of cost reductions among journalists and has reduced the productive advantage IN&M had enjoyed.

Indeed, it is likely that a shift from permanent staff journalists to a larger number of freelancers and contractors would have happened already were it not for the sustained attacks by the Daily Mail against IN&M's market dominance.

However, when it comes to rewarding capital, the board of which O'Reilly is part believes in inflation busting dividend increases.

For as inflation touches 3.3 per cent, and leads to demands across business for wage moderation, IN&M has decided to reward its shareholders with a 19.4 per cent increase in the dividend, amounting to 10.75 per share for the year.

This means that Gavin, his two brothers and father will receive dividends of more than €21.26 million for calendar year 2005, although the vast bulk will go to Tony senior.

Last year, Gavin received a salary of €561,000, a bonus of €350,000 and pension contributions of €155,000, which in total was a 13 per cent increase on the previous year. The annual report, due out soon, will show if any increase in 2005 remuneration beats the inflation figure for the year.