APN shares sink to record low after loss from writedowns

Published: Thu 18 Aug 2011 01:46 PM
APN shares sink to record low after loss from newspaper impairments
Aug. 18 (BusinessDesk) - APN News & Media Ltd., the Australian publisher of the New Zealand Herald newspaper, posted a first-half loss after taking an impairment charge against its New Zealand metropolitan newspaper titles. The company’s shares dropped to a record low.
The net loss was A$98.3 million in the six months ended June 30, from a profit of A$39 million a year earlier, the Sydney-based company said in a statement. Revenue was little changed from a year earlier at A$508 million.
The shares tumbled 7.3% to 83 Australian cents on the ASX today and have more than halved in value this year. The stock reached as high as A$6.04 in October 2006. APN had flagged the loss at its annual meeting, in what chief executive Brett Chenoweth called “a challenging period for the company’s publishing businesses, affected by weak retail markets and natural disasters.”
The A$156 million non-cash impairment of the New Zealand newspapers comes after a review initiated by Chenoweth, who took up his position at the start of the year. It trims the value of the assets “in line with prevailing international benchmarks and current market conditions.”
"Our greatest challenge in the first half came from the publishing businesses in Australia and New Zealand," said chief executive Brett Chenoweth. "Consumer and business confidence in those local markets began to deteriorate in the fourth quarter last year. The flooding in Queensland and earthquakes in New Zealand exacerbated this general slowdown."
The APN writedown is indicative of the broader malaise in the newspaper market as publishers grapple with the advance of the internet. Rival media company Fairfax Media Ltd., which publishes the Domion Post, the Press and the Sydney Morning Herald, wrote down the value of its own mastheads and goodwill by A$513 million in the 2009 financial year.
The stock is rated a ‘hold’ based on the consensus of 13 recommendations compiled by Reuters that ranged from ‘buy’ to ‘sell’. APN will pay a first-half dividend of 3.5 cents a share and is offering its dividend reinvestment plan with a 2.5% discount.
Excluding one-time charges, profit fell 46% to A$21.8 million.
Earnings before interest and tax from Australian newspaper operations fell 39% to A$17.6 million in the first half and New Zealand newspaper EBIT fell 36% to A$21.8 million.
Its radio and outdoor advertising operations continued to improve in the period, with Australia radio market share up 2.2% in the first half, although EBIT came in 5% lower at A$20.3 million. New Zealand radio EBIT rose 6% to A$4.8 million.
APN's outdoor advertising business recorded an 80% increase in half-year EBIT to A$12.4 million, as the market for billboards continued to expand despite the sluggish pace of the Tasman economies.
The company also announced an expansion into the digital advertising market with the acquisition of CC Media, a digital catalogue distribution business in Australia, and Jimungo, a New Zealand sports tipping platform with around 300,000 registered users. No price details on the acquisitions were disclosed.
Looking forward, the company said the outlook for the second half of the year was looking more positive, and was targeting EBIT of A$118 million for the six months to Dec. 31, in line with last year's result.
"We are a seasonal business and although it is difficult to predict how our advertisers will react to the recent volatility on financial markets, we are entering our strongest trading period for the year and our forward bookings are encouraging," Chenoweth said.
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