Damp New Zeland advertising market hits APN News & Media earnings
13 Aug 2008
Trans-Tasman media group APN News & Media has warned of possible trouble from the damp New Zealand advertising market if it deteriorates any further, after posting a drop in its half-yearly earnings from newspapers across the Tasman.
APN's operating profit before non-recurring items dropped $3.4 million to $139 million for the six months ending 30 June, mostly matching market expectations that predicted it to be a little behind last year's ''record result". The company's bottom line, or net profit after tax, also dropped marginally to $72 million.
However, APN's New Zealand result trends were worse, with operating profit and revenue from across the Tasman declining 10.3 per cent and 2.4 per cent respectively, on a constant currency basis.
APN's New Zealand businesses have been seen the brunt of an economic slowdown, with a number of its major advertisers shedding their advertising plans.
Talking with The Australian, APN CEO Brendan Hopkins blamed macroeconomic issues in the Shaky Isles for the trend, specially issues over the last six months, since New Zealand was actually ahead of the past year's numbers till around February.
Though Hopkins suggested that he was "comfortable" with media analysts predictions of APN making its full-year $162 million net profit after tax projection, the projection was actually based on APN's performance in the fourth quarter across the Tasman, which is where 33 per cent of the earnings before interest and tax (EBIT) fructifies.
Hopkins had also acknowledged that the company's performance in July and August, the first two months of the next half year, was a ''struggle'', ''in line with'' New Zealand's weak economy, maintaining the weak trend from the half year.
A number of analysts are concerned that with APN's exposure to New Zealand's dampened ad market, and a third of the EBIT coming in the fourth quarter is a source of vulnerability.
APN's Australian business had to an extent mitigated the impact of poor performance in the New Zealand market, posting a 6.4 per cent growth in operating earnings on a constant currency basis. Its Australian regional newspapers business, which is dominated by Queensland titles, drove growth in a state where unemployment stayed below Australia's national level.
Within Australia too, some segments are started to get difficult, while others continue to perform. Hopkins acknowledged the Sydney radio market as a ''very tough market'', while saying that the outdoor advertising business ''continues to be very strong'', and was the star performer with a 79 per cent growth in operating profit. Operating earnings from APN's radio buiness fell 6 per cent, with Sydney performing the worst.
APN had acquired Media 1, New Zealand's third largest billboard company, for around $6 million, and could be looking at more acquisitions.
APN News and Media, which is based out of Sydney, publishes 23 regional daily newspapers and over a 100 non-daily titles across Australia and New Zealand.
