14 August 2007
APN News & Media Interim Profit up 5% to $73.2 million

APN News & Media Limited [ASX, NZX:APN] today announced a record interim Net Profit After Tax and before non-recurring items (NRI) of $73.2 million for the six months ended June 30 2007, up 5% on the prior year.

* Excludes finance income and businesses disposed/closed in the prior year
** Excludes businesses disposed/closed in the prior year

The Directors have today declared an unfranked interim dividend of 10.5 cents per share, up 8% on the prior year.

APN Chief Executive Brendan Hopkins said: “This is a solid outcome for the first half of the year. While trading conditions in New Zealand were subdued, Australian Publishing continued to perform well, due in part to the ongoing strength of the Queensland economy. The Outdoor division recorded a very pleasing 33% increase in EBIT, demonstrating the value of our market leading brands.

“The second half of the year is traditionally our busiest trading period and we are well placed to profit from changes that have been made to our business model and the ongoing growth of our portfolio of assets across a broad range of economies and geographies.

“Cost management has been a priority across the Group, with cost growth in local currency being limited to just 2% despite significant increases in newsprint prices.

“The period saw significant investment in two areas of our business. First, APN continues to invest in its Online Division, building new assets and forming strategic joint ventures that expand our offering to advertisers and to audiences. Secondly, the Company has almost completed the process of redefining its business model, requiring investment in new business systems, facilities and training that transforms the way we operate in our markets.

“The new business model has initially focused on the Company’s Publishing divisions but will broaden its scope to bring subsequent benefits to Radio, Outdoor and Online. Already there has been a significant reduction in staffing requirements and an improvement in production efficiencies. The gains from the new business model have already been seen in July trading and will continue throughout the second half, with full benefits to be seen in 2008/09.”

Divisional EBIT results

All of the Company’s divisions recorded EBIT growth in the first six months of the year.

Trading conditions in regional New Zealand were subdued; however, new product developments continue to be well received by advertisers and readers. New gloss colour property sections across a number of titles helped grow real estate advertising. Similar to Australia, unemployment in New Zealand is at generational lows, and double-digit growth in employment advertising was achieved.

New Zealand National Publishing (NZNP)

NZNP comprises The New Zealand Herald, Herald on Sunday, The Aucklander and New Zealand Magazines. The division leads the major Auckland market, with 8 out of 10 Aucklanders reading at least one APN title each week.

Trading conditions remain challenging; however, growth in revenue and EBIT continues to be positive. Costs were flat despite a 6% increase in the cost of newsprint, showing the early benefits of the business restructuring programme.

The New Zealand Herald has the highest readership of any daily newspaper in the country and undertook a number of strategic new product developments in the first half, including new Metro Pages, Green Pages and The Business.

The Herald on Sunday, which launched in October 2004, has now moved into profitability. It is the most read Sunday newspaper in Auckland and continues to make good gains in advertising market share. Combined with the Weekend Herald – the biggest selling newspaper in New Zealand – the publications reach 86% of weekend readers in Auckland. A number of new sections were launched in the first half, maintaining readership and advertising momentum.

The New Zealand Woman’s Weekly continues to be the best read weekly magazine in the country, growing circulation by 1.5% in the first half, leading the women’s magazine category. Similarly, the Listener grew its circulation in the current affairs category, and Crème magazine recorded an exceptional 22% increase in circulation in the 12 months to June 2007.

Online

APN continues to invest in its Online Division, developing products that extend existing APN brands, as well as identifying joint venture partners for standalone internet opportunities. The nzherald.co.nz website grew advertising revenue in the first half by 75% on the previous corresponding period. The site now generates more than 7 million page impressions from 500,000 unique browsers each week. It is the third most visited website in New Zealand and the most popular news site, receiving the best news website award in the Qantas Media Awards.

The investment phase continues for the ‘Search 4’ classifieds brand, which is being extended for cars, jobs, property and general classifieds across New Zealand and Australia. Search4jobs is a strong second in the New Zealand online employment market, where audience growth flattened in the last quarter. Search4cars and Search4stuff are both building good audience numbers in Queensland, while the Worksearch jobs site has provided an important complement to our newspaper employment sections across northern NSW and Queensland.

The Sunshine Coast Daily’s website was relaunched as thedaily.com.au and has been well received by the local community, with other site relaunches being planned. The New Zealand joint venture classified site sellmefree continues to build volumes and is increasing market share. The joint venture finda has successfully consolidated and transformed APN’s existing UBD businesses, with the online directory including more than 270,000 listings, now the largest online directory in New Zealand.

Radio

The Radio Division comprises the Australian Radio Network (ARN) and The Radio Network (TRN) in New Zealand, which together reach almost 6 million listeners each week – the largest radio audience in Australasia. Overall, EBIT grew 2% to $36.5 million. In Australia, the network’s two music streams of Classic Hits and Mix continued to focus on their core demographic of 25-54. The Classic Hits network in particular continues to show good returns, increasing share of agency advertising in key markets, and Mix has increased its cumulative 10+ audience across the 2007 surveys to date. Tight cost management helped deliver a 3% increase in EBIT for ARN. In New Zealand, EBIT moderated as costs rose, reflecting new licences and sales related costs. TRN remains the market leader in New Zealand radio, with the number 1 stations in Auckland and Christchurch and number 2 in Wellington. TRN has a combined 45% share of all audiences aged 10+, well ahead of its nearest competitor.

Outdoor

APN Outdoor operates the market leading brands in each of the main outdoor advertising categories in Australia and New Zealand. The division produced a very strong 33% increase in EBIT to $9.2 million, building on the acquisition of a number of major new contracts, including Christchurch Airport and Vic Roads. Adshel was also successful in retaining the Melbourne Street Furniture contract, the largest contract of its type in Australia.

Buspak introduced new formats which have been well supported by advertisers. New digital panels were also introduced in Australia and are due for rollout in New Zealand. In Asia, operations continued to grow. In Hong Kong, the Company’s transit business benefited from a renewed focus on new product development and new revenue streams. The success achieved in the first half of 2007 across the Outdoor division is expected to continue in the second half.

Capital management

At the recent AGM the Company announced it would continue the share buy-back program commenced in 2005. By the end of last year, 55 million shares had been bought back.

During the period the balance of the 63 million convertible notes issued in 2001 as part of the acquisition funding for Wilson and Horton were converted or redeemed. The buy-back has, and will continue to help ensure that the Company’s capital is efficiently managed to enhance returns to shareholders.

The Company is in a sound financial position, with access to capital for worthwhile growth opportunities.

Outlook

The Company continues to believe that second half growth will be in line with expectations outlined at the recent Annual General Meeting.

Growth in Net Profit After Tax of between 5% and 10% is likely for the year.

For further information please contact:
Peter Brookes, Cannings 0407 911 389 - Luis Garcia, Cannings 0419 239 552

Back >