Media group hit by advertising slump
In a trading update released after the stockmarket closed on Thursday, the trans-Tasman company said publishing revenue had slumped 10 per cent since June on the back of weaker advertising markets.
While $25 million in cost cuts had helped offset some of the impact, APN's annual earnings before interest, tax, depreciation amortisation (EBITDA) are forecast to fall by 28 per cent. The group expects EBITDA for 2012 will fall to between $150 million and $155 million from $208.9 million in 2011.
Net profit is expected to drop by more than a third to between $51 million and $54 million in 2012.
APN, which owns regional newspapers and radio stations across Australia and New Zealand, said its result would be hit by an $8 million charge linked to its outdoor advertising joint venture with Quadrant Private Equity. The falls in the value of APN's newspapers has also hurt its ability to deduct interest for tax purposes, causing another hit of up to $8 million.
Chief executive Brett Chenoweth said while the group's radio, outdoor advertising arm Adshel and online venture GrabOne had outperformed, its publishing business had felt the full force of the market downturn in Australia and New Zealand.
Conditions in the second half had been more challenging than in the first six months, he said, "with extremely short bookings and we have not seen the usual seasonal uplift in revenues".
"We are proactively managing the levers within our control, including cash management, product innovation, sales transformation and cost reduction. "While these initiatives will deliver a substantial contribution, the weak advertising markets have had a negative impact on APN's publishing results in Australia and New Zealand."
The slowdown in the Queensland mining industry and drop in government advertising had particularly hurt revenues at APN's Australian regional media division. Cost cuts could not offset the declining revenues, causing the division's second-half earnings to fall below those of the first six months of 2012.
In New Zealand, APN fears advertising revenues will be down 9 per cent for 2012.
Revenues from APN's radio division, which includes the Mix network, are also expected to rise 5 per cent, thanks in part to better ratings.
APN's outdoor advertising business also continues to perform well, with EBITDA for Adshel expected to rise 25 per cent.
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APN said a major weakening in newspaper advertising markets led to publishing revenue falling about 10% since June. The company cited weaker advertising across Australia and New Zealand, a slowdown in the Queensland mining sector and a drop in government advertising as key reasons its full-year profit was downgraded.
APN forecast its EBITDA for 2012 will fall by around 28%, to between $150 million and $155 million, down from $208.9 million in 2011.
The group expects net profit to drop by more than a third, forecasting net profit of between $51 million and $54 million for 2012.
APN has implemented about $25 million in cost cuts, which management says helped offset some of the revenue impact from weaker advertising markets.
APN said its radio division (including the Mix network) and its outdoor advertising arm Adshel, plus its online venture GrabOne, have outperformed. Radio revenues are expected to rise about 5% (helped by better ratings) and Adshel's EBITDA is expected to increase about 25%.
APN expects an $8 million charge linked to its outdoor advertising joint venture with Quadrant Private Equity. In addition, falls in the value of APN's newspapers have reduced its ability to deduct interest for tax purposes, causing another hit of up to $8 million.
Management reported the second half has been more challenging than the first, with 'extremely short bookings' and a lack of the usual seasonal uplift in revenues, which worsened publishing results.
APN said it is managing levers within its control, including cash management, product innovation, sales transformation and further cost reduction, with the aim of offsetting some of the negative impact from weak advertising markets.
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