APN cuts profit forecast in challenging markets

APN News & Media, has downgraded its 2009 earnings guidance, as challenging market conditions continue.

The media group, owner of the New Zealand Herald and nzherald.co.nz now expects full year net profits, before one-offs, to fall to a range between A$100 million ($NZ130.5 million) to A$110 million.

APN had in February forecast annual profits to be around A$20 million below its 2008 result of A$140.1 million before charges and significant items.

Chairman Gavin O'Reilly told shareholders at the company's annual general meeting in Sydney today that the new guidance was based on the assumption that advertising and credit markets did not deteriorate further.

"Consistent with previous comments, the majority of the shortfall will occur in the first half of 2009 when results are being compared with a near record 2008 performance, with NPAT (pre one-offs) expected to be around A$40 million," he added.

"In terms of the second half, it is important to remember that profit for the second half of 2008, unlike the first, was severely impacted by the global financial crisis and was well down on 2007.

"As a result, we do not expect to see similar year-on-year declines in our second half results."

O'Reilly said 2009 would be a "challenging and workmanlike year" for APN.

"As we look forward, it is important to remember that it is our markets that are challenged," he said today.

"Whereas our products and franchises remain strong and are generally holding their market share, with costs well down on the prior year.

"Whilst directors are optimistic that government stimulus packages will ultimately result in an easing of the current conditions, in the short term markets will continue to be difficult."

APN made a bottom line net loss after one-offs of A$23.97 million in calendar 2008, compared to a net profit of A$167.44 million in 2007, as revenue fell 6.5 per cent to A$1.26 billion.

O'Reilly said reducing costs continued to be a key focus with year-to-date costs down 10 per cent.

"Our capital expenditure requirements over the medium term will be extremely modest at around A$25 million per annum for 2009 and at that level for the next couple of years, down from A$80 million in 2008," he said.

"Happily in these still-turbulent credit markets, APN continues to receive good support from our funding partners."

APN recently accepted an offer for a new five-year A$50 million asset finance facility with the Commonwealth Bank of Australia.

"This will provide greater flexibility in relation to any upcoming maturities," O'Reilly said.

"APN has strong cash flows, reduced capex, good banking relationships and, with a conservative approach to dividends, expects to reduce debt in 2009 and 2010."

As at the end of April, and with the inclusion of the new bank facility, APN had in excess of A$120 million in cash and undrawn facilities.

In 2008, APN reduced its full year dividend payout by 29 per cent to 22.5 cents.

O'Reilly told shareholders that INM remained "a long term committed shareholder" in APN.

INM in January announced it would retain its stake in APN, despite receiving 'significant interest' from third parties.

It said the deteriorating stake of global credit markets had made it difficult for interested parties to put together a fully financed bid that offered appropriate value for APN.

INM in November had announced a review of its holding after receiving several approaches.

"I think it's fair to say that INM is happy that it did conclude," O'Reilly said referring to the review process.

- AAP