Perth-based newspaper monopoly, West Australian Newspapers Holdings, yesterday reported a near 20% rise in 'normalised net profit' (before noteworthy items) to $128.4 million for the 2007 financial year, ending June 30.
This result includes 53 trading weeks for all business units other than Hoyts Cinemas and Community Newspapers, so the additional trading week accounted for 1.9% of the increase, making the underlying increase 17.6%.
Directors also said that the outlook for the current year was "favourable".
"The strong advertising market in 2007 has continued into the first quarter of 2007/08.
"Combined with a relaunch of Saturday's The West Australian in August and the benefits to flow from the Herdsman upgrade, the outlook remains favourable."
(That's the continuing upgrade of the company's new printing plant at Herdsman in Perth.)
Net earnings (not normalised) as reported (after noteworthy items) fell 22.1% to $54.0 million as a result of accelerated depreciation on Herdsman printing equipment, employee redundancies and a write-down of the Hoyts carrying value to $145 million.
Directors said that while the pre-tax contribution from Hoyts "rose 17.4% to $16.2 million, this included a non-recurring item of $2.4 million relating to a gain on surrender of a lease. Excluding this one-off item, operating profit was slightly up on the prior year.
"Following a review, the board has decided to reduce the carrying value of this investment by $60 million to $145 million."
Directors failed to note the size of the cut in percentage terms, but it was a substantial near 30% cut, based on the book value of around $205 million.
The half share of Hoyts was bought from the private company of the Packer family in 2004-05 for $173.5 million cash. PBL bought the other 50% for PBL shares worth that amount which were paid to Cons Press.
The company will pay a final dividend of 31 cents a share, fully franked (previous year 28 cents per share fully franked).
This brings total dividends for the 2006-07 year to $125.7 million, representing 61 cents per share (previous year 50 cents per share, or 22%).
"This completes the Board's commitment to normalise dividends for the 2005/06 and 2006/07 financial years to compensate shareholders for the initial negative effects of the Herdsman Production Upgrade," directors said yesterday
The company had undertaken to maintain dividends in real terms for two years because of the cost of the new plant and the impact of accelerated depreciation on earnings. (Hence the 'normalised' and reported earnings figures differing so much over the two years.)
Directors said the capital loss from the write down of the Hoyts investment "does not affect the group's ongoing profitability and has no impact on the group's ability to continue its current dividend policy".
The company's CEO, Ken Steinke, said in a statement that the "result represents a strong performance in a strong economy, reflecting again the pre-eminent market positions of our products.
"The major press upgrade at Herdsman is now nearing completion and while that installation has resulted in some short-term cost pressures, its benefits in both cost savings and revenue opportunities will be reflected in future performance.
"One early manifestation of those revenue opportunities will be the revamp of our Saturday publication in mid-August, including the launch of two new magazines.
"The company is also maintaining its emphasis on developing its digital opportunities with the ongoing growth in its major website, thewest.com.au, and associated products."
The company's major business is publishing the West Australian, Perth's only daily and Saturday newspaper (News Corp owns the Sunday Times).
The company said total revenue at the paper rose 13.8% to $354.2 million. Net advertising revenue rose 16.1% to $267.3 million and Circulation revenue rose 7.7% to $77.7 million.
Total gross advertising in The West Australian rose 13.4% in the twelve months, with a 9.0% increase in volume and a 4.4% increase in the average advertising rate per column centimetre. This increase is higher than the rate card increase because of the mix favouring higher-yielding sectors.
Total display revenue increased 9.8% with National display increasing 15.6% and Local display increasing 7.1%. Total Classifieds revenue increased by 15.2% with Employment increasing by 19.8% and Real Estate increasing by 27.5%.
New Homes performed strongly during the year with revenue 52.4% above the prior year.
Circulation revenue in The West Australian rose 7.7% as a result of an increase of 20 cents to $2.20 in the cover price of the Saturday edition in February 2006, and an increase of 10 cents to $1.20 in the cover price of the Monday to Friday editions in September 2006.
"Internal data shows paid circulation levels slightly below the corresponding period Monday to Friday while Saturday is tracking around 3% below the prior year.
Underlying expenses in The West Australian rose 9.5% due to a combination of increased advertising volumes, more commercial inserts and issues related to the progressive commissioning of new printing and publishing equipment in a live production situation.
Personnel costs rose 2.0%, with a 3.3% reduction in people numbers compared to last year and the transfer of CEO costs into corporate costs.
"Overtime and casual labour are 28% above last year because of larger papers, an 11.3% increase in commercial insert revenue and issues associated with the installation of new equipment while maintaining normal production. These costs should diminish once the new printing equipment is fully operational and bedded down.
Newsprint costs rose
