Seven Network and West Australian Newspapers continue to trade insults and accusations over Seven Chairman, Kerry Stokes’ attempts to unseat the media group’s board.
The campaign to get himself and another representative, plus two independent directors, appointed, has seen a series of leaks, statements and claims and counter claims about WAN’s performance, Mr Stokes’ real motives, and concerns about creeping takeovers and poor performance of the flagship West Australian newspaper.
Yesterday WAN released third quarter results showing an improvement in "normalised’ earnings, but a fall in the circulation revenue and sales of the West Australian.
WAN directors reported a lift in third-quarter net profit and forecast solid growth on the back of the booming WA economy and upgraded printing presses in Perth.
WAN said net profit rose 16% to $29.6 million for the third quarter to March 31, 2008.
The company’s normalised earnings were up 13% to $31 million for the March quarter – a result it said would have been better but for the costs of fighting the campaign by Seven Network chairman Kerry Stokes to gain seats on the company’s board.
WAN said the costs of meeting Seven’s requisition for an extraordinary general meeting tallied $1.4 million in the period, both in direct meeting costs and in providing shareholders with information.
Directors said the lift in normalised earnings was assisted by a 4.7% increase in revenue and a 6.1% cut in expenses at its main division, The West Australian newspaper, thanks to the impact of the new pressures on staffing levels and paper consumption.
Total reported revenue in The West Australian rose 3.7% to $273.7 million for the nine months to March 31, with advertising sales up 5.8% to $210 million, but circulation revenue from newspaper sales falling 4.7% to $55.9 million for the nine months.
WAN’s directors claimed that the company’s "internal data" showed its Saturday edition circulation increased by 3,669 during the third quarter to 348,101, but its Monday to Friday edition had declined by 1,931 to 196,485.
WAN said it expected to see an increase on the January to March figures for the next two circulation audit periods, but conceded sales are expected to be below that of last year’s comparative periods.
In a statement issued late yesterday Seven Network said "The issue is very simple".
"In a booming State with the fastest growing economy and population, the circulation of WAN is falling and at an alarming rate, particularly for the Saturday edition, and over a long period of time.
"WAN has recently confirmed its circulation is down further, approximately 5% against last year. We do not believe that the current Board has the necessary media expertise to arrest this decline.
"WAN’s digital strategy, which consists of little more than a website, must attract significantly more users to build a digital business. Currently thewest.com.au lags well behind the local News Limited offering. And now because of their lack of performance it is reported that Fairfax is planning a WA focused news and current affairs site.
"Since our announcement in February, we have also heard from many newsagents who have expressed long-held frustrations about the delivery delays and a lack of financial incentives – all of which contribute to declining circulation.
"As you know, Board performance is not just about historical financial results and it is certainly not just about one quarter’s results. No doubt WAN will claim that the business is back "on track". We don’t believe that a business that has 25,000 fewer customers today than it did two years ago is "on track".
"The above issues are some of the reasons we are running for two Board seats. These failings need to be addressed now and not later, and to achieve this, the Board needs some real media expertise."
Seven also said yesterday (it owns around 19.4% of WAN) that it had appointed Korn Ferry to prepare an independent report on the nine external candidates for the WAN board.
Mr Stokes said the process would result in an objective review of the candidates.
Seven says the report is expected to be completed next week (on April 14), at which time it will advise the market of the two candidates it will vote for at the WAN general meeting on April 23.
In an obvious pitch to small shareholders, most of whom live in WA, WAN directors said: "The final dividend for fiscal 2008 is expected to exceed the previous financial year’s dividend of 31 cents".
