The market was cautious about the improvement reported by West Australian Newspapers, the shares edged higher, but finished down 1 cent at $6.69.
The shares of its biggest shareholder, Seven Network ended up 8 cents at $5.75.
There seems to be a wariness about WAN and Seven, some investors wondering if they will link up for a tilt at APN News & media, others concerned that Seven will creep up the share register to dominate without paying a control premium.
Seven boss and new WAN director, Kerry Stokes, indicated that he didn’t see any cross financial links. But he seemed to suggest that the company’s current policy of paying out 100% of profit might be up for grabs.
And Mr Stokes told the meeting (from what media reports tell us) that he would continue to use the ‘creep’ provisions of the takeover law to buy 2.9% of WAN every six months, just as he moved from 19% to 22.4% a few months ago.
It means he will be a buyer in January-February of next year. Seven paid more than $500 million for its stake, and he’s losing the best part of $200 million at the moment.
But perhaps the biggest reason for the caution in the market was the discernible worsening in the returns from the company’s biggest asset, the West Australian newspaper. Revenue, circulation. Advertising and profits were all down.
WAN said it had a lift in profit for the first quarter of fiscal 2009, despite the weaker advertising market.
WAN reported net profit of $29.65 million for the three months to September 30, a 43.8% jump on the prior corresponding quarter.
Net profit on a normalised basis was up 5.4% also to $29.65 million, compared to the prior corresponding period.
WAN said the advertising market remained uncertain, but that certain revenue and cost initiatives would help it mitigate an advertising downturn.
"The benefits of (the) press upgrade and further revenue and cost initiatives will assist in mitigating further softening of the market," WAN said.
In the first four weeks of October, advertising revenue was down 7.8% on the corresponding period last year.
WAN said display advertising was down 6% and classifieds were down 12%, with employment, motoring and real estate categories all below the prior year.
WAN said new homes advertising was showing a solid 35.5% growth on last year.
For the first quarter of fiscal 2009, WAN said its main newspaper, The West Australian, performed solidly, with cost controls offsetting some of the advertising shortfall.
WAN chief executive Ken Steinke said "“Our flagship product The West Australian was able to offset some of the advertising shortfall with tight cost controls and other initiatives.
“Those costs will be further tightened as necessary during the remainder of the year.
“Our decision to use the proceeds from the sale of Hoyts last year to pay off debt has resulted in a considerably lower interest charge, helping the final profit figure,” he said.
“That reduction in external debt also enhanced the strength of the company’s already very solid balance sheet.
“We are aware that we are now in a tougher trading environment and are managing our business in the context of that environment.
”However, we remain committed to our future strategies, and have maintained our investment in our Digital division, and in our Circulation and Marketing areas. Longer-term, we believe we will reap the benefits of those commitments.
"Normalised EBIT for The West Australian was 2.4% below the prior year.
"Total revenue fell 2.5% to $89.2 million. Net advertising revenue fell 2.7% to $68.3 million and circulation revenue fell 2.1% to $18.6 million.
"Total gross advertising in The West Australian fell 2.6% in the three months, with a 6.5% decrease in volume and a 3.9% increase in the average advertising rate per column centimetre.
"Total Display revenue rose 0.4% with National Display down 5.1% and Local Display up 3.4%. Total Classifieds revenue fell by 7.1% with Employment decreasing by 18.1% and Motors falling by 6.9%.
Real Estate was steady with the prior year and New Homes performed strongly with revenue 30.8% above the prior period.
"Circulation revenue in The West Australian fell by 2.1%.
"A 10 cents increase in the Monday to Saturday cover price occurred on July 14, 2008 together with the introduction of a new distributor compensation arrangement from the beginning of July. Monday to Saturday circulation was 3.1% below the corresponding quarter last year."
