The tough times for the Australian media continue.
Last week it was News Corp, Seek and APN News and Media downgrading 2008 and 2009 earnings forecasts; today it will be the Seven Network confirming the extent of a previous forecast, and on Thursday Fairfax media with a much anticipated trading update that won’t be happy.
In fact you can read into Fairfax’s forthcoming update from the APN statement late Friday (both operate in regional Australia and in New Zealand) that times are going to get tougher.
News Corp cut its 2009 earnings forecast from a rise of 4%-6%, to a fall in the "mid-teens" to quote chairman and CEO, Rupert Murdoch.
Seek said earnings had gone flat: that was after a 37% rise in 2008. The slump in job ads on line has hurt earnings for the country’s largest business in this sector.
The giant General Motors warned on Friday that it would be cutting another $US5 billion in costs next year, and was looking for much of that to come out of its marketing budget, which will be bad news for media outlets in the US.
Mr Murdoch last week singled out the cuts GM and other car makers have made so far this year for cutting revenues and profits at News’ local TV stations in the US.
Seven forecast more than a month ago that first half earnings would be 40%-50% down because of share losses and a downturn in ad spending and rates forecast for the rest of the year and into 2009. Car advertising is down here.
Now APN Friday downgraded its 2008 earnings and said 2009 would be flat.
News of the downgrade will make the task of Tony O’Reilly selling his 39.1% stake in APN much harder.
APN CEO Brendan Hopkins said earnings at the newspaper publisher and radio broadcaster would fall 12.6% in 2008, more than three times the decline forecast only three months ago (Source).
APN said that earnings before one-time charges are now expected to be about $148 million in 2008, at the lower end of market forecasts, and down from $169.4 million last year. Net income will be weighed down further by costs of $20 million for redundancies related to a restructuring program completed this year.
APN also forecast flat earnings for 2009. That, it said, reflected analyst estimates.
Mr Hopkins said: "The board agrees with analyst concerns, and views the economic climate with caution. It believes that conditions for the foreseeable future will remain challenging and advertising bookings remain very short term.
"These are challenging times for all businesses. Our long term investment plan to upgrade business models across all our areas of operations has facilitated further cost savings. In this uncertain financial climate we must do everything we can to ensure that all our businesses are in the best possible shape for the future.
"Our diverse range of media businesses across five countries continue to perform in line or better than their respective markets, in particular:
"Elsewhere our New Zealand Publishing, Radio and Outdoor businesses are challenged by testing market conditions although Radio in Australia has been recently gaining after losing share at the end of 2007 and in the early part of 2008."
"APN has demonstrated an ongoing ability to restructure its operations to meet prevailing market conditions. We have a strong cost focus, which, coupled with the benefits of our significant three year capital expenditure programme now complete will deliver a satisfactory operating earnings performance for the balance of the year and in 2009 providing market conditions remain reasonable."
"Regarding current trading, the Board of APN notes that the consensus forecast for APN has fallen in line with the economic outlook for the present year which reflects a more difficult trading environment.
"The Board agrees with analyst concerns, and views the economic climate with caution.
"It believes that conditions for the foreseeable future will remain challenging and advertising bookings remain very short term.
"The outlook for the fourth quarter is such that the lower end of the present analysts consensus range (A$148 million Net Profit After Tax pre non-recurring items) better reflects the Company’s current expectations for the 2008 year and is in line with recent analyst’s updates.
"It should be noted that the achievement of "project related" efficiencies, principally headcount reductions, will result in a non-recurring charge (A$20 million), the majority of which will fall within the current year. As a result the Board expects a significant benefit (A$10 million plus) to the 2009 Earnings Before Interest and Tax.
"The Board of APN considered its best estimate for the profit performance for calendar year 2009 and, given reasonable market conditions, expects it to be broadly in line with the present year before any non- recurring items.
"The Board remains confident that APN’s diversified portfolio of market leading assets will continue to prosper and, in the main, grow their respective market shares. In addition the Capital Expenditure for the specific Project Upgrade Programme commenced three years ago has now been completed so a significant (A$50 million) reduction in capital spend will also benefit the 2009 year," Mr Hopkins said in the statement sent to the ASX after trading had finished on Friday.
APN shares retreated 3c Friday to end at $2.89, down from the surge above $3 reached earlier in the week, but up on the $2.41 a week earlier, before Independent News &a
