The downgrade by APN found an echo at West Australian Newspapers, now 23% controlled by Kerry Stokes’ Seven Network. With WAN joining APN in another earnings downgrade.
The message is that the Australian media (newspapers, radio and TV) is about to undergo another cut by analysts.
It’s another bit of bad news for Seven Network and Mr Stokes. The share price fell 9c to $4.87 yesterday. That’s up on the low for the quarter of less than $4.
But the results in the third quarter confirm that the business outlook in Western Australia is poor as the resources boom continues to fade.
Perth house prices fell 10% in the March quarter and new home building approvals fell 1.9%.
WAN said in its third quarter results and update yesterday that net earnings for the June 30 year are now expected to be lower than previous forecast.
Like APN, the downgrade is effectively the second in three months.
The company said normalised net profit for the nine months to March 31 (excluding Hoyts impact in 2007-08) was down 14.2% year on year and normalised Earnings Before Interest and Tax (EBIT) for The West Australian was 17.6% below the prior year.
But in the disclosed figures show that third quarter earnings slumped 34% to just $19.2 million in the three months to March 31 2009.
That led the newish CEO, Chris Wharton to say in a statement:
"This has been a very difficult quarter, with further deterioration in the advertising market, particularly in the employment and real estate categories.
“The year-over-year decline which sharply increased at the beginning of the third quarter appears to have stabilised.
"While no turnaround is yet apparent no further decline is expected in monthly run-rate.
“Reflecting the abnormal trading conditions, the Group now expects results for Quarter 4 to be consistent with Quarter 3 which will deliver a full year Net Profit After Tax in the range of $93 – $98m.
"This is lower than previous guidance of $100 – $108m."
That would be a fall of around 23% if the figure ended up around $93 million on the 2007-08 result.
WAN made a pre-abnormals profit of $121 million in the year to June 30, 2008.
The company said total revenue fell 10.6% to $244.8 million.
"Net advertising revenue fell 12.2% to $184.4 million and circulation revenue fell 5.6% to $52.8 million.
"Total gross advertising in The West Australian fell 12.2% in the nine months, with a 12.9% decrease in volume and a 0.7% increase in the average advertising rate per column centimetre.
"Total Display revenue fell 9.2% with National Display down 3.5% and Local Display down 12.1%.
"Total Classifieds revenue fell by 17.4% with Employment decreasing by 36.7% and Motors falling by 8.8%. Real Estate was down 13.8% and New Homes performed strongly with revenue 33.6% above the prior period.
"Circulation revenue in The West Australian fell by 5.6%, partly as a result of the introduction of a new distributor compensation arrangement from the beginning of July.
"The number of copies sold was 1.1% less than the prior year and an increase in telemarketing activity has seen a rise in the number of discounted copies sold.
"Expenses in The West Australian for the nine months ended 31 March 2009 fell 3.8% to $134.1 million.
"The radio operations achieved a 3.4% increase in revenue and a steady EBIT of $1.9 million.
"The 49.9% owned Community newspapers had a tough quarter with net profit after tax declined 23.5% to $3.6 million.
"Personnel costs rose in the nine months by 4.2%.
"All other costs decreased in the nine months, with Newsprint down by 16.0% due to a 7% price reduction, a 6.4% decrease in paging and a reduction in printing waste."
