Poor results, anticipated, but poor nevertheless from two companies on either side of the continent on Friday.
Perth’s West Australian Newspapers Holdings reported a 20% fall in 2009 net profit, while in Brisbane Suncorp Metway issued another earnings downgrade that seemed to win the market’s trust with the shares closing lower, but not by as much as they were during trading.
WAN said the recession and a slump in advertising revenue (which has been mentioned in past reports this year) saw net profit fall to $87.2 million for the 12 months to June 30 compared with $109.9 million in the prior corresponding period, the company told the ASX on Friday.
WAN said that that normalised profit (which removes one-off reorganisation costs) fell 20.4% to $97.1 million.
Revenue was down 11.3% as property, cars and job ads dried up in the west as the resources slump and recession took hold.
Unemployment in Perth is now running at 5.7%, close to the national figure of 5.8% and up sharply this year.
For Kerry Stokes, the controller of the Seven Network and now the largest shareholder in WAN with 24%, the profit news means the company has had one of its toughest years for decades, and has cut the value of his holding.
WAN shares closed at $6.15, down more than 3% on the news on Friday. Mr Stokes average price is around $11 a share, but falling as he buys more shares around the current level.
Directors said that "the very difficult trading conditions that prevailed at the start of the calendar year have stabilised, albeit at a lower level than the first half of last year".
And WAN CEO, Chris Wharton (a former Seven executive in Perth) said :
“Although we continue to experience difficult trading conditions we feel fortunate to be in WA. We are beginning to see the benefit of new projects announced in the resource sector.
"They promise prosperity in this State, even during the course of this recession.
"The company has pursued a program to improve cost competitiveness, which is ongoing.
"A new editor was appointed in March and the long term slide in circulation was halted in the March quarter, when The West recorded its first across the board circulation increase in eight years.
"I am confident, based on internal estimates, that the good circulation story will be sustained in the next audit period,” he said in the statement.
Normalised EBIT for The West Australian was 22.6% below the prior year.
WAN cut its final dividend to 10 cents a share from 2008’s 32 cents, that’s as good a recognition of the company’s financial pressures.
That will save more than $45 million this year, which will hurt Kerry Stokes as much as other investors.
The result was under the earlier forecast for profit of $93-$98 million.
In Brisbane Suncorp-Metway seems to have withstood any gloom from its latest downgrade.
The bank-insurer said it now expects its full-year profit before tax to fall as much as 18% due to volatile financial markets, lower interest rates and major insurance claims.
Suncorp said it expects full-year profit before tax and items related to its purchase of Promina, completed in 2007, will be between $790-810 million.
That compares with $967 million profit reported in last fiscal year.
Suncorp shares finished down 10 cents at $7.90, after being down by as much as 37 cents during the day.
The news that the company was given the once over by a private equity group earlier in the year, is keeping the share price high.
Suncorp said it expects to pay a final dividend of 20 cents per share, in line with previous forecasts. Full results will be issued on August 25.
Earlier this year, Suncorp raised about $1 billion in new equity to boost its capital and announced a surprise departure of its chief executive.
Last month the company named Patrick Snowball as new CEO from September 1.
Acting chief executive Chris Skilton said the 2009 financial year had been particularly challenging due to combined effects of volatile investment and credit markets, subdued domestic economic growth and major insurance claims events across Australia and New Zealand impacting its businesses.
"While Suncorp expects its Banking and General Insurance businesses to report results broadly in line with guidance, volatile investment markets have reduced underlying profits in Suncorp Life and resulted in lower returns in the General Insurance investment portfolios," the company said.
"Accordingly, the Group’s net profit after tax (NPAT) for the year to June 2009 will be lower than the prior financial year."
Suncorp said its preliminary expected results for the group for the full year ending June 30, 2009, were for net profit of $340 million to $360 million That’s after all items.
"Profit before tax and Promina acquisition items will be in the range of $790 million to $810 million," Suncorp said.
"Cash profit is expected to be in the range of $510 million to $530 million."
