APN ends shocker year with more masthead value write-downs

Thursday 21st February 2013

Beleaguered APN News & Media, the Australasian publisher of the New Zealand Herald, has increased write-downs on the value of goodwill and its newspaper mastheads in its end of year result, to produce a net loss to Dec. 31 to A$455.8 million.

The decision to add a further A$151 million on non-cash impairments to the A$485 million already announced at the half-year result has effectively halved the total value of goodwill and non-amortising cash-generating units on APN's books from A$1.4 billion a year ago to $727.5 million now.

The result was presented by the company's new chairman, Peter Cosgrove, after a boardroom coup over the weekend in which the previous chair, three independent directors and former chief executive Brett Chenoweth resigned because major shareholders opposed raising capital to ease the company's woes.

The APN result was also affected by the company's sale of 52 percent of its APN Outdoor billboard advertising business into a joint venture during the year, cutting revenues and earnings accordingly.

Total revenue was down 13.4 percent to A$928.6 million, earnings before interest, tax, depreciation and amortisation were off 25.3 percent to A$156 million, and net profit after tax before exceptional items fell 30.4 percent to A$54.4 million.

However, on a continuing operations basis, stripping out the joint venture's impact, revenue rose 2 percent to A$857 million, while ebitda still fell 14 percent.

Unlike the first-half write-downs, which related only to New Zealand publishing assets, the bulk of the latest cuts is a charge of A$111.5 million against the value of the group's Australian regional newspapers, in part reflecting the impacts of the mining sector downturn and flooding in Queensland, where APN owns titles.

Notes to the accounts show the current asset valuations are highly sensitive to changes in advertising revenues, the assumed post-tax discount rate, and long-term economic growth rates in both countries.

For its New Zealand assets, a 1 percent decline in long-term growth would add further impairment of $14.7 million, a 1 percent increase in the discount rate would add $13.6 million, and a 10 percent fall in cash flow would have the biggest impact, wiping out $21.4 million.

Cosgrove highlighted the group's reduction in net debt by A$180 million during the year, with another A$40 million to A$50 million targeted in the current financial year.

"This will be delivered by organic earnings, including the cost reduction programme in publishing, as well as small asset and property sales," he said.

Today's announcement made no mention of the boardroom crisis, but appeared to make soothing noises about its plans for further cost-cutting in New Zealand and Australia.

Its New Zealand newspaper and magazine segment had delivered "substantial cost savings during the year", while advertising revenues fell by 8 percent, led by downturns in display and employment ads. The segment produced revenues of A$287.4 million, down 7 percent, and ebitda was down 23 percent to A$47.8 million.

However, the New Zealand assets, had "delivered its rejuvenation programme," with the relaunch of the New Zealand Herald - APN's largest single asset - in tabloid format. Other efforts to refresh its print products would continue this year, such as this month's relaunch of the Herald on Sunday.

The New Zealand media business had "a major cost reduction programme under way and is progressing with the sale of its publishing businesses in Christchurch, Oamaru, and Wellington."

With a half-share in The Radio Network, APN reported weak advertising in the New Zealand radio market although the Newstalk ZB network remained the country's top-rating network. TRN's revenue was down 2 percent at A$87 million, to produce 12 percent lower ebitda, at A$15 million.

The New Zealand outdoor advertising market was also difficult, with revenues down 19 percent, in part because of heavy advertising in the earlier year because of the Rugby World Cup.

The group's emerging digital operations, including the GrabOne and brandsExclusive shopping deal websites, produced strong revenue gains, up 367 percent to A$55.3 million and an 82 percent improvement in performance. However, investment in its growth contributed to an ebitda loss of A$800,000 for the year.

BusinessDesk.co.nz

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