APN first half profit drops 67%, paywall to start this year for NZ Herald

Thursday 20th August 2015

APN News & Media, the Australasian publisher and radio station operator, is taking its first step toward a digital subscription model for its New Zealand flagship newspaper, the New Zealand Herald, and plans to roll out registrations on the masthead's website before the end of the year. The company posted a 67 percent slump in first-half profit today.

Net profit sank to A$7.5 million, or 0.7 cents per share, in the six months ended June 30, from A$22.6 million, or 2.4 cents, a year earlier, the Sydney based company said in a statement. The New Zealand division, which includes the NZ Herald and the Radio Network stable of stations, posted a 13 percent decline in earnings before interest, tax, depreciation and amortisation, to $32.4 million on a 1 percent decline in revenue to $214.9 million.

The Herald website will begin digital registrations before the end of the year in the first phase of its digital subscriptions strategy, the company said. NZME, the local unit, is in talks with rival Fairfax Media to expand on their joint print agreement, and they are also in negotiations to stitch up a distribution deal, which APN said would "deliver incremental revenue and earnings growth."

Earlier this year, the NZME strategy was outlined to shareholders, where company executives said the New Zealand unit was looking at content across all platforms as being either news, sport and entertainment. Paywalls would help convert its audience into registered users, who would be offered member benefits in exchange for their data, the presentation says. Monetising the audience would include memberships, subscriptions, pay-per-view and personalised content.

NZME was carved out as a standalone business last year with APN intending to sell down its stake in the New Zealand business in an initial public offering, which has since been delayed.

The New Zealand unit's integration of its New Zealand Herald, TRN radio group and GrabOne voucher business has generated A$18 million in savings, at a cost of A$1.4 million in redundancies and A$657,000 to outside consultants in the six-month period, it said.

APN's group profit was dragged down by A$17.7 million of one-time costs, largely related to the loss of an outdoor advertising contract in Hong Kong with Buzplay. Stripping out the exceptional items, profit rose 5.5 percent to A$25.1 million on a 5.3 percent gain in revenue to A$427.6 million.

The Australian regional newspaper division reported a 5 percent decline in first-half revenue to A$94.5 million and a 22 percent drop in Ebitda to A$8.2 million, and the company is looking at ways to expand a distribution partnership with 15 percent shareholder News Corp.

The Australian radio division boosted revenue 29 percent to A$104.6 million for a 26 percent gain in earnings to A$36.6 million, due to investments in Perth, Melbourne and the drive time period.

The outdoor advertising business posted a 12 percent decline in revenue to A$24.8 million and a 28 percent drop in earnings to A$3.3 million due to the lost contract in Hong Kong.

APN's debt gearing had been reduced by its strong cash flows, but wasn't low enough to reinstate dividend payments. The company more than doubled operational cash inflow to A$37.3 million in the half. It also extended its A$655 million debt facility to a 2019 maturity.

Ciaran Davis, APN's former head of the radio, took over as chief executive today, replacing Michael Miller, who left to re-join News Corp as executive chair for Australasia.

APN's dual-listed shares last traded at 91 cents on the NZX, and 66 Australian cents on the ASX.

BusinessDesk.co.nz

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