APN’s half year results show profit increase of 77 percent, but there isn’t good news across the board

APN’s first half figures for 2014 for the six months ended 30 June show that the company’s overall revenue across its Kiwi and Australian offerings climbed three percent, rising from A$394.6 million last year to A$405.9 million this year.

Statutory net profit after tax followed the revenue trend rising 77 percent from Au$12.8 million from the previous year to A$22.6 this year.

The official release from APN published on the New Zealand Stock Exchange website attributed this growth in profit to the company’s acquisition of the remaining 50 percent of Australian Radio Network (ARN) and The Radio Network (TRN) in February from Clear Channel.

“Radio continues to grow as a medium in both countries,” commented APN chief executive Michael Miller in the statement. “TRN held revenue share in a strong market and for the first time ever, ARN is the leading FM network in Australia. These results are ahead of our expectations, affirming that our decision to back these businesses, and radio as a segment, was the right.”

TRN’s revenue climbed from A$47.3 million last year to A$56.9 million and the earnings before interest, taxes, depreciation and amortisation (EBITDA) figures went from A$8.7 million to A$10.1 million.

However, it wasn’t all good news on the Kiwi side of the business. New Zealand Media, which includes the New Zealand Herald, underwent a slide in revenue from A$136.7 million last year to AU$135.6 this year. This was also reflected in the EBITDA figures, which showed a slight dip in earnings from A$23 million to A$22.7 million. On a local currency basis, both of drops were much more significant at 13 percent.  

The declines in revenue and profit were put down to the sale of South Island and Wellington newspapers in April 2013 and the sale of several magazine titles, including the NZ Listener, to Bauer in February of this year. A statement from APN said that if the revenue was adjusted on a like-for-like basis then the decline in revenue was only six percent in local currency.

There was also bad news for GrabOne, with the statement from APN calling the daily deal site’s figures “disappointing”. With a revenue figure of A$9 million, GrabOne’s figures this year came with a three percent year-on-year drop. This was also reflected in the EBITDA figures, which at A$1.8 million were down 16 percent on a local currency level.       

“This result is reflective of the challenges facing GrabOne and other ecommerce businesses, with declining email open rates and the accelerating migration from desktop to mobile impacting purchase and conversion rates,” said APN’s statement.

It could also be attributable to the fact that the company’s subscriber base has reached a plateau given that the company already has about 1.5 million members, a sizeable tally considering population of New Zealand.

The more mature daily deal markets are also slowing down, with a Forbes article published earlier year pointing out that GroupOn’s figures weren’t all that impressive. 

That being said, APN is keeping its faith in the business by announcing plans to roll out a ‘GrabOne 2.0’ platform before the end o the year. APN says that this will see include an initiative called ‘Facevalue’, which will encourage increased purchasing frequency “by allowing consumers to use the purchase value of a voucher once its validity period has expired.”

Overall, Miller said that APN’s performance had been strong, and that structural changes, introduced by the New Zealand arm’s new chief executive Jane Hastings, were ensuring that the company was on the right track.

“Although advertising markets remain challenging, APN’s second quarter performed better than the first. This gives us great confidence in our strategy of investing in talent, brands, digital infrastructure and a more integrated approach … APN’s New Zealand businesses continue to undergo significant and positive change under the leadership of Jane Hastings. The establishment of integrated sales offering APN Collaborative Media Solutions is one of the many ways in which our New Zealand businesses are working closely together to offer the best solutions to our clients and make the most of our assets,” Miller was quoted as saying in the statement.

The release of APN’s figures come after Fairfax recently announced its interim results. According to a report on Stuff, New Zealand earnings for Fairfax before interest and tax for the year to June were $65.9 million, up six per cent on a year earlier. Overall, Fairfax’s cross-Tasman operations resulted in net profit of A$225.2m, up from a loss a year earlier on write-downs of A$460m.

And although these interim results indicate the business continues to do well, a report on the Herald indicated that advertising sales for Fairfax dropped by 5.2 percent year-on-year to $269 million and that circulation had also declined by 6.6 percent to $117.9 million.

Given the steady decline in ad revenue in the digital age, Fairfax entered a three-year restructuring process last year, with the aim of saving $311 million on an annualised basis by June 2015.

Bauer also recently announced the commencement of restructuring measures in an effort to increase efficiencies in a changing media landscape.

The importance of taking such measures was illustrated recently with the leak of News Corp’s (owned by Rupert Murdoch) financial statements, which showed the conglomerate’s Australian publication was losing about A$30 million a year. And in a great example of corporate hypocrisy, News Corp has now taken legal action compelling Crikey, the publication that first reported on the figures, to destroy the information. Fortunately, this is unlikely to change the fact that the story has already featured on publications throughout the world.

What these leaked accounts also served to indicate was that, in some instances, the financial information fed to the public is sometimes sugar-coated when compared to the information contained within the media owner’s private ‘blue book’.            

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