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APN News & Media, the Australian publisher of The New Zealand Herald newspaper and owner of The Radio Network, says earnings are lagging last year with flat advertising spending falling short of expectations and weighing on its publishing arms.
Chief executive Michael Miller told shareholders at the annual meeting in Sydney group earnings before interest, tax, depreciation and amortisation "is slightly behind where we were at this time last year" due to moribund spending by advertising agencies. APN generated ebitda of A$65 million in the six months ended June 30, 2013 before exceptional items, for annual earnings of A$162.8 million in 2013.
"As an advertising industry, agency expenditure in both Australia and New Zealand has been flat and as a result our agency revenues have been below expectations, especially in publishing," Miller said. "This has been partially offset by stronger direct and local advertising revenues, as well as improving circulation trends."
According to Advertising Standards Authority figures, New Zealand's total newspaper advertising revenue dropped 8.5 percent to $494 million in 2013, while online ad turnover jumped 29 percent to $471 million. Radio ad spending gained 7.7 percent to $267 million.
APN's dual-listed shares dropped 7.1 percent to 63.2 Australian cents on the ASX, and were unchanged at 73 cents on the NZX.
The media group bought out US partner Clear Channel in Australian Radio Network and TRN in New Zealand for A$246.5 million this year, rounding out an overhaul of its portfolio to ditch underperforming assets and shore up its balance sheet.
Miller said 55 percent of the company's earnings are expected to be derived from growth assets, identified as radio, outdoor advertising and digital media.
"We have furthered our investment in ARN and TRN because we are confident that radio will continue to grow as a medium and that ARN and TRN will continue to grow market share," he said.
APN aims to reduce publishing costs by A$20 million this year, and chairman Peter Cosgrove said publishing will continue to play an important role for the company, despite not being seen as a growth asset.
"We will explore all options with other industry players in a range of areas including printing and distribution to further reduce costs and extend their lives," Cosgrove said.
Miller said the New Zealand publishing unit is focused on new revenue generating opportunities, and the company is committed to introducing a digital subscription model for The New Zealand Herald.
"From our close watch of international markets, we are encouraged by recent US results which have shown that the newspaper industry there has had two years of growth in newspaper circulation revenues," he said.
"While most of our businesses outperformed their markets in 2013, we have identified opportunities for them to work more closely together, particularly in New Zealand, and be open to greater collaboration with other media companies in order to provide a wider range of options to our clients and to win a larger share of the advertising market," he said.
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