APN News and Media is attempting to reverse its poor fortunes by switching focus to the fast-growing outdoor advertising market, as newspaper earnings dwindle.
Outdoor advertising was the big earner for the beleaguered company when it reported its full year results on Thursday, but it was not enough to save APN from plunging into the red.
APN, which owns regional newspapers and radio stations across Australia and New Zealand, reported a $45.1 million net loss for 2011 compared to a $93.7 million net profit a year earlier.
Earnings in the outdoor category rose nearly a third, while they fell by a quarter at APN’s Australian and NZ newspaper arms.
Given the strong performance by the APN Outdoor business, APN wants to sink its teeth further into the sector through a 50 per cent joint venture with Quadrant Private Equity.
The pair want to extend APN Outdoor’s advertising reach throughout Australia, New Zealand and Asia.
The venture, which is subject to regulatory approval, is expected to generate about $190 million for APN and values APN Outdoor at $272 million.
It does not include APN’s Adshel street furniture business or its Buspak and Cody business in Hong Kong.
APN chief executive Brett Chenoweth the venture would focus on expanding in Asia.
“We had success in 2011, we’re going to have more in 2012,” he said.
“In 2011 we won a number of contracts, in Hong Kong we provided very strong growth, as in Indonesia.”
APN Outdoor’s full year earnings before interest and tax were $38 million on revenues of $263.7 million.
Morningstar Analyst Nathan Zaia said joint venture, which includes billboards, advertisements on public transport and throughout airports, was a ray of light.
“While it may appear APN is selling one of its best businesses, given its debt position, and given a languishing share price makes a capital raising unattractive, we don’t think the company had plenty of options,” he said.
“Cash received from the sale and co-investment from private equity partner Quadrant can be used to increase investment in digital products and pursue growth opportunities in Asia.”
While APN Outdoor grew its earnings in 2011, APN’s print operations suffered.
APN took a $156 million hit for reducing the asset value of its New Zealand newspapers, including The New Zealand Herald, after earnings fell following the Christchurch earthquake.
Recent floods and cyclones in Queensland also took their toll on APN’s stable of newspapers which include The Queensland Times.
The earnings results came amid controversy over the departure of advertising veteran Pierce Cody from APN’s board.
Mr Cody, who had sat on the board for a decade, is understood to have cited corporate governance concerns for being behind his decision to quit.
APN has disputed there are any such issues.
APN declared a final dividend of five cents a share, partly franked.
Its shares closed 1.5 cents higher at 83.5 cents.
