APN to sell-off regional media offering due to 'challenging environment'

By Sarah Homewood and Rachael Micallef | 25 February 2016

APN has announced that its regional newspaper business is up for sale after revealing a Group-wide loss in this morning's full-year results.

APN has stated that a number of parties have already been engaged in a sale process, despite newly-minted CEO Ciaran Davis explaining that it is operating in a challenging environment.

He told AdNews that the business has a number of positives but requires a signficant investment to make a successful reposition to digital.

"The publishing market in itself is challenged all round and we're no different to that," Davis says.

"We've been incurring costs in this business for a long time - 40 million over the last three years - and against that backdrop it still does produce some solid results. It's audiences are very good; we took the brave decision to roll out digital subscriptions, that's paying off. There are an awful lot of positives going on in this business.

"The decision that we’ve made today is that we absolutely appreciate that digital growth is the future of this business in terms of repositioning it, but it does require a lot of investment. Looking at APN and the opportunity we have with other businesses in the portfolio we're just not prepared to put the investment in it."

It's for those reasons that Davis explained that APN has commenced a process to divest ARM.

“New ownership should give ARM the flexibility to invest where required, to continue to providing quality news and content to its audiences, without having to compete for APN’s capital.”

The business rolled out a paywall last May with the aim to grow revenues and when AdNews previously spoke to Davis he explained that ARM had the largest audience and circulations it has ever had.

“I look at the innovations that it's producing with digital printing, digital subscriptions and data based journalism, there's an awful lot of innovations happening that have actually resulted in the largest circulations and audience that ARM has ever had in its history.”

Mixed results:

The news of the divestment follows a 7% loss in net profit after tax to $70m in APN News and Media's full year results.

Revenue from continuing operations was up 1% to $850m while earnings before interest, taxes, depreciation and amortisation (EBITDA) was up 1% to $166.2m.

The group also reported that its cost savings target of $25m was exceeded with further cost savings identified for 2016.

In addition, operating cash flows for the business were $78.2m with leverage at 2.74 times, down from the 3.1 times it reached following the acquisition of Perth based 96FM in January last year. APN announced it won't be paying a dividend until leverage reaches 2.5 times.

Davis says that the results were impacted by the performance of the group’s NZME and ARM businesses.

“Strong radio growth and increasing revenues following digitisation of Adshel have been offset by the challenging advertising markets in New Zealand and regional Queensland, which affected overall performances in NZME and ARM,” Davis says.  

Adshel to expand advertiser options

The group also used the results presentation to announce the expansion of its Adshel Live digital street furniture network in Australia.

In October, the network was rolled out in Australia with more than 270 digital panels on launch. The expansion will bring the digital asset base to more than 800 screens.

Also, in what is being called a Trans-Tasman first, Adshel announced it will launching a creative ad-serving platform, Adsmart, which it says will give advertisers the ability to change creative based on time of day, place, audience, context and business needs.

Adshel CEO Rob Atkinson says the new tools will boost opportunities for advertisers.

“Adsmart is all about simplifying the digital out of home ad-serving process while simultaneously giving advertisers the opportunity to create smarter, contextually relevant campaigns,” he says.

Revenue for the Adshel business increased by 8% over the year to $159.5m with EBITDA growing by 4% to $38.3m. However, costs grew by 10% to $121.2m, with net deb of $7.3m.



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