APN shares bounce 20% in a day

Better-than-expected results propel APN to a three-month high.

Andrew Mudie

Andrew joined the growing team of Motley Fool freelance writers in mid-2013 following years of personal development as a passionate self-taught sharemarket investor. At the time, Andrew was an engineer by trade, writer by hobby, and an investing nerd by passion who spent far too many breaks reading, writing and learning. Andrew’s first investing lesson came with his first stock selection in 2011 when takeover rumours caused a spike and subsequent plunge in the share price of Woodside and then the 21% fall in the market through mid-2011. The next four years of investing saw Andrew dabble in a vast array of strategies until settling on his favourite investment methodology, which is closely aligned with that of the Motley Fool: Fundamentals-based long-term buy-and-hold of great companies at great prices.

Published August 19, 2013 6:31 am AEST

APN News and Media (ASX: APN) shares soared 20% on Friday after announcing better-than-expected results for the first half of 2013. In the six months to June, the company achieved a net profit after tax (NPAT) of $16.2 million and cut net debt by around 15%.

The result was in stark contrast to a loss of $319.4 million in the previous year, when the group's New Zealand publishing business was subjected to a $485 million writedown. Excluding exceptional items, the result was up $1 million from the previous period. Revenue for the period was up 5% to $426.5 million and net debt was reduced by $17 million. Chief executive Michael Miller stated that with further cost-cutting to come, debt would be reduced by $40 to $50 million by the end of calendar year 2013.

Revenue and earnings were weak in the group's Australian Regional Media (ARM) division, falling 12% and 40% respectively. The result was due to ongoing weakness in the retail and regional job markets where the division has historically received much of its revenue. Ongoing cost-cutting and a switch in focus from mining industry advertising to tourism and agriculture is believed to have slowed the revenue contraction at the start of the current half.

APN also announced that part of its digital business, brandsExclusive, registered a $2.6 million loss and is being considered for divestment as the company focuses on reducing debt. The digital business, comprising brandExclusive, GrabOne in New Zealand, and iNC media, increased revenue by 270% to $12 million but registered a loss of $0.4 million, an improvement of 35% on the previous period.

The Australian and New Zealand radio businesses were the highlights, with revenue up 7% and 14% respectively, and earnings up 6% and 14%. Additionally, cost savings resulted in a 6% increase in earnings in the New Zealand Media newspaper business, despite revenue being 3% lower.

Foolish takeaway

Overall, it appears that APN is starting to turn a corner with net profit and revenue increasing in the past six months. There are promising signs in most divisions that cost-cutting initiatives are successful, with the Australia and New Zealand radio businesses the highlight. The company's cash flow is strong and has wisely opted to prioritise debt reduction over shareholder returns in the short term. With the share price still down over 20% in the last 12 months, there may be more short-term upside for investors willing to accept greater risk.

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Motley Fool contributor Andrew Mudie does not own shares in any of the companies mentioned in this article.

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