Advertising lift helps Herald publisher increase profit

By SIMON HENDERY

Herald publisher APN News & Media yesterday reported a 24 per cent increase in half-year profit, a result boosted by strengthening advertising sales and a rise in the New Zealand dollar.

Sydney-based APN's net profit for the six months to June 30 was A$44.7 million ($50.07 million), compared to A$36 million for the same period last year.

Revenue from the New Zealand Herald business rose 25 per cent from A$108.8 million to A$136.2 million. Total group revenue rose 20 per cent to A$569.9 million.

Herald earnings before interest and tax rose 26 per cent to A$40.5 million, and group earnings were up 26 per cent to A$105.2 million.

The company said currency movements - the strengthening of the New Zealand dollar against the Australian - added A$3 million to net profit. It also booked a A$9.6 million one-off gain from a sale and lease-back deal with the Herald's central Auckland headquarters.

This was largely offset by an A$8 million one-off cost associated with the restructuring of the company's outdoor advertising division.

The paper's circulation revenue increased from A$29 million to A$31.3 million due to cover price increases in March and the stronger exchange rate.

The strengthening New Zealand dollar is a double-edged sword for the company, which has $416 million in debt denominated in New Zealand currency.

Finance Minister Michael Cullen said in May he planned to shut a tax loophole at the centre of a financing arrangement involving the sale and lease-back of the Herald masthead.

But APN chief executive Brendan Hopkins said yesterday the two-year-old lease-back arrangement should be allowed to remain in place over its seven-year life.

"We're confident of the masthead financing structure and believe that if there are going to be any changes in legislation - which the New Zealand Government has indicated that they are looking [at] - we believe those changes should not be retrospective.

"We entered into a structure which was entirely legal at the time and we believe this would send the wrong message to any international investors looking at the New Zealand environment."

A spokeswoman for Dr Cullen said officials were due to report back to the minister in about a month with "an appropriate solution".

APN yesterday announced a company refinancing involving a fully underwritten $100 million share placement and a review of its banking facilities, which Hopkins said would "significantly increase the company's financing flexibility and efficiency".