Kerry Stokes' Seven Network Ltd today continued its attack on the performance of West Australian Newspapers Holdings Ltd, arguing that WAN's improved quarterly results did not mean the company was "back on track".
WAN this morning announced a 13 per cent rise in normalised net profit, and forecast solid growth on the back of the booming WA economy and new upgraded presses.
The company said normalised net profit from continuing operations rose to $31.0 million for the third quarter to March 31, 2008 -- a result it said would have been better but for the campaign by Mr Stokes to gain seats on the company's board.
WAN said the costs of meeting Seven's requisition for an extraordinary general meeting was $1.4 million in the period.
The company said that while ad revenue in some segments had weakened, the upgrade of its printing presses in suburban Herdsman had allowed significant cost savings and opened new opportunities.
"As forecast at the half year, revenue in particular advertising segments has weakened, primarily national display and employment," the company said today.
"However, the revenue opportunities provided by the Herdsman upgrade and the strength in Western Australian economy should allow the company to continue solid growth overall."
Seven responded with a statement this afternoon arguing that the quarterly results did not chage its critical assessment of WAN's performance.
"As you know, Board performance is not just about historical financial results and it is certainly not just about one quarter's results," the Seven statement said.
"No doubt WAN will claim that the business is back "on track". We don't believe that a business that has 25,000 fewer customers today than it did two years ago is "on track".
The Seven statement is pasted below:
9 April 2008 --- You may have seen more information from West Australian Newspapers
Holdings Limited (WAN) and we don't intend to go into a blow-by-blow response as we don't
believe that shareholders will be well served by that.
The issue is very simple.
In a booming State with the fastest growing economy and population, the circulation of WAN is
falling and at an alarming rate, particularly for the Saturday edition, and over a long period of
time.
WAN has recently confirmed its circulation is down further, approximately 5% against last year.
We do not believe that the current Board has the necessary media expertise to arrest this
decline.
WAN's digital strategy, which consists of little more than a website, must attract significantly
more users to build a digital business. Currently thewest.com.au lags well behind the local
News Limited offering. And now because of their lack of performance it is reported that Fairfax
is planning a WA focused news and current affairs site.
Since our announcement in February, we have also heard from many newsagents who have
expressed long-held frustrations about the delivery delays and a lack of financial incentives - all
of which contribute to declining circulation.
As you know, Board performance is not just about historical financial results and it is certainly
not just about one quarter's results. No doubt WAN will claim that the business is back "on
track". We don't believe that a business that has 25,000 fewer customers today than it did two
years ago is "on track".
The above issues are some of the reasons we are running for two Board seats. These failings
need to be addressed now and not later, and to achieve this, the Board needs some real media expertise.
We have the experience necessary to make a real contribution and our sole objective of two
Board seats is an appropriate number for a major shareholder of 20 per cent and with $480
million invested.
Please do not be misled: we do not want to control WAN. We have recently announced a
Board selection process to ensure that WAN remains an independent listed company with a
strong experienced board with well qualified independent directors for the benefit of all
shareholders.
Again do not be misled: Seven does not intend for WAN to have any share buybacks to gain
control of WAN.
