WAN shares down after first-half profit report

West Australian Newspapers Holdings Ltd has joined a string of blue chip listed companies to be hammered by investors after reporting its result, with WAN shares down 10 per cent after announcing a $44.2 million interim net profit.

WAN said it expects a strong state economy to drive its growth this year, after reporting the 21.1 per cent slide in first half profit.

After stripping out one-off costs, its normalised profit rose 3.6 per cent to $59.6 million but that failed to satisfy investors.

The group said its second half earnings would benefit from continued cost savings, a cut in interest charges as debt is paid down from the proceeds of the sale of its Hoyts cinema business last year and the absence of depreciation charges on old printing presses at its Herdsman facility.

"We expect the strength of the Western Australian economy, allied with business improvements flowing largely from the Herdsman upgrade, to continue to enhance future earnings," it said.

"However, sharemarket volatility and rising interest rates may have a slightly negative effect, in the short term, on the current strong rate of advertising growth, particularly in the national market."

WAN shares closed at $10.10, down $1.10 or 9.8 per cent, after falling as low as $9.51 today.

WAN's normalised profit was adjusted for accelerated depreciation and other write-offs related to the production upgrade at Herdsman, as well as employee redundancies and for the effects of discontinued operations.

Chief executive Ken Steinke said business improvements from the Herdsman upgrade were continuing to flow through.

As well, gross advertising revenue in the company's flagship newspaper, The West Australian, including colour conversion, was up 11.1 per cent on a like-for-like basis.

"Costs for the half-year are up only 1.2 per cent on the same basis and that number will be lower in future as the full cost benefits of the upgrade are realised," Mr Steinke said.

"The increased revenue and cost savings delivered by the press upgrade, allied to the continued growth in the West Australian economy, position the company well for a strong 2008/09."

The company noted its results were no longer being impacted by the interest expense on the Herdsman equipment production upgrade, which is no longer being capitalised.

Noteworthy items after tax totalled $8.5 million, mostly due to accelerated depreciation on Herdsman printing equipment.

"This completes the write-down of the old Herdsman printing equipment," it said.

Revenue from continuing operations rose 6.2 per cent to $237.125 million in the half year ended December 31.

The West Australian publishing operation, which includes the newspaper, and regional and community papers, generated reported earnings before interest and tax (EBIT) growth of 9.2 per cent to $99.60 million.

Net advertising revenue rose 6.6 per cent to $140.6 million while circulation revenue fell 4.2 per cent to $37.4 million.

The company said gross advertising revenue rose on the back of 6.7 per cent volume growth and a 4.4 per cent rise in the average advertising rate per column centimetre.

The company will pay an interim dividend of 21 cents, which is down from 30.8 cents in the same period in fiscal 2007.