There are exceptions to most rules and The West Australian is a clear exception to the rule that traditional newspapers are suffering at the moment. While most are in decline, Perth’s only daily still produces huge profits and cash flows. For the 2007 financial year, WA News reported an 18% increase in ‘normalised’ net profit to $126m. Headline profit fell 24% as the company accelerated the depreciation of its printing press (because of an upgrade) and wrote down its Hoyts joint venture by $60m.

Advertising prices increased by 4.4% and the cover prices of the daily and Saturday newspapers were raised by 10 cents and 20 cents respectively. The ability to increase prices is something that most daily newspapers can only dream about these days. It’s all thanks to a booming Western Australian economy, which helped earnings before interest and tax to rise by 15% to $158m.

The company’s Hoyts cinema chain investment disappointed once again, with flat profits. Andrew Gordon, chairman of WIN Television, was recently quoted as saying: ‘Buying Hoyts was the most disastrous thing WA News has ever done.’ It’s hard to disagree, though at least the company has said it won’t buy the other 50%.

A fully franked final dividend of 31 cents has been declared (ex date 10 Sep), maintaining the company’s policy of paying out all earnings to shareholders. The share price is down 8% since our last review on 22 Feb 07 (Sell – $15.30). We’d love to own this company, but it’s too expensive and we’re not keen on the management. SELL.

Tim Searles