One-stop model assists Webjet

ONLINE travel booking service Webjet says the next year will be difficult for the travel industry as a strong dollar fails to stimulate demand and consumers become more cautious.

Webjet has been able to largely escape a slowdown in demand, which it attributes to consumers preferring the one-stop shop that its online service provides.

The company yesterday posted a 24 per cent rise in annual net profit to $13.6 million, despite what it has described as a flat travel market.

Webjet’s managing director, John Guscic, said there had been a noticeable slowdown in demand across the entire industry, citing growth of just 0.8 per cent in the international market in May, compared with a 5 per cent rise in the same month last year.

”The market has clearly slowed down over the last six months,” he said. ”The Australian consumer is just generally more cautious. It’s no different to all the other retail groups who have spoken about the consumer behaviour.”

Mr Guscic said the strong Australian dollar was not stimulating demand for travel like it had a year ago. ”The next 12 months will continue to be tough for the airline and travel industries,” he said.

Webjet shares rose 4 per cent to $3.65 yesterday following the release of its full-year profit, which was slightly better than its guidance. Revenue rose 30 per cent to $59 million.

The company has not given guidance for this financial year but highlighted that it boosted total transaction value – the price at which travel products and services were sold – by about 14 per cent in July.

Webjet will pay a final dividend of 7¢ a share on October 5, taking the payout for the year to 13¢. It compares with a payout of 11¢ a share in 2010-11.

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Increase in digital sales allays decline in newspapers

Industry group The Newspaper Works said the tough economy and structural changes in publishers’ businesses had contributed to the decline in circulation.AUSTRALIA’S newspapers have again recorded disappointing circulation and readership figures, with overall weekday circulation down by 5.7 per cent year-on-year. But digital sales have provided some positive news, with many publications recording double-digit growth.

Fairfax, which is continuing its strategy of stripping out unprofitable newspaper sales, has recorded the biggest falls in print. According to the Audit Bureaux of Australia, weekday circulation of The Age is down 14 per cent year-on-year, with Saturday down 13.2 per cent.

The Age’s main competitor, the Herald Sun, is down 6.4 per cent on Saturdays and 5 per cent during the week. Readership figures echo the decline, with The Age’s weekly readership down 13.6 per cent, according to Roy Morgan Research.

But digital circulation figures showed strong growth for Fairfax titles, with The Age experiencing huge lifts in digital sales, growing 81 per cent, quarter-on-quarter, across all editions and the weekday Age enjoying 127 per cent growth quarter-on-quarter.

Industry group The Newspaper Works said the tough economy and structural changes in publishers’ businesses had contributed to the declining circulation. Chief executive Tony Hale said while there were 18.4 million copies of newspapers sold each week, the circulation data was only a partial measurement of the audience of newspapers, with publishers implementing digital strategies to capture audiences in print, online, on mobiles and tablets.

Chief executive of Fairfax’s Metro Media business, Jack Matthews, said Fairfax’s expansion of its news brands across platforms was validated by the latest figures. ”We are right to be focusing on the digital and mobile expansion of all of our mastheads so we can capture as much of that shift as possible. This is industry-wide and it requires the kind of fundamental overhaul … which we have embarked on at The Age and The SMH. We’re doing so to make print sustainable for the future and we’re doing so from the best possible position as shown in the first total masthead readership results.”

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Foxtel subscriber growth eases but earnings on rise

SUBSCRIBER growth at Foxtel remained subdued and slowed over the past year as the News Corporation-controlled pay TV company posted an 8.5 per cent growth in earnings to $598 million.

The number of people who signed up for Foxtel in the year to the end of June grew by 1.3 per cent to 1.68 million.

Revenue was up 4 per cent to $2.2 billion and profit before tax $258 million – up from about $200 million this time last year. It does not release a net profit number as its tax bill is shared by its three shareholders, News, Telstra and Consolidated Media Holdings.

The result does not include the $1.9 billion merger with Austar in May, which brings its combined subscriber base to 2.3 million.

The full impact of the Olympics on the business will not be known for another two months, the company said.

Foxtel was a joint bidder with Nine for the rights to broadcast the Olympics to Australian viewers.

It split the $120 million bill for the summer and winter games between itself and the free-to-air broadcaster and has put on eight dedicated channels for round-the-clock coverage.

”We will be evaluating that in the next two months. We have seen a tick-up in subscriber numbers. I won’t say it is huge, but it is certainly noticeable. We have also seen an increase in the number of people who are taking our sports pack, which is encouraging,” a Foxtel spokesman said.

Foxtel gave the Olympics channels free to its existing subscribers – 80 per cent of them now take its sports package. Its churn rate – the number of people who choose to cancel its service, has dropped below 13 per cent.

The company said the ongoing savings from the Austar merger, which includes staff, back-office functions, real estate and executive salaries would amount to $40 million a year but it declined to detail the one-off costs associated with the transaction.

This time last year subscriber numbers grew 2.5 per cent for the 12 months to the end of June 2011 and profits rose 26 per cent off the back of a 6 per cent lift in revenues.

Last week News Corporation, which is a 25 per cent shareholder, cleared a regulatory hurdle to double its stake when the Australian Competition and Consumer Commission said it would not ”lead to any substantial lessening of competition in any relevant market”.

News wants to buy the James Packer-controlled Consolidated Media, which also owns a quarter of Foxtel.Foxtel paid Telstra a $108 million dividend, a figure revealed in Telstra’s results.

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Competition, turbulence to keep bank costs ‘up for years’

Bank on it: There is a price to pay.TWO of the country’s biggest banks have warned that funding pressures will keep climbing for years to come, setting the scene for more disputes over their mortgage rate decisions.

Despite bankers previously predicting funding costs would cool off from this year, ANZ and Westpac executives yesterday said there had been no let-up in offshore turbulence or competition for deposits.

Instead, banks would be forced to pay a premium to access funds overseas for another five years, the acting chief operating officer of Westpac’s financial services division, Jim Tate, said.

The predictions, which suggest banks are unlikely to pass on any further official interest rate cuts in full, were made before a Senate inquiry into how the global financial crisis has changed banking.

ANZ’s deputy chief, Graham Hodges, said the biggest pressure on its cost of funds was the fierce competition for deposits, which continued to heat up. Banks obtain about half their funding from deposits, but are looking to lift this to 60 per cent, forcing them to offer higher interest rates to savers.

The competition for funds, alongside jittery overseas markets, would continue pushing up the banks’ costs for the next two years, he said.

”The overall impact at this stage looks as though we’ve got another two years where costs will continue to rise step by step,” Mr Hodges said in Sydney.

Westpac’s Mr Tate told the inquiry there would be no let-up in overseas lenders’ demands that Australian banks pay extra for borrowed funds.

Big banks were paying 1.5 percentage points over the benchmark cost to access long-term capital markets, he said, compared with 0.25 percentage points before the 2008 financial crisis.

”You would think that under normal, ongoing, quite predictable growth, that spread would come in, but we’re not at that point and we’re a good five years away from being at that point,” Mr Tate said.

In 2010, Westpac chief executive Gail Kelly said her best guess was that funding costs would cool off from this year.

Commonwealth Bank group executive David Cohen also said the competition for deposits had made bank funding more sustainable. But the relatively high taxation of income earned from interest was limiting the role of deposit funding.

Mr Cohen also defended the bank against claims its $2 billion takeover of BankWest at the height of the financial crisis had harmed competition, saying the deal saved Australia from a financial shock.

While bank costs are rising, banks are no longer enjoying rapid credit growth that fuelled bumper profits before the global financial crisis.

The Reserve Bank’s assistant governor, Guy Debelle, said that after mortgage growth of almost 20 per cent early last decade, credit was more likely to expand at the pace of the broader economy.

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Thrift and slowing housing construction blow to Scali

Managing director of Nick Scali furniture Anthony Scali.FURNITURE retailer Nick Scali received a strong tailwind from the federal government’s recent carbon tax compensation payments, which boosted fourth-quarter sales, but hit weaker conditions in July and said it was unable to provide a profit forecast for the 2012-13 financial year.

Managing director Anthony Scali said consumers continued to save rather than spend money. That, combined with a slowing Australian housing construction market, meant the retailer would need to depend on earnings growth from the stores it had opened over the past 18 months.

Nick Scali yesterday reported a 22.3 per cent fall in full-year net profit to $9.024 million, which was at the bottom end of a trading update provided in May. The weaker than expected result was due to a slump in its gross margin, down to 60.8 per cent from 62.7 per cent, as the retailer was forced to offer promotions and discounts during the year to drive traffic into its stores and generate sales orders.

Revenue for the period rose 9.4 per cent to $109.39 million, but more than $7 million in furniture orders were not included in the accounts and will show up in the 2012-13 result.

The company declared a final dividend of 3.5¢ a share, down from 4.5¢ in the previous corresponding period.

Mr Scali said a strong fourth-quarter order book was most likely the result of the compensation paid to households for the carbon tax. Orders in July were down, and the volatility of the past 12 months continued to affect operations, with directors unable to predict the company’s full-year results for 2013.

Shares in Nick Scali ended down 5¢, or 3.5 per cent, at $1.40.

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