Annual Report to Shareholders 1996

Review of Operations

Brian McCarthy

Welcome falls of rain during the year improved the seasonal conditions and lifted the spirits in many rural and regional communities. Although the weather patterns were more favourable, the year in review was difficult for small businesses throughout regional Australia. Country areas suffered from Government rationalisation policies, and in some States, the extension of licensed gambling to hotels impacted on retailers.

The economic slowdown in the second half took its toll on many regional publications in country cities and towns. The resilience of these centres was severely tested, and advertising volumes, revenues and profits from these publications were under pressure.

Despite the listless trading conditions, it is pleasing to record that Rural Press Limited was able to increase its revenues, increase its operating profits, maintain margins, and continue expansion into new markets.

We consider the record net profit after income tax and minority interests of $31,529,000 a very pleasing and creditable result. It reflects the creativity and commitment of our staff, and the underlying strength and quality of our mastheads, broadcasting licences and printing operations in the marketplace.

Rural Press revenues from advertising, newspaper sales and printing rose to $282,881,000 an increase of $51,028,000 or 22% over the previous year. New acquistions accounted for $36,901,000 of the record sales growth, with $14,127,000 of the increase from existing products. Considerable gains were made in national advertising.

In December, Rural Press Limited acquired the Macquarie Publications group, at the time the largest independent regional publisher and printer in Australia. This was a most significant expansion of the company's New South Wales publishing base, and increases to nine the number of regional daily newspapers in the company. Additional newspaper acquisitions were made in Clare, South Australia; Crookwell, New South Wales; and Northam, Western Australia.

Due to the worldwide newsprint shortage, the company's newsprint costs were approximately $6,000,000 higher than the previous year, though some downward movement in pricing in the new financial year has occurred.

The company continued its technology drive, both in the pre-press and press areas, with expenditures at several sites on new state-of-the-art pre-press computer technology to improve efficiencies and expenditure on press equipment to allow more economic and efficient use of colour. Early in the new financial year, a major technology and marketing development, Farming OnLine, commenced to provide a stream of agricultural information and services on the World Wide Web for our readers and advertisers.

The commitment to staff training and development continued with the focus on sales training, editorial training and management training. Education in staff work and safety issues and environmental practices was extended.

Rural Press Limited is fortunate to have a team of motivated and dedicated staff who believe in standards of excellence. In the difficult environment in which the company operated during the past year, the company's greatest asset - its people - worked with even more determination, vigour and ingenuity to maintain Rural Press's position as a leading Australian company, and the major publisher and broadcaster for regional and rural people.

As Directors and senior management travel around the company, meet the staff, and listen to what they say, they hear highly motivated people working with great dedication to retain the standards of excellence, to increase sales and profits, and to perform better wherever possible. We place on record our appreciation to all staff at all levels for the pleasing and creditable result.

It is encouraging to record that a total of 561 employees now participate in the company's employee share scheme, collectively holding 2.1 per cent of the shares issued in the company.

Rural Press Limited publications and radio stations maintained their strong links with the communities they serve. Throughout the year the company contributed to very many community events and projects.

The year in review marked a number of important milestones, including the 125th anniversary of The Tenterfield Star and the 85th anniversary of Rural Press Limited, celebrated with a special colour supplement in the Hawkesbury Gazette. The Port Macquarie News published a special supplement to mark the 175th anniversary of the Port Macquarie community, one of Australia's oldest areas of settlement.

The company continued its record of dividend growth. above the normal dividends the company also paid a special dividend of 10 cents per Ordinary share in January 1996. The payment was satisfied by the issue of the newly created Preferred shares that shareholders approved in the General Meeting on December 7, 1995.

The number of tradeable shares on the Stock Exchange thus increased by the issue of the Preferred shares which were listed in January 1996.

The shares, which attract an additional 10% in dividends per share compared with the Ordinary shares, should be attractive to investors seeking a higher yield without requiring the full voting rights pertaining to Ordinary shares.

Creation of the new Preferred shares also facilitates growth opportunities by providing flexibility to issue shares as consideration for acquisitions. Full details on the Preferred shares are provided in the Directors' report and in Shareholder Information.

Dividend Policy

Rural Press aims to pay approximately 50% of its profit after tax to its Ordinary and Preferred shareholders with the maximum possible level of franking credits. This proportion may vary from year to year to ensure that if at all possible, the previous level of dividend is maintained.