Avusa expects gloomy second half

Johannesburg - Media company Avusa said a gloomier second half was in the offing because sluggish economic activity has slowed down advertising and retail spend in the interim period to September.

The company said it was expecting "softer" revenues on account of further deceleration in advertising spend and "reduced" private consumer spend in the second half of the year, in line with forecasts.

The owner of South Africa's biggest weekly newspaper, Sunday Times, recorded a 12% increase in both revenue and net profit to R2.3bn and R167m.

Rapidly rising costs were the main culprit as they were ahead of both the top and bottom lines, with a 15% increase to R1.5bn (R1.3bn). This resulted in the gross profit margin decreasing to 37% from 39%.

Although revenue grew 48% to R458m in the retail division (which houses Exclusive Books and Van Schaik Bookstore), operating profit was inexplicably 38% lower at R10m.

The weakest link was the entertainment division, which houses cinema and film distribution company Nu Metro and Compact Disc Technologies.

Again sign of the rough economic times, this division saw a 4% decline in revenue and a steeper 48% drop in operating profit to R12m.

BEE-deal question mark

Avusa blamed that performance on "weak content" at Nu Metro and "a lack of hit material" in the music division. "The line-up for the second half of the year includes stronger content," said Avusa CE Prakash Desai in the results commentary. In an attempt to woo back cinema-goers, Nu Metro Cinemas activated its cellphone ticket-reservation facility.

Another surprise was Avusa's claim that there wasn't enough shareholder support for the conclusion of a black economic empowerment (BEE) transaction.

The company simply says: "The requisite 75% shareholder approval to effect such a transaction is currently not available". What Avusa didn't mention is that no transaction proposal was ever put to shareholders to vote on.

Minority shareholder activist Theo Botha also cannot a recall any announcement of a proposed BEE deal.

"The Avusa board has been saying for the last five years that they are working on a deal," says Botha. "But nothing to date. I don't even know why they put it there (on the results)." Botha has never missed an opportunity to ask the board about concluding a BEE deal, each time receiving the same answer that the company was "working on it this year".

Fin24.com left numerous messages for both the CE Prakash Desai and CFO Howard Benatar, but at the time of writing neither of them had been available to shed light on the "deal".

Avusa was pleased with the performance of its online businesses. It said employment services website Career Junction and financial information service I-Net Bridge continued to enjoy double-digit growth.

"Our newspapers managed to grow revenue and earnings despite a downturn in the advertising market," said Avusa.

It said the results were "commendable" and added that the magazine business division managed a "marginal increase" in revenue while earnings remained steady at last year's levels. "A combination of printing cost initiatives and cover-price increases helped counter the decline in advertising spend."

- Fin24.com