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Johannesburg - Its new focus on digital media has helped to cushion Kagiso Media Limited [JSE:KGM] as advertising spending continues to fall.
"Advertising spend is under severe pressure but considering these tough trading conditions the company has performed fairly well," said Adrian Zetler, analyst and Coronation Fund Managers.
Kagiso Media, owner of radio stations like Jacaranda and East Coast Radio among others, reported a 4% increase in revenue to R458m for the six months to end-December 2009. Profits for the period also rose, improving by 13% to R132m.
Kagiso CEO Murphy Morobe said, "These results indicate our ability to withstand these tough market conditions. We are up in some areas and down in others, but for the main part we have managed to sustain our margins at levels that are quiet competitive."
One area that was down was revenue from broadcasting, Kagiso's core business, which decreased by 2.7%. However, its new acquisition Gloo contributed R10.2m.
Gloo is a digital design agency that focuses on interface and communication design for interactive audio visuals, DVDs, interactive television, website design, viral video, direct email campaigns and interactive game design.
"Kagiso's move into digital is paying off," said Zetler. "Gloo has certainly helped defend broadcasting revenue."
Kagiso has been launching digital initiatives to protect itself against decreasing radio advertising, said Morope.
"We decided on this strategy before the market meltdown and this intervention has come to play an important part in helping us withstand the shock of the previous year," he said.
"Before Gloo, the only offer available to customers was on-air advertising but now it can offer an entire package," said Zetler.
The future direction of the company still remains a concern for Independent Securities CEO Simon Fillmore.
"Kagiso Media should be considering where the next growth sector is," he said. "These new areas will determine future profits."
"The radio market is very mature, so the move towards digital is certainly the right move and it will help growth the business," said Zetler.
- Fin24.com
