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Mercury Media, a media-buying and planning agency that claimed billings of R500m a year ago, has gone into voluntary liquidation, leaving R94m owing to creditors – specifically media owners who are members of Media Credit Co-ordinators (MCC). It’s probably the biggest agency collapse in 20 years, but MCC members are secured by a bank guarantee, cession of book debt and personal suretyship.
Mercury was trading in difficulties for some while, but the crunch came when it lost the Government Communication and Information Services (GCIS) account, believed to involve media placement of up to R500m, though the actual amount varies enormously from year to year. The GCIS handles advertising on behalf of a range of Government departments, usually health and public services campaigns. In an election year the total shoots up.
But the fluctuations – plus the cash flow problems created for the agency, combined with Government’s notorious slowness in paying – make a State ad account a very mixed blessing.
Mercury – South Africa’s biggest black-owned media agency – ranked 12th in the country by media spend and was almost totally dependent on national and local government work and quasi-government organisations. A year ago it listed GCIS, the SA Revenue Service, IEC, Gauteng Shared Services, City of Johannesburg, Telkom, AvBob and SA Express as clients.
Media owners are at risk when agencies go under and prefer practitioners to be accredited with MCC. Voluntary accreditation reduces the risk and administration for both the media owner and advertising practitioner. To become accredited, agencies must supply security in the form of bank guarantees, cession of debt or investment guarantees in favour of MCC.
There’s an alternative fund, the Practitioners Credit Security Trust, for agencies with billings below R2,8m/year. Accreditation applications are made to CoreXalance, the agent of MCC and the administrating body that monitors advertising practitioner indebtedness on a monthly basis. There are 170 accredited advertising practitioners, representing 93% of the industry.
“All the agencies with overdue accounts or inadequate security in place are highlighted in our monthly Radar reports,” says CoreXalance CEO Mandy Kayser. “Those bring to our attention agencies with overdue billings but no current billings, or those with creditors exceeding debtors. On average over the past year, 15,5% of “outstandings” are overdue, which we define as unpaid after 60 days. We hold securities on every agency of at least 2% - 5% of their annual billings.”
Since the beginning of 2009, 11 (mostly small) agencies have closed their doors. The percentage of overdue accounts closely reflects the health of the business. Overdue accounts increased from 5% in January 2007 to 20% in January 2009, but improved slightly to 16% last year.
Mercury was trading in difficulties for some while, but the crunch came when it lost the Government Communication and Information Services (GCIS) account, believed to involve media placement of up to R500m, though the actual amount varies enormously from year to year. The GCIS handles advertising on behalf of a range of Government departments, usually health and public services campaigns. In an election year the total shoots up.
But the fluctuations – plus the cash flow problems created for the agency, combined with Government’s notorious slowness in paying – make a State ad account a very mixed blessing.
Mercury – South Africa’s biggest black-owned media agency – ranked 12th in the country by media spend and was almost totally dependent on national and local government work and quasi-government organisations. A year ago it listed GCIS, the SA Revenue Service, IEC, Gauteng Shared Services, City of Johannesburg, Telkom, AvBob and SA Express as clients.
Media owners are at risk when agencies go under and prefer practitioners to be accredited with MCC. Voluntary accreditation reduces the risk and administration for both the media owner and advertising practitioner. To become accredited, agencies must supply security in the form of bank guarantees, cession of debt or investment guarantees in favour of MCC.
There’s an alternative fund, the Practitioners Credit Security Trust, for agencies with billings below R2,8m/year. Accreditation applications are made to CoreXalance, the agent of MCC and the administrating body that monitors advertising practitioner indebtedness on a monthly basis. There are 170 accredited advertising practitioners, representing 93% of the industry.
“All the agencies with overdue accounts or inadequate security in place are highlighted in our monthly Radar reports,” says CoreXalance CEO Mandy Kayser. “Those bring to our attention agencies with overdue billings but no current billings, or those with creditors exceeding debtors. On average over the past year, 15,5% of “outstandings” are overdue, which we define as unpaid after 60 days. We hold securities on every agency of at least 2% - 5% of their annual billings.”
Since the beginning of 2009, 11 (mostly small) agencies have closed their doors. The percentage of overdue accounts closely reflects the health of the business. Overdue accounts increased from 5% in January 2007 to 20% in January 2009, but improved slightly to 16% last year.
