Ad downturn smacks Avusa
Nov 20 2009 15:43
Ines Schumacher
Johannesburg - Media company Avusa shocked the market when it reported a 20% plunge in advertising revenue, causing its share price to nose-dive by 10% at one stage.
Posting its interim results to end-September, Avusa said the drop can be attributed to a decline in recruitment advertising as employers shed jobs and limited appointments.
"I think the market didn't realise how geared towards recruitment advertising Avusa really was," said Cadiz African Harvest media analyst Rob Nagel. "We did not expect that kind of change."
Avusa CEO Prakash Desai warned investors not to get their hopes up for the second half of the year. "We don't see any growth," he said. "Avusa will remain flat. No growth, but also no decline."
Desai said although the number of advertisers remained the same, they were spending less. Some segments grew in volume, for example travel and retail, but overall the volume of column centimetre advertising had dropped.
"We saw the first big drop in October 2008 and then a second fall in January this year. April was a disaster with all the public holidays. Since then, the position has remained relatively flat which encourages us to believe it will remain so," Desai said.
The group reported an operating profit of R77m, down 56% from R177m in the comparable period. Revenue dropped 5% (R128m) from the comparable period to R2.2bn. Of that loss, R140m is attributable to the media division. Revenue at the retail, entertainment and books and maps divisions was up R12m.
Across Avusa, only the 50%-owned BDFM business had retrenchments. BDFM includes the Business Day and Financial Mail titles.
BDFM incurred a loss before interest and tax of R12m against last year's R3m profit. This is attributed to development costs and R5m in retrenchment costs.
The latest figures from the Audit Bureau of Circulations of South Africa (ABC) show Business Day's circulation dropped to 38 128 in the third quarter, from 40 370 in the previous corresponding period.
The recession killed off BDFM's The Weekender newspaper, which published its last edition on November 7 and was closed due to "insurmountable financial difficulties".
Avusa's controversial multimedia investment The Times halved its losses over the period to R8m. Desai expects The Times to break even by September 2010.
In late afternoon trade on Friday, Avusa's shares recovered slightly to 1 600 cents per share, down 7.51% for the day.
Avusa's biggest competitor Naspers is expected to release results on November 26 2009.
"I expect Naspers' print business will perform similar to Avusa's, but Naspers' other divisions will perform exceptionally well," Nagel said.
- Fin24.com
