Splitting HairsHas Avusa lost the plot? |
Interims are riddled with useless figures.
This is the peculiar tale of a company caught playing silly buggers in the worst recession in living history.
It was always going to be tough as media companies across the world have seen revenues decimated by a fall in advertising but how much of the Avusa's (JSE:AVU) interims, which were released on Friday, can you put down to the recession and how much to not managing its costs effectively?
The Avusa interims for the six months ending on September 30 were abysmal. Ad revenue down 20%. Revenue down 5% from R2.330bn to R2.202bn. Operating profit dropped 56% to R77m, down from R177m and it burned through R200m of cash reserves. It has R200m in cash left.
The company's biggest revenue earner is media (it owns the Sunday Times, The Times, the Sowetan, Sunday World, The Herald, Daily Dispatch and half of Business Day and the Financial Mail) and then there's its book and maps publishing division, retail in the form of Exclusive Books and entertainment (NuMetro and Gallo).
Business Times's Grapevine column noted on Sunday that the interims were presented to a select audience of 16 people and that no journalists were invited but the figures speak for themselves - or at least the transparent obfuscation of the figures do. One media analyst told me that the interims were riddled with useless figures while the crucial numbers for the Sunday Times, the biggest earner in the company's biggest division, and its new baby, The Times, were absent.
The only specifics for these two titles was that The Times's "loss of R8m was half that for the prior period" and then there was a wacky bar graph for revenue for The Times with no figures at all!
But, in fact, this tomfoolery has been going on for quite some time and it's not hoodwinking investors. Wayne McCurrie of RMB Asset Management told Alec Hogg on his radio show on Friday evening: "But look, they can more than double the earnings because they've been slaughtered now. Make no mistake, when things turn in your favour you can get massive positive gearing on it but it's a very cyclical company, and just the investment community hasn't kept track of it. But with Element One and the unbundling and Avusa, and the name change, people have just lost track of what the company's up to and they haven't been following it, quite frankly."
So what can we glean from the numbers?
Well, the media analysts say that it's clear that costs have not moved in the past six months, that the books and maps division is doing alright but it is coming off a low base, that The Times's revenue growth (even without the figures) looks too low for us to expect the paper to break even in September next year (which is the company's stated aim).
They also say that The Times's lack of advertising means that the Sunday Times ad rates are effectively being discounted but it will be hard for Avusa to shut The Times as advertisers and subscribers have come to expect having the two papers for the price of one. (The Times is given for free to Sunday Times subscribers). Recruitment advertising, which drives the Sunday Times, will not pick up till we are clear of the recession, they say, and non-recruitment ad spend could be even worse in the next six months so, in short, there are troubled waters ahead.
It truly is very difficult to assess what's potting at Avusa, and its heavy reliance on recruitment advertising has come as a surprise to many. Though it's unfair to compare Avusa with the giant Naspers (JSE:NPN), which will release its interims on Thursday, one can't help but wonder why Avusa's suffered a 20% fall in ad revenue while the South African division of Independent group reported a 10% decline in its interims for the first six months of 2009.
The lack of information of losses at The Times and the cost and revenue relationship between the Sunday Times and The Times is another big question. The R8m loss for The Times revealed in these latest interims comes after a Business Day report in September that said that The Times had lost R64m over two years.
There were rumours in media circles last week that Avusa might be about to retrench and merge the Sunday Times and The Times newsrooms but I was told that the CEO "stakes (sic) categorically that those are just rumours and there is certainly no substance to them". Staff members said the two newspapers were moving into the same office so that they could bring a halt to unnecessary duplication in production and news gathering. This should be a good move and, in fact, retrenchments would make no difference to this financial year. The smart media companies retrenched before the start of this financial year - and, indeed, many did so.
Last week another set of figures came out, the ABC circulation figures for the third quarter of the year, though they were not widely reported on - probably because newspapers and magazines' sales figures were down pretty much across the board and they would rather not flag this fact.
There was in the ABC figures, however, a notable event - and that is for the first time in many years the Sunday Times sales figures were below 500 000 - they came in at total circulation of 491 430. Those of you read an earlier column of mine about newspaper bulking, that dubious practice of giving away papers for free to boost circulation numbers, and that of James Myburgh's will know that this appears to say that the Sunday Times, one of the chief bulking culprits, has decided that the cat is out of the bag.
The Sunday Times third-party bulking for the third quarter of the year was 37 615 (46 628 in the second quarter of the year) but its print media in education sales (newspapers given to schools) was in fact up to 71 249 from 62 627, which means its copy sales were 241 185 (down from 254 775).
So what gives? There is reference to bulking in the Avusa interims but it's a little peculiar. It says (under separate bullet points):
"* Single copy sales are being converted to subscribers and bulk sales are promoted to maximise circulation revenues.
*Large print orders with large returns will increase single copy sales delivering a loss to bottom line - we have delivered lesser single copy sales."
So it looks like bulking will continue though I'm not completely sure what is trying to be communicated here or if the company knows what it is trying to say. And that, I think, is the story of the latest Avusa results: as the company contrives to confuse, it is quite possible that it has lost the plot too.
*Media columnist Gill Moodie spent 14 years as a salaried hack in print media in South Africa and the UK before escaping to the blogosphere and freelance journalism. She is the publisher of Grubstreet http://grubstreet.co.za/ in between unpacking and packing the infernal dishwasher and bringing up a four-year-old with attitude.
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