Publishing and printing group Caxton on Monday (21 September) reported a significant decline in earnings for the year ended June 2020 – and the loss of a quarter of its workforce, in a sign of the times in South Africa.
Revenue declined by R748 million (11.8%) to R5.57 billion, significantly impacted by the lockdown, given that prior to lockdown, revenue tracked similar levels to the prior year, it said.
Post-lockdown, the main contributors to the decline were the drying up of advertising revenues, no publication or advertising insert printing work and no demand for packaging products for the fast food, alcohol and cigarette markets, Caxton said.
Profit from operating activities before depreciation and amortisation declined R303 million (46.4%) compared to the prior year, while headline earnings per share declined 79.1%, to 21.2 cents per share.
Caxton said that lockdown significantly impacted all businesses, “with the major impacts being felt in our newspaper business where advertising revenues dried up, the commercial printing operations were impacted by no publication or advertising insert printing work and the packaging divisions that service the fast food, cigarette and alcohol markets were also severely affected by the bans on trade in these sectors”.
“In light of the uncertain current and future trading environment, the group was also compelled to evaluate certain marginal operations in its portfolio. The group acted decisively in making a strategic election to close certain businesses that have been in decline for a number of years pre-Covid-19,” Caxton said.
These businesses, the group said, had no chance of surviving the post-Covid-19 trading conditions, and the lockdown simply exacerbated the situation.
These decisions resulted in the complete closure of the magazine publishing, including 10 titles such as Farmer’s Weekly, People, Garden & Home, Rooi Rose, and Bona, and distribution divisions and the CD and DVD replication plant.
“In addition, there has been a group-wide assessment of the likely impact of the difficult trading conditions that are expected to persist for the foreseeable future and many operations are undergoing some form of restructure in line with the reduced demand.”
These actions, the group said, lead to substantial job losses, estimated at up to 1,500 positions once completed, out of a pre-Covid-19 staff complement of some 6,000 persons. “The retrenchments and closure costs associated with these decisions have been fully provided for in the reported results and further materially depressed earnings,” the group said.
Staff costs declined by 6.2%, notwithstanding approximately R58 million in one-off retrenchment costs having been accounted for, associated with closed operations and restructurings that have either been completed or are under way.
In response to the pandemic, all staff also accepted a reduction in remuneration for the three-month period (May to July), Caxton said.
“There is no doubt that the impact of the Covid-19 pandemic on an already precarious economy has added another layer of uncertainty, which means the outlook is extremely difficult to predict,” it said.