Caxton Media, publisher of the Citizen newspaper, reported a drop in headline earnings for the six months ended December 2013, in trading conditions it described as “unusually problematic”.
Caxton pointed to improved turnover by 7% to R2.9 billion, however, operating profit was marginally lower at R418.7 million – a drop of 3.5%.
Headline earnings per share dropped 5.4% to 59.1 cents.
Caxton said that recent events and trends have once again necessitated the detailed examination of the value of the company’s plant and equipment.
It has been deemed prudent to impair the value of such items by R400.5 million, it said.
“Through a variety of factors, the most important of which has been the large and unanticipated drop in the value of the rand, and which resulted in raw materials and consumables increasing substantially by 21.7% during the period covered by this report, trading conditions have been unusually problematic.”
Caxton stressed that advertising spend on printed products continues to fall but not at the same pace as has been evident in recent times.
“Conversely, digital products and publications have increased in popularity, which trend is expected to gather pace as more tablets and sophisticated mobile phones become available to consumers,” it said.
Newspaper publishing and printing
Despite the difficult trading and economic environment, the company said its newspaper division continued to grow and increased its market share.
“The relentless pressure on daily and Sunday broadsheet newspapers has continued and further falls in circulation and particularly in advertising has occurred,” Caxton said.
This, it added, is fortunately not a market within which the company operates except for the company’s regional daily newspaper, The Citizen, which despite the difficulties mentioned above, is holding its own and increasing its market share under difficult conditions.
Caxton said that digital publishing products continue to grow and the digital strategy which the company had embarked upon last year is underway, with a number of new sites being rolled out with good success.
“Good profits were achieved by all components of this important division of the company, including the Johannesburg newspaper factory, which has benefited from the extensive capital expenditure over the past few years and is a model of production efficiency,” the company said.
Caxton said there is sufficient evidence emerging worldwide to show that there is a clear divergence between the future outlook for magazines and newspapers.
“Whilst at this point in time, it appears as though newspapers, especially those that rely on a cover price, could over a number of years continue declining, the same cannot be said for the fate of magazines in a printed form,” it said.
The group continued that, while digital applications are becoming the preferred source of news, magazine readers fortunately still demand a printed product even though a digital equivalent is in many instances available.
“However, one of the biggest challenges facing publishers of magazines in South Africa has been the substantial increase in printing costs which have risen alarmingly and will rise further consequent to the large fall in the value of the Rand.”
This, the company said, has resulted in the magazine division not making its budget even though advertising sales achieved budget.
Looking ahead, Caxton said that the new year has started on an unhappy note.
“As is well documented, consumers are reeling under the strain of the cost of living which in reality is going to worsen.
“Inflation is expected to increase as a result of the huge fall in the value of the Rand and increased fuel costs and other costs are adding to the their burden. Interest rates have increased for the first time in many years and further increases can be expected.”
In these circumstances, Caxton said it is not possible to plan for or anticipate any growth in earnings.