Recovery on the cards at Caxton

Publishing group says cost management and financial discipline have returned it to profit and offset weak advertising spend

REDUCED ADVERTISING SPEND IS LIKELY TO REMAIN A CHALLENGE

increase in profit before depreciation and amortisation, R563.9m compared to R350.3m in the previous year

Printing and publishing group Caxton, which has been restructuring its business in the face of falling newspaper and magazine sales, returned to annual profit as cost cuts offset weak advertising demand.

On Monday the publisher of the once iconic Bona magazine, which has shut down, said headline earnings per share which strip out the effects of one-off financial events — came in at 75.4c from the previous year’s 21.2c loss. But revenue fell 6.3% to R5.2bn, reflecting weak advertising demand in the newspaper publishing industry.

The newspaper publishing industry, it said, “has had to deal with the compounding effects of reduced consumer spending, due to the pandemic, and sluggish recovery of the economy on an already constrained and difficult newspaper industry”.

This resulted in reduced advertising spend — the bread and butter for publishers — and this is likely to remain a challenge as the country grapples with the prospect of a fourth wave of Covid-19 infections expected in the coming months.

National advertising revenues were 2% below those of the previous year.

Caxton — worth R3.04bn — says the second half of the year was much better than the first with the strongest recovery for advertising spend coming from food retailers, which was marginally higher than the previous year. Spend from the general merchandise and DIY markets has taken longer to recover.

Profit before depreciation and amortisation increased by R213.6m, up 61%, to R563.9m compared to R350.3m in the previous year.

The group said it had a “largely restored full-year performance notwithstanding the effects of the pandemic that are still being felt across all sectors of the business”. It attributed this to “financial discipline, excellent cost management, huge efforts by our staff, commitment to our customers and well-timed strategic decisions have all contributed to this recovery”.

Cash and cash equivalents at the year end were just under R2bn, an increase of R246.3m, putting the group in a position to restore dividend payouts after suspending them in 2020 when companies were scrambling for cash to navigate challenges posed by the pandemic. It will pay out 50c per ordinary share and 410c per preference share.

In May 2020 the group said it was withdrawing from magazine publishing and associated businesses. The titles affected were Bona, Country Life, Essentials, Food & Home, Garden & Home, People, Rooi Rose, Vrouekeur, Woman & Home and Your Family.

In October it sold its shares in two internet network infrastructure and services companies. Octotel, which provides internet network infrastructure, and RSAWeb, a hosting and connectivity provider, will be sold to fund manager Neoma Africa Fund for R493m. The group says it made a profit of R399.3m from the disposal.

Shares in Caxton — a little traded stock up 52% so far in 2021 — were 0.85% weaker on Monday at R8.19.