Pre-tax profits fell by 39.0% to £36.0 million at SMG, whilst turnover dropped by 6.6% to £280.8 million, according to the company’s year-end financial results released this morning.
Whilst SMG has clearly been hit by the advertising downturn in the year to 31 December 2001, these results are pretty much in line with market expectations.
Television SMG operates two franchises in the ITV Network – Scottish Television and Grampian Television. Airtime sales fell by 8%, outperforming ITV as a whole, which saw ad sales declines of 14%. As a result, the company’s share of total net advertising revenue (NAR) increased from 5.9% to 6.2%.
Total television turnover fell by 11% to £141.6 million. SMG says that “against this unprecedented level of advertising weakness, [its] television stations put in a creditable performance.”
In light of the weakness in advertising and increased licence costs, SMG has taken cost reduction measures in its television businesses, mainly through staff reductions in 2000 and 2001. In Q1 2002, revenues continue to be down by 10%, compared to 14% at ITV as a whole.
Press SMG’s publishing division is less reliant on national advertising – which has been weak – but nevertheless felt the ‘general caution over the economic outlook’, the company said. Revenues fell by 2% to £77.4 million.
A strong performance in the recruitment and property sectors in the early part of the year dissipated in the second half, with other key categories, including motoring and London display, recording slight declines across the year. Only retail and entertainment held firm, according to SMG.
Radio SMG’s radio interests are principally with Virgin Radio, which is solely dependent on national advertising. This has been very weak in the radio sector, with local advertising putting in a stronger performance. Consequently, turnover fell by 17% to £27.9 million, whilst operating profit was down 30% to £10.5 million.
The year on year drop at Virgin is partly accounted for by the strong advertising performance centred around the Euro 2000 football radio campaigns which were keen to reach the station’s 22-44 audience.
Outdoor and cinema SMG’s out of home divisions bucked the sector trend to return significant growth across the year, with turnover up by 16% to £33.4 million. In outdoor, increased panel numbers – up 14% to 9,500 – resulted in continued growth in advertising revenues across the year, the group said.
In cinema, turnover rose by 23% during 2001. During the course of the year SMG won the contract to sell for UGC cinemas (see SMG’s Pearl & Dean Wins UGC Cinemas Contract), increasing the market share of its Pearl & Dean sales house to 45%, the highest since 1998.
Outlook SMG says that advertising markets in the UK have yet to show substantive signs of recovery and that, as expected, Q1 2002 shows modest year on year falls in advertising across a number of media sectors.
“These declines are significantly less severe than those experienced in Q2 and Q3 2001 when the downturn in advertising was at its most acute. Encouragingly, the market is becoming more predictable and buying activity is reverting to more traditional patterns. In particular, radio, as the medium most able to take short-term money, is showing the first signs of recovery.”
Shares in SMG were up 4p at 148p by mid-morning today.
