SMG Remains Cautious On Advertising Upturn
Andrew Flanagan, chief executive of SMG, said that he remains cautious about advertising conditions moving into the second half of the year, despite there being some signs of gradual improvement beginning in the autumn.
“We are already detecting signs of significant improvement in each of our businesses. However, we believe that it is too early to take a view on whether or not this is the start of the sustained upturn,” he said.
Radio In the group’s radio division, the flagship national station, Virgin Radio, was given a ‘root and branch’ review following the departure of Chris Evans two years ago (see Virgin Radio Sacks Evans).
The group says that its new presenter line-up and music policy were reflected positively in the latest audience figures from RAJAR, with the average number of weekly listeners rising by 3.2% quarter on quarter in Q2 (although this figure was down by a hefty 10.0% year on year).
The continued downturn in national advertising markets caused turnover at Virgin Radio to fall by 13% to £11.8 million, although it gained some market share from the other national commercial stations. SMG did not give a specific figure for the degree of airtime revenue decline in the period.
Television The company’s ITV franchise – Scottish and Grampian Television – saw advertising levels fall in line with the ITV Network as a whole, down by around 5% in the first half. Combined with an increase in programming budgets, this decline pushed television revenues down by 27.9% to £6.2 million.
Outdoor Out of home advertising was once again the bright spot for SMG, with the company’s cinema and outdoor businesses reporting rising turnover and profits. Turnover was up by 2% to £20.2 million, whilst operating profit rose by 7% to £3.2 million.
SMG says that revenues to its Primesight six-sheet panels increased by 25% as the business continued to develop its targeted packages for advertisers, including the Drivebuy pack of petrol station forecourt panels, which is attracting both FMCG and motor manufacturers to the medium.
Outlook Flanagan says that SMG is well-placed to benefit from a sustained rise in the advertising market whenever it may emerge. Cost reductions should contribute to a stronger H2, as should reduced marketing spend at Virgin Radio.
The summer months of July and August are traditionally the quietest months for advertising revenue and continued the trend of the first half of the year. However, the short-term advertising market has returned strongly for September and October and there are encouraging signs of a strengthening of the market, said the group’s statement.
“We expect such events as the Rugby World Cup and a more promising film release pattern in cinema to have a positive impact on the fourth quarter. We believe it is too early to take a view on whether or not this is the start of the upturn, but we are cautiously optimistic about advertising markets,” added chairman Don Cruickshank.
Shares in SMG were down by 4.0% at 95p by mid-morning.
