SMG Sees No Ad Recovery This Year
SMG, the media group which owns Virgin Radio and Scottish Television, this morning said that it does not expect any material recovery in advertising conditions before 2004.
SMG posted profit before tax (excluding exceptional items, online losses and goodwill) of £26.0 million, down 27.8% on last year’s £36.0 million. Total turnover dipped slightly, by 0.9% to £278.4 million and earnings were flat at £65.6 million.
Group advertising revenues grew by 4% against a ‘background of tough trading conditions’, although a stronger H2 2002 began to deteriorate at the beginning of this year and the market has again become more short-term, says SMG.
Television The effects on television of the global advertising downturn eased sufficiently in the second half of 2002 to offset first half falls in airtime revenues, but fewer network programme commissions resulted in turnover in the company’s television division reducing by 9% to £128.5 million.
However, SMG says that its airtime sales outperformed ITV as a whole, which fell by 1%. The group’s share of net advertising revenue (NAR) increased from 6.2% to 6.3% on the back of this performance.
Radio Virgin Radio, as a national station, was ‘fully exposed’ to the advertising downturn, as national advertising has been much weaker than local. As a result, the station’s advertising revenue fell by 7.2%, with no recovery in the second half (-7.0%). Turnover fell by 7% to £25.9 million.
Virgin’s weekly reach dropped by 8.4% year on year in the Q4 2002, from 2.4 million to 2.2 million listeners. SMG says that this fall was an ‘inevitability’ during a period of transition in which the station has been ‘rebuilt’ with new schedules following new audience research.
“We continue to view the radio sector as very attractive and expect that once the current downturn is over that it will revert to its historically high rates of growth,” said SMG’s statement.
Out of home The company’s out of home division saw turnover rise by 36% to £45.4 million, with outdoor up 11% and cinema revenue up by 50%. Overall, operating profits increased to £6.2 million from £5.2 million in 2001.
Outlook “The strengthening of advertising markets in the second half of 2002 has slowed in the early part of 2003 and the market has again become more short term. Until the Iraq situation is resolved, and there is greater certainty over the economic outlook, we believe advertising levels will remain subdued,” said Don Cruickshank, chairman of SMG.
The company says that the significant deflation of ITV pricing, caused by improved audience ratings, will add to ITV’s attractiveness and draw additional advertisers as we go through the year. So far though, ITV’s improving audiences have had a negative effect on advertising revenues, according to analysts at Merrill Lynch (see ITV Revenues Drop As Audiences Improve).
The radio market remains tough and out of home revenues continue to outperform the market, with strong growth and increasing market shares at SMG’s division, the company said.
Shares in SMG were down 7.1% at 65p by late morning today.
