Ann Crotty
Times Media Group’s (TMG’s) results for the year to June have all the signs of being part of an industry in a state of flux.
Results posted on Friday showed exceptional costs of R219 million all but wiped out the R225m profit made during the 12 months and highlight the fact that an investment in TMG is still not for the faint-hearted.
However, analysts who follow the company believe that the relatively new chief executive, Andrew Bonamour, is on the right track with his strategy of disposing of businesses that he deems are not core to the media group’s operations.
After decades in which the cash flow from its valuable DStv stake and The Sunday Times were used to fund ambitious ventures into other areas of business, shareholders decided early in financial 2013 that the group’s core business is media and retail solutions.
Indeed until management is able to extract profits from BDFM, which is now 100 percent owned, the core could in fact be said to be The Sunday Times and Retail Solutions.
Yesterday, Bonamour told Business Report that he was “cautiously optimistic” about a turnaround at BDFM.
The group’s books division and its cinema business are being sold. So far, this will not be done at fire sale prices.
Van Schaik, which was bought from Naspers several years ago for R66m, is being sold for R350m. Financial news service I-Net Bridge, which is part of the core media business, is being sold to McGregor BFA for R115m, because TMG does not believe it can undertake the investment necessary to compete with the large multinational agencies.
About R96m of the R225m exceptional costs relate to TMG’s entertainment operations and an additional R53m are costs related to the scheme of arrangement transaction involved in the restructuring of Avusa into TMG.
Perhaps more troubling for shareholders who had concerns about the controversial UHC transaction undertaken by former chief executive Prakesh Desai in 2010 is the R45m of exceptional costs that are attributable to TMG’s Retail Solutions division.
Retail Solutions is essentially UHC (Uniprint and Hirt & Carter). News that Uniprint has lost the contract to print the South African white and yellow pages telephone directories will add to concerns.
Shareholder activist Theo Botha, who had been outspoken in his criticism of the 2010 transaction, told Business Report that UHC had never been able to match the sort of performance that it reported for the period ahead of the transaction.
At the shareholder meeting to vote on the R925m acquisition, Botha said Avusa was significantly overpaying for a company that had assets of only R145m.
The loss of the directories contract, to Paarl Media, has meant that Uniprint has been considerably scaled back.
Bonamour told Business Report yesterday that he was disappointed about the loss of the contract, which was certainly not expected at the time of the 2010 deal, but stressed that Hirt & Carter remained “a very solid and unique business”.
He would not be drawn on whether Avusa had overpaid, noting: “On the basis of the facts at the time the shareholders were happy with the deal.”
TMG’s media operations were also hit with exceptional costs. The largest one was a R33m goodwill impairment relating to the termination of the printing arrangement with TNPC. This, however, was more than made up for by the R42m of costs saved by transferring printing to Caxton during the year. Bonamour estimates future annual savings of R62m.
Yesterday, Blackstar Investments, which is led by Bonamour, announced it had increased its holding in TMG to just over 20 percent.
TMG shares dipped 1c to close at R19.99 yesterday.