Mer­cury goes un­der

Prom­i­nent me­dia agency leaves R94m in un­paid bills

Finweek English Edition - - ADVERTISING&MARKETING -

MER­CURY ME­DIA, a me­dia-buy­ing and plan­ning agency that claimed billings of R500m a year ago, has gone into vol­un­tary liq­ui­da­tion, leav­ing R94m ow­ing to cred­i­tors – specif­i­cally me­dia own­ers who are mem­bers of Me­dia Credit Co-or­di­na­tors (MCC). It’s prob­a­bly the big­gest agency col­lapse in 20 years, but MCC mem­bers are se­cured by a bank guar­an­tee, ces­sion of book debt and per­sonal sure­ty­ship.

Mer­cury was trad­ing in dif­fi­cul­ties for some while, but the crunch came when it lost the Gov­ern­ment Com­mu­ni­ca­tion and In­for­ma­tion Ser­vices (GCIS) ac­count, be­lieved to in­volve me­dia place­ment of up to R500m, though the ac­tual amount varies enor­mously from year to year. The GCIS han­dles ad­ver­tis­ing on be­half of a range of Gov­ern­ment de­part­ments, usu­ally health and pub­lic ser­vices cam­paigns. In an elec­tion year the to­tal shoots up.

But the fluc­tu­a­tions – plus the cash flow prob­lems cre­ated for the agency, com­bined with Gov­ern­ment’s no­to­ri­ous slow­ness in pay­ing – make a State ad ac­count a very mixed bless­ing.

Mer­cury – South Africa’s big­gest black-owned me­dia agency – ranked 12th in the coun­try by me­dia spend and was al­most to­tally de­pen­dent on na­tional and lo­cal gov­ern­ment work and quasi-gov­ern­ment or­gan­i­sa­tions. A year ago it listed GCIS, the SA Rev­enue Ser­vice, IEC, Gaut­eng Shared Ser­vices, City of Jo­han­nes­burg, Telkom, AvBob and SA Ex­press as clients.

Me­dia own­ers are at risk when agen­cies go un­der and pre­fer prac­ti­tion­ers to be ac­cred­ited with MCC. Vol­un­tary ac­cred­i­ta­tion re­duces the risk and ad­min­is­tra­tion for both the me­dia owner and ad­ver­tis­ing prac­ti­tioner. To be­come ac­cred­ited, agen­cies must sup­ply se­cu­rity in the form of bank guar­an­tees, ces­sion of debt or in­vest­ment guar­an­tees in favour of MCC.

There’s an al­ter­na­tive fund, the Prac­ti­tion­ers Credit Se­cu­rity Trust, for agen­cies with billings be­low R2,8m/year. Ac­cred­i­ta­tion ap­pli­ca­tions are made to CoreXalance, the agent of MCC and the ad­min­is­trat­ing body that mon­i­tors ad­ver­tis­ing prac­ti­tioner in­debt­ed­ness on a monthly ba­sis. There are 170 ac­cred­ited ad­ver­tis­ing prac­ti­tion­ers, rep­re­sent­ing 93% of the in­dus­try.

“All the agen­cies with over­due ac­counts or in­ad­e­quate se­cu­rity in place are high­lighted in our monthly Radar re­ports,” says CoreXalance CEO Mandy Kayser. “Those bring to our at­ten­tion agen­cies with over­due billings but no cur­rent billings, or those with cred­i­tors ex­ceed­ing debtors. On av­er­age over the past year, 15,5% of “out­stand­ings” are over­due, which we de­fine as un­paid af­ter 60 days. We hold se­cu­ri­ties on ev­ery agency of at least 2% - 5% of their an­nual billings.”

Since the be­gin­ning of 2009, 11 (mostly small) agen­cies have closed their doors. The per­cent­age of over­due ac­counts closely re­flects the health of the busi­ness. Over­due ac­counts in­creased from 5% in Jan­uary 2007 to 20% in Jan­uary 2009, but im­proved slightly to 16% last year.

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