Caxton hit by woes of small businesses

The business environment in the newspaper industry is gloomy, with a sharp fall in advertising and frequent increases in raw materials, printing and publishing group Caxton says.

The rise of social and digital media has led to most newspaper firms worldwide suffering a drop in circulation. Readers are resorting to the internet as a source of news.

Announcing half year to endDecember results on Thursday, Caxton blamed the sector’s woes on SA’s weak economy, which it said is putting pressure on small businesses and forcing businesses to advertise less.

The group said the demand for newspapers continued to drop, while increases in the prices of raw material could not be recovered from customers, given the weak economy.

The group profit after taxation declined 18.1% to R175.5m, though finance revenue rose owing to dividends from Novus. Caxton took a 5% stake in the printing group in 2018.

Pressure due to SA’s weak economy, where small businesses are “struggling to survive”, was particularly evident in its newspaper publishing and printing business, Caxton said.

The bulk of the revenue decline came from its newspaper business in large metropolitan areas such as Gauteng, where it is the “newspaper printing operation that is faced with declining copies and page numbers, the company said.

“Sadly, it looks like this trend will continue into the foreseeable future as declining circulations and possible closure of titles will continue to negatively impact this operation,” Caxton said.

DECLINING

CIRCULATIONS AND

POSSIBLE CLOSURE OF

TITLES WILL

CONTINUE TO

NEGATIVELY IMPACT

THIS OPERATION

“In contrast, the national advertising market held up relatively well when considering the difficult retailer environment,” the group said.

It had a healthy balance sheet, Caxton said. However, in the absence of revenue growth, profits are expected to remain under pressure.

The publisher’s packaging operations have also managed to maintain turnover. Although margins are under continual pressure, the profitability is on par with the previous corresponding period.

The group is seeking to manage its operations as tightly as possible.

“Staff costs and other overheads are essentially flat year on year, which is a commendable performance, especially in the face of large energy cost increases,” the group said.

During the six-month period, the group disposed of 10% of its shareholding in communications and marketing agency Ince, in an empowerment transaction. This resulted in a loss on disposal of R5.1m .

Last year, businessperson Andile Khumalo bought a 26% stake in the family-owned business, in a move meant to improve the company’s BEE status and its offering to clients.

Khumalo bought the shares from Caxton and Ince founders the Atkinson family, which disposed of 16% of the business.

Ince specialises in marketing and investor communications for corporate companies such as Old Mutual, Sasol, Absa, Nedbank and Liberty.

Caxton also said it initiated an energy-cost review with an outside consultant, which resulted in savings.

Caxton shares remained unchanged on the news in trading on Thursday, at R6.15. The company has a market capitalisation of R2.32bn.

Anglo American Platinum (Amplats) foresees no disruptions in sourcing spares to repair two converter plants to restore platinum group metal (PGM) supplies to the market after declaring force majeure.

The project will cost between R650m to R800m.

The Anglo American 80%held subsidiary activated clauses in PGM supply contracts and with mining companies selling it concentrate, to notify them of a failure of the two plants in quick succession, which halted refining of the metals.

An explosion in February at the first converter, which readies matte from Amplats’s four smelters by stripping out iron ahead of the refining processes, and then inexplicable water ingress at the second standby converter plant in March, prompted the force majeure declaration on March 6.

Amplats lowered its refined metal output forecast for 2020 by 900,000oz of platinum, palladium, rhodium, ruthenium, osmium and gold for 2020, representing about a fifth of its annual output.

The suspension of metal supply from Amplats has come as prices for PGMs plummet.

There is concern about demand from vehicle makers, which use the metals in their antipollution devices, as the global economy reels under the effect of the Covid-19 viral outbreak.

Amplats plans to take parts from the first converter, which will take between R500m and

R600m to repair by the first quarter of 2021, to fix the second converter. The second converter will cost between R150m and R200m to repair over 80 days, with a target of May 25 to return to operations.

“The repair team is on site executing the work, and a full investigation is under way to understand the cause and nature of the water ingress into the furnace,” Amplats said, noting that a “majority of the replacement equipment” could be found in the first converter or in its spares inventory.

“All procurement of additional equipment is from within SA, so no supply chain disruptions are anticipated,” it said, addressing concerns around disruptions caused by Covid-19 to imports from other countries.

Sibanye-Stillwater, the world’s largest source of PGMs, has opted to move all refining of its Rustenburg material that was being toll-treated at Amplats to its half-full Marikana metal processing complex. It will retain its smelting contract with Amplats.

Royal Bafokeng Platinum said on Wednesday it had reached agreement in principle with Amplats around the purchase of concentrate contract, with a substantial payment made on delivery and the balance made at a later date.

THE SECOND

CONVERTER WILL

COST BETWEEN

R150M AND R200M

TO REPAIR OVER

80 DAYS