RJR bearish on advertising market for the next two quarters
Published:Friday | October 22, 2010 | 12:00 AM
Radio Jamaica Limited is forecasting a drop in advertising revenue in the period ahead but hopes to offset it by containing expenses.
But group managing director of the communications company, Gary Allen, has ruled out more job cuts and is looking instead to eliminate waste and to get a hold of losses from theft in its transmission segment.
"Up to the end of September, revenues are down by three per cent and our total expenses are up by approximately 12 per cent," said Allen on Wednesday, addressing shareholders at RJR's annual general meeting in New Kingston.
The company's September results are not yet available but in its first quarter report ending June 30, revenue fell 3.03 per cent from J$491.8 million in the 2009 period to J$476.8 million, while operating profit was sliced in half from J$108 million to J$53 million. Net profit fell from J$63 million to J$29 million.
Allen attributed the poor advertising revenue intake to difficulties being experienced by businesses which, he said, are unable to launch new products and have had to cut back on promoting existing products.
"In fact, business that has been booked directly with us or through advertising agencies is down and down significantly in some sectors," he said.
"Our radio and television brands have produced better audience results this year than they did last year but the simple fact is that the advertising market is shrinking and is virtually in a depressed state."
Allen said problems in some companies have led to the cancellation of millions of dollars in booked advertising in some instances while the limited state of emergency led to significant cancellation of business and of some events that would normally happened in May/June.
"The periods of flood rains we have been experiencing have also had a negative impact and led to cancellations and advertising campaigns either being stalled, being curtailed or activities not started," he said.
As income falls, the company has also been struggling to address theft of fuel used to power its transmitter at Spur Tree in Manchester, Oracabessa in St Mary, and in Westmoreland, which has the company J$3-4 million. Part of its added expenses include beefed up security to arrest the problem - a J$2-3 million investment in surveillance cameras.
"As the economic conditions worsened, we are seeing a greater level of pilferage and theft there. The persons who often go to the sites are armed and to have security guards there is not advisable if you are not looking to take on confrontations," said Allen.
"So we try to use the technologies to help us but it is racking up significant losses as we go along."
Allen said three persons have been prosecuted and are now before the courts to answer for the fuel thefts.
Allen did not fully spell out the cost-containment measures he has in mind, but told the Financial Gleaner that job cuts was not one of the options.
"We are looking at how we can re-deploy people rather than put people out of work so when we bring technology in, whereas technology may reduce people in a particular area, we will try to redeploy them elsewhere," he said.
There is already ongoing, he adds, an aggressive campaign in computer literacy for the staff.
In its last full financial year ended March 31, RJR grossed J$2 billion, up from J$1.6 billion in 2008, and made net profit of J$222 million in a dramatic swing from a loss of J$140 million in 2008.
"The present state of the economy and what is on the horizon suggest that for the next two quarters, buoyancy will not return to the advertising market, nonetheless, we will continue strident cost containment and aggressive selling approaches emphasising our own strengths and diversity," Allen told shareholders.