Caxton and CTP Publishers, Printers and Distributors has a long name and a longer history, dating back to 1980 when it was founded by Terry Moolman and Noel Coburn.
The company is one of the largest publishers and printers of books, magazines, newspapers and commercial print in South Africa. Unfortunately, this isn’t an industry with terrific fundamentals.
It’s a R1.5bn market cap dinosaur that is trying to survive an ice age. The share price has been on a downward spiral since August 2015 when the company traded at over R21 per share. It’s now at a paltry R4 per share.
Caxton just released its provisional annual results for the period ended 30 June 2020. Revenue dropped -11.8% and operating profit fell -46.4%. The company slipped into a sizable net loss position of -R64m from R355m the year before. It’s worth noting the R58 million in retrenchment costs, which is gut-wrenching when one considers the state of the media industry as a whole and the total lack of jobs.
The magazine aisle is sparse
The Audit Bureau of Circulations of South Africa reports quarterly magazine distributions in South Africa, but very few titles even reported results for Q2 2020. We therefore have to use Q1 2020 as the most recent reliable statistics.
To give context to the state of the industry:
- Associated Media shut its doors in May 2020, taking the likes of Cosmopolitan South Africa (circulation 35,000) and Good Housekeeping South Africa (circulation 34,000) with it
- Caxton announced soon thereafter that Bona (circulation 65,000) would close (to the shock of many) along with numerous other titles like Country Life, Garden & Home, People and Your Family
- In July, Media24 laughed off a number of fitness titles including Men’s Health and Women’s Health (combined circulation 40,000)
The consumer magazine market was down -13.1% in Q1 2020 so lockdown was just the nail in the coffin for an industry that was already suffering. Newspapers were even worse, with daily papers down -14% and weekend papers down -17%. The market is still substantial (Sunday Times circulation remains over 200,000) but the joy of the newspaper over breakfast or enjoying your coffee with a magazine is coming to an end.
In case you’re curious, here are a few other data points…
Huisgenoot is the biggest magazine in SA with total circulation of nearly 160,000 copies. YOU sells just over half as many magazines. Business Day was the only daily newspaper with increased circulation in Q1 2020 and the Financial Mail did better than the overall magazine market with circulation only down -4%.
If you find the circulation numbers interesting, check out https://www.marklives.com/ for quarterly analysis on the stats.
Advertising drives the industry
The economics are tough. Without advertising, there is no printed magazine and newspaper industry. It’s that simple. Consider the substantial circulation numbers of some of the titles that were shut down (like Bona with 65,000 circulation) when you think about this.
The cover price barely covers the cost of printing and distribution. Content needs to be created and paid for and the industry is extremely competitive, with competing titles rehashing the same garbage (at least that’s how I feel when I see most of the covers). The magazines are big on 8 Ways to Get the September You Deserve but aren’t big on 4 Ways to Be Profitable.
In the migration to online, advertising is still important but becomes less critical if there is a paywall in place. The cost of running a website is of course far less than the cost of printing and distributing magazines, so the economics for advertising and paywall profitability look totally different.
The way forward
Caxton does have other business interests, but the publishing and printing side of the business contributed half of operating profit in the FY19 results before the world went mad. It’s tough for Caxton with half the business in such a death spiral.
The major other business interest in the group is in packaging. It’s another highly competitive space that must have benefitted from growth in online shopping. Still, it probably won’t be enough to offset the severe pain in the magazine and newspaper market.
Caxton needs to reinvent itself and find new market verticals or it could be our very own Kodak.