Although many media group executives expected a year of economic recovery and the end of the downturn, the sovereign debt crisis put an end to these hopes. The downgrading of the U.S. credit rating, the Fukushima catastrophe, austerity measures and an unstable geopolitical environment have only intensified uncertainty in the financial markets.
The media sector is particularly sensitive to these economic factors because of its dependence on advertising revenues, technological change and consumer financial health, and the sector experienced the same problems as the European financial exchanges during the second half of 2011. Nonetheless, the financial structure of the companies selected for review on the media panel assembled by Mazars has enabled them to remain strong, demonstrating their resilience and their ability to adapt and innovate.
As such, although overall revenues for the media groups selected for review on our panel were clearly impacted by the financial crisis, the groups were able to adapt and succeeded in increasing their operating profit, largely as a result of:
- cost saving measures: a number of these groups implemented restructuring and redundancy plans together with various other initiatives to reduce operating costs (including supplier management and process optimisation);
- effective investment strategies in certain niche areas to support the digital transition, as well as in emerging markets.
Net income however decreased for companies in the sector resulting in particular from changes to business plans and long-term hypotheses that led certain groups to impair less profitable parts of their business. Shareholder remuneration policies in the form of dividend payouts do however remain very attractive. Could this be a gesture of encouragement by media groups towards their shareholders, to retain their support in the context of the expected repercussions from the digital transition?