Investment: Media trapped by the advertising slowdown
Tuesday 06 October 1998
Take the media sector. This traditionally highly-rated sector has been hit hard by the recent shakeout. Even some of the largest companies have seen their share prices fall as much as 50 per cent. The culprit is concerns about advertising. Although forecasts are for a slowdown - rather than a fall - in spending over the next few years, the market believes the actual figures will prove gloomier.
Investors have a point. During the last recession, advertising fell 18 per cent from its peak in 1989 to its trough in 1992. Most media companies have high fixed costs, so the effect on profits was even more dramatic. However, not all firms are heavily exposed to the cycle. Most vulnerable are radio and outdoor advertisers, while regional newspapers depend on highly volatile recruitment advertising. National newspapers and TV companies will also suffer, although to a lesser extent.
In this context the hammering handed out to United News & Media, the Express to ITV group, makes superficial sense. However, Lord Hollick's company also derives a large chunk of its revenues from exhibitions, which are more stable. With the shares down 45 per cent in the past four months and the demerger of its Garban moneybroking division imminent, United - at 519p yesterday - is worth a look.
British Sky Broadcasting also continues to offer value. Digital satellite has been launched and BSkyB looks well-placed to build up a decent subscriber base. Provided the acquisition of Manchester United is cleared, the shares - at 471p after a strong run - should continue to outperform.
The market's harshest treatment has been reserved for Reed Elsevier, which owes its recent derating to nothing but worries about management succession. The market will probably steer clear until a new chief executive is found. But with its unique clutch of must-have business and legal information, Reed is the closest the media sector comes to being recession-proof. At 476p, buy the shares.
- 1 Australia to impose 24-hour curfew on all cats to protect endangered species
- 2 Model's video shoot on the beach interrupted by sudden landing of a group of illegal migrants
- 3 The difference between a psychopath and a sociopath
- 4 MH370: Boeing 777 wing that could match missing plane found on the French island of Reunion
- 5 'Killer robots' with AI must be banned, urge Stephen Hawking, Noam Chomsky and thousands of others in open letter
Kate Winslet thanked 'particularly horrible' girl who bullied her at school after Titanic success
Israel accused of killing 75 children during day of 'carnage' and war crimes in Gaza war
Australia to impose 24-hour curfew on all cats to protect endangered species
Walter Palmer: Cecil the lion killer revealed to be American dentist
MH370: Boeing 777 wing that could match missing plane found on the French island of Reunion
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
I am the Jeremy Corbyn supporter that many will tell you doesn't exist
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
Labour leadership contest: I would never quit the party, says Liz Kendall
iJobs Money & Business
£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...
£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...
£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...