Media companies hit by 'age of austerity' in Q2 2010, but times
not as hard as 2009
The second quarter of 2010 saw the valuation of mid-market media
companies fall by 12% amid political uncertainty, public sector
cuts and fears of further drops in advertising spend. The decline
however was broadly in line with the FTSE 100 and FTSE 350 which
both saw a drop of 13% according to the latest Media Watch index*
from financial and business advisers Grant Thornton.
Media Watch tracks the performance of 98 UK listed media-related
companies, excluding those on the FTSE 100 and Micro Cap
companies.
The four FTSE 100 listed media companies also saw their values
decline in Q2 2010, with falls in share price of 14% for Pearson,
7% for WPP and 5% for Reed Elsevier. BSkyB is the only FTSE 100
media business to buck the trend, where value rose by 16% due to
takeover interest from News Corp.
Mark Henshaw, Head of Media and Entertainment at Grant Thornton
said, "The media sector has been affected by the general downturn
in share prices over the last quarter, but we have not seen values
drop off a cliff as we did in 2008 and early 2009 when media shares
tumbled far below the rest of the market because of sharp drops in
advertising spend. It is encouraging that this time, values have
performed in line with the market."
"The market as a whole has been very jittery in recent months
but fears that public sector spending cuts, particularly in the
Central Office of Information (COI) would hit the media sector hard
have not been realised. If media share prices were going to drop
drastically as a result of these fears it would have happened this
quarter. However, we have only seen a fall in value of 12%, which
is in line with the wider market. This may indicate that the market
and analysts in the media sector had expected cuts for some time,
so the recent spending cuts announced in the Emergency Budget came
as no surprise."
"With tightened budgets, I expect the COI to reduce the breadth
of media which campaigns are run on, rather than cut back on
original content, so media sales businesses may be affected more
than creative businesses."
The sub-sector faring the best over the last quarter is Media
Agencies, which saw a drop of 7%** in Q2 2010. Struggling however,
was Publishing which saw values drop by 14% in the quarter. This is
significant fall from Q1 2010 which saw values actually rise by an
average of 17%.
Mark Henshaw concluded: "With media stocks falling in Q2 2010,
there may be opportunities for foreign investors. We are seeing
this in the private sector with cross border mergers and
acquisitions picking up and this may be reflected among listed
companies too."
For further information, please contact: Lisa Ritchie, Grant
Thornton Press Office: 020 7728 2208. email: