MORGAN Stanley has warned the declines in Telstra’s directories business, Sensis, may be impossible to reverse, despite the efforts of a new digital strategy.
Sensis reported a 32.1 per cent fall in earnings before interest, tax, depreciation and amortisation to $288 million for the six months to December 31. On an adjusted basis, underlying earnings were down 15 per cent.
Yellow Pages, which accounts for more than half of Sensis revenue, sustained an 18 per cent drop in revenue (13.7 per cent on adjusted basis) yet its digital sales were up just 0.2 per cent. Telstra expects this to return to double-digit growth in the second half of 2010-11.
“These declines may be difficult or impossible to reverse, even if Sensis executes well on a digital strategy,” Morgan Stanley analyst Mark Blackwell wrote in a note to clients this morning.
“Media is a network business, and the virtuous cycle of five years ago may have turned vicious.”
Telstra faces the same problem as publishers around the world. While it is making more money from digital distribution platforms such as smartphones and tablet computers, it is not enough to offset losses from the traditional side of the business.
The analyst firm said the current decline may also place pressure on Sensis’ ability to fund for its extensive sales presence. Sensis boss Bruce Akhurst will brief the market on how his digital strategy will play out in the next couple of weeks. He will focus on growth opportunities on the digital side of Sensis.
“The lesson from global comps is that digital growth is available to Yellow Pages incumbents and can make up for print declines, but Sensis does not appear to be capturing it, yet. We await the Sensis investor day with anticipation,” Mr Blackwell said.
Mitchell Bingemann – February 15, 2011 – 10:35AM
theaustralian.com.au/business/industry-sectors/telstras-sensis-declines-may-stick-morgan-stanley/story-e6frg9hx-1226006190593
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