Aggressive cost cutting reduces Ma'ariv loss

However, the worrisome drop in revenue continues, and rival "Israel Today" is set to launch a weekend edition.

The financial report for the third quarter of 2008 that Ma'ariv Holdings Ltd. (TASE: MARV) published today reflects the declining fortunes of Ofer Nimrodi's publishing and newspaper company. Revenue, cash flow, and shareholders' equity are all in steady decline.

Ma'ariv reduced its net loss by 52% to NIS 11.2 million (NIS 0.45 per share) for the third quarter from NIS 23.4 million for the corresponding quarter of 2008, and reduced its operating loss to NIS 8.1 million from NIS 18.3 million.

Ma'ariv attributes the improvement in its operating and net loss to its aggressive streamlining plan, which reduced operating expenses to NIS 49 million in January-September, out of a hoped for full-year savings of NIS 70 million.

Revenue fell 8.5% to NIS 98.4 million for the third quarter from NIS 107.6 million for the corresponding quarter. Most of the drop was due to falling advertising revenue, belying the company's hopes that the Jewish holiday season with its greater advertising content, would help boost revenue.

Ma'ariv had a working capital deficit of NIS 145.8 million at the end of September, up from a working capital deficit of NIS 119.1 million at the end of 2008. Shareholders' equity fell to NIS 58.9 million at the end of September from NIS 106.9 million at the end of 2008.

Ma'ariv's auditor, Ernst & Young Israel Kost Forer Gabbay & Kaiserer stated in the financial report, "Continuation of the company's activity in its present format and ability to meet its obligations depend on meeting its business plan and the cash flow forecast derived from it, which includes various streamlining measures." These obligations include a NIS 31 million bond payment in March 2010.

The streamlining measures include recycling loans and securing loans and credit lines from Ma'ariv's main creditor bank, as well as other banks and non-bank financial institutions, shareholders, and a public offering through a rights issue.

In other words, Ma'ariv's streamlining measures are not enough to prevent its controlling shareholders, the Nimrodi family, through Israel Land Development Company (TASE: ILDC) from having to again inject capital into the company.

One source of Ma'ariv's vulnerability, indeed the vulnerability of all of Israel's print media, comes from Sheldon Adelson's freesheet "Israel Today", which is about to launch a weekend edition on Friday.

In a laconic statement, Ma'ariv Holdings said that the launch "is liable to affect weekend distribution of Ma'ariv".

Ma'ariv Holdings share was unchanged today at NIS 5.89, giving a market cap of NIS 147 million.

Published by Globes [online], Israel business news - www.globes-online.com - on November 17, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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