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THE POWER OF TELEVISION

Technology and media investor Venfin’s share price has bounced back to levels last seen when it was listed in 2000, just after the Rembrandt group was split into two companies, Venfin and Remgro.
Venfin’s headline earnings came in at R406m during the period, thanks to R335m from its 15% interest in Vodacom and an impressive R31m from its 33% share of e.tv .
On this good news the share price surged to around R28. In 2003 it had dipped to around R15. At that stage e.tv was running at a loss.
Imara SP Reid analyst Steve Meintjies believes the upsurge could be because investors view the share as a “long-term cheap entry into Vodacom”. He says the drop in 2003 could have had more to do with general market conditions.
With e.tv stabilising and showing profit, analysts believe earnings should continue growing. The station is now in a position, financially and with increasing viewership, to offer more competitive local and foreign programmes. Television advertising spend is expected to continue rising for a few more years. Venfin says the challenge will be to increase revenue and market share, while keeping costs down.
The TV station was always viewed as a good investment but it came with high costs. It was licensed in 1998 but started showing a profit only last year. Companies like Venfin and HCI, which each have a third of e.tv, accepted that deep pockets were needed. The first profits were due to continued revenue growth (26% year-on-year) and curtailment of operating expenses.
As for HCI, e.tv contributed R21m to its headline profit for the year ending March 2004, and a further R61m for the six months ending September 2004.
There is no doubt that the TV channel is an important part of Venfin’s investment strategy. E.tv has the potential to achieve annual revenue growth of more than 20% because of a stable trading environment supported by favourable economic factors.

Source: Financial Mail – Themba Hlengani