Publishing group Maariv Holdings lost NIS 47 million in the fourth quarter of 2011. The firm's auditors also once again appended a "going concern" warning to its financial reports, which means they question whether the company can continue operating for long.
For the year 2011 Maariv ran a cash burn of NIS 138 million, more than double the burn rate it anticipated in its 2010 financial statement. As a result, at year-end 2011, the company had all of NIS 5 million in cash.
Maariv also expects a negative cash flow for both 2012 and 2013 after a NIS 138 million cash flow deficit last year - over twice its own forecast of NIS 61 million at the end of 2010. Maariv had only NIS 5 million in cash left in the kitty at the end of 2011.
Cash burn means the company is spending more than it is making.
The pace of cash burn anticipated in 2012, according to the company, is NIS 6.7 million a month. At that pace, the publishing house will quickly need more money from its parent company.
For the year 2011, the firm ran a NIS 159 million operating loss, a 60% increase over 2010, and a NIS 96 million net loss.
Revenues fell 16% in 2011 from the previous year.
The poor results came even after its new controlling owner, Nochi Dankner's Discount Investment, invested NIS 280 million in Maariv in the past nine months alone.
The company blamed the poor results on a continued drop in advertising revenues, much of which were switched by clients to its free daily competitor, Israel Hayom. There was also "continued erosion in the newspaper's exposure to the public."
The drop in advertising revenues came despite an attempt by Dankner's IDB to switch the advertising of many of its subsidiaries from other newspapers to Maariv.
Higher newsprint costs also added to the problems. Maariv also cut expenses less than it had planned.
Revenues totaled NIS 271 million in 2011, with NIS 60 million coming in the fourth quarter, down from NIS 72 million in the fourth quarter of 2010. Advertising revenues dropped 14% and newspaper sales revenues fell 10%.
Revenues from its NRG ("energy") website dropped 11% to NIS 8.3 million for the year.
One bright light - for executives - was their salaries. Despite the big losses, the cost of the salary for outgoing editor-in-chief Avi Meshulam last year was NIS 1.1 million. The salary cost of former CEO Israel Goldstein was NIS 1.43 million.
Even after raising NIS 182 million in shares in 2011, and after Bank Hapoalim forgave NIS 74 million in debt, Maariv's shareholder equity was still only NIS 77 million at the end of the year. The Nimrodi family's Israel Land Development Corporation - the other major shareholder in Maariv and the previous controlling owner before IDB - also forgave a NIS 64 million owner's loan.
Maariv's books also hold a few problematic assets, such as NIS 88 million that customers still owe. This includes over NIS 19 million that is at least four months overdue, and another NIS 22 million stemming from accounting adjustments for loans.
Maariv's accountants, Ernst & Young Israel - Kost Forer Gabbay & Kasierer, said the company's negative cash flow for the coming two years - based on the company's own business plans approved by the board - placed it in danger of going out of business. The accountants said there is no formal plan as to how to cover the cash flow deficit and there are serious doubts that the firm can raise further credit from the banks or from Discount Investment, and this money is also needed to roll over bank debts and carry out its business plan.
Nochi Dankner himself and his son Omer sit on the Maariv board of directors. The investment by Discount Investment had been supervised in part by Zehava Dankner, 78, who is mother of Nochi Dankner, grandmother of Omer Dankner and who has a high-school education.
Maariv's circulation shrank to 11.5% in 2011 (weekend edition), compared with 17.7% in 2009.
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