Radio Jamaica's corporate headquarters and studios, Lyndhurst Road, St. Andrew. - File

Radio Jamaica's investment in the struggling GV Media group has dragged down the broadcaster's performance, pushing it into loss position, despite its otherwise creditable growth in revenues.

From net profits of $93 million in 2006, RJR this week announced a $32.4 million loss in its financial year just ended in March, flowing from $89.9 million of impairments on its United Kingdom (U.K.) investment. It also took an additional $19.13 million hit, reflecting its portion of GV's 775,000 losses.

"The board, after assessing the investment in GV Media Group Limited has decided to impair the investment in full which has resulted in a one-time charge against the profit and loss account in March 2007," said the company in a statement to shareholders.

"This determination was made against the background of the losses incurred during the past two years and projections of continuing losses before recovery can be achieved. The associate also projects cash flow deficiencies which would restrict its ability to repay additional contributions made by the company."

But even as it struggled with its non-performing associate, RJR decided to diversify, buying controlling stakes in cable companies Jamaica National News Network, or JNN, 80 per cent, and RETV, 65 per cent.

Negative results

A portion of the transaction finalised last December was financed with a $34 million loan acquired at 16.5 per cent interest for 10 years from RBTT Bank.

But those two subsidiaries - which RJR acquired in a cash and shares transaction - also returned negative results in the four months of ownership, contributing $11 million to the group's losses, according to a note to the accounts.

RJR owns 20 per cent of GV Media, formerly Gleaner U.K. Limited, which it acquired in April 2005, and has pumped equity of 769,000 into the business, inclusive of the price of acquisition in the past two years.

Principal owner of GV Media, The Gleaner newspaper group, last week assured shareholdersat its annual general meeting in Kingston that the company was implementing new initiatives to turn the operation around, but chairman Oliver Clarke made no promises on when, saying it was "an ongoing assessment."

RJR said it does not expect the impairment to impact on its cash resources - recorded at $62.6 million at the end of March compared to $38.5 million the year prior - nor its future profitability.

But even without the weight of the impaired investment, RJR 's accounts were depressed by heavier administrative and selling expenses which wiped out the 16 per cent gain on revenues during the review period.

In a year when world cup cricket and political campaigning swelled the advertising coffers of the media houses, RJR's turnover climbed to $1.45 billion, compared to $1.25 billion the year prior; and its gross profits grew healthily by $100 million to $875.9 million despite bigger "direct programming costs - principally rights fees in relation to World Cup Football and World Cup Cricket."

But a 13 per cent increase in day to day expenses stripped away the gains, pulling down operating profit by 9.5 per cent to $141.8 million.

And, though managing to eke out pretax profits of $14 million, the broadcaster slid into red under the weight of a $46.3 million tax charge.

"Notwithstanding the overall increase in expenses, the group realised a 10 per cent operating profit margin, which is 2.0 per cent below the level achieved the previous year," the company said.

Its assets also grew by just over $100 million to $1.27 billion, largely boosted by $81 million of goodwill from its JNN and RETV acquisitions.

business@gleanerjm.com