For most Jamaican media houses, the massive spending during the last election campaign was a welcomed blessing. Were it not for that well-timed shot in the arm, many media houses would be bleeding far more red ink today. With mounting operational expenses due to the high cost of electricity, transportation, gas and standby power plants at broadcast transmission sites, media houses globally are spending long hours brainstorming potential strategic solutions, for it has become increasingly clear that media is not for the weak of heart.
Word on the street is that Jamaican radio stations are hurting and hurting badly. Radio Jamaica Ltd. (RJR), the largest and most diversified of the electronic media houses, recently reported weak results for the second quarter and the six month period which ended September 30, 2008. The company posted an operating loss of Jamaica Dollars (JMD) 20.88mm compared to an operating profit of JMD 27.72mm; receiving a tax credit this period totalling JMD 14.76mm compared to being charged tax of 6.33mm previously. Nevertheless, RJR reported a net loss for the period of JMD 31.55mm compared to a profit of JMD 4.63mm previously.
Gary Allen, Managing Director for RJR, who recently took over the reins from long time Chairman and Managing Director Lester Spaulding, must be having sleepless nights as he struggles to find a new path from what must be viewed as clear and present danger. Shareholders’ Equity declined 3.62% to JMD 1.04B from JMD 1.08B. This decrease is mainly due to a 25% fall in unissued share capital to JMD 41.25mm from JMD 55mm, and a 4.34% decline in Retained Earnings to JMD 557.05mm from JMD 582.3mm.
Allen certainly has his work cut out for him. It’s because of the RJR Groups’ activity in the electronic media that you can view the performance and get a feel for how other media houses are faring.
RJR reported losses per share of JMD 0.0717, compared to earnings per share (EPS) of JMD 0.0233 previously. The organization attributes its loss to tropical storm Gustav, rising energy costs, transportation and insurance charges, as well as expenses incurred for the Olympics and World Cup qualifiers.
In a recently emailed report (17/11/08) from Michelle Hirst, Research Manager at Stocks and Securities Limited (SSL), headed by Managing Director Mark Croskery, it was noted that RJR started the year well, but has fallen hard during the first six months of 2008-2009, due to the current economic environment. RJR states that revenues from endeavours such as the World Cup qualifiers will be seen in its nine month 2008-2009 results.
SSL is however not convinced of a turnaround anytime soon, stating in its report that “RJR has not been able to contain its costs as they increased across the board in Q02 2008/2009. Therefore, SSL is not convinced that RJR will increase revenues and lower costs in the near future. The stock has a book value per share (BV/Share) of JMD 2.95. It is currently trading at JMD 3.20 with a price to book value (P/BV) of 1.08. RJR has been trending downwards for the past three years decreasing 46.67% from JMD 6.00 on October 3, 2005. SSL recommends investors SELL this stock at current levels of JMD 2.85 and up.”
Informed media sources indicate that TVJ led by General Manager Kay Osborne, which according to all recent media surveys is the number one and most viewed television station, is carrying the group, but the strain is beginning to tell on the operations. Radio brands are performing below budgets and the flagship station RJR94 is now dangerously lagging in media polls. Hitz 92FM is not working as planned and there are frantic moves to change the all sports and reggae music format. FAME is not as bad as the other two stations but still under performing.
According to the SSL email report, “Turnover at the media group increased 3.61% to JMD 785.44mm from JMD 758.08mm. However, in Q02 2008/2009, RJR reported a 2.63% decline in turnover to JMD 401.54m from JMD 412.4mm. RJR has attributed this decrease to the slowdown caused by Tropical Storm Gustav and the fact that prior year revenues included political advertising in the period leading up to the general elections. Other Operating Income climbed 89.15% to JMD 19.01mm from JMD 10.05mm.”
A closer inspection of the numbers by SSL indicates that RJR like other media houses is struggling to keep costs down. “Cost of sales increased 20.2% to JMD 356.22mm from JMD 296.35mm due to the increase in production costs for Rising Stars (the company states that revenues will be seen in Q03 2008/2009) and the impact of broadcasting rights associated with World Cup Football Qualifiers and the Olympics.”
As a result, Gross Profit declined 7.04% to JMD 429.22mm from JMD 461.73mm.
The SSL email goes on to report that distribution costs fell slightly to JMD 145.58mm from JMD 146.02mm, while these costs increased 2.42% in Q02 2008/2009 to JMD 75.44mm from JMD 73.66mm. The quarterly increase in distribution costs is because of changes made to the marketing department’s structure in an attempt to improve customer service.
Administrative Expenses saw a similar decline, falling minimally to JMD 166.53mm from JMD 167.7mm; however Q02 2008/2009 reported an increase in administrative expenses to JMD 90.25mm from JMD 82.74mm.
Back in April of this year, Gary Allen announced that the RJR Group was undergoing management changes aimed at implementing new strategic competitive adjustments in the media industry. The changes introduced were designed to improve profitability and increase market share, the effects of which are still to be felt.
Among the changes was the appointment of experienced programmer and former station manager for FAME FM, Francois St Juste, to the new position of
General Manager – Radio Services. In this new role, he assumed general management responsibilities for the following radio brands, RJR 94 FM, FAME 95 FM, and HITZ 92 FM.
Carlene Swaby was also appointed to the position of Marketing and Sales Manager for Radio Services, combining marketing and sales functions of the three radio stations under one manager. It wasn’t clear how this would have impacted the role and function of Gary Cole who was recently appointed Marketing Director and who according to many marketing insiders is still to make his mark.
The RJR Group News Centre was re-structured to extend its news dominance in the electronic media and to diversify news operations by establishing additional revenue streams. The company appointed experienced journalist and media manager, Milton Walker, to the position of Group Head, News and Current Affairs. Milton was formally with the CVM Group owned by Michael Lee Chin, and chaired by his brother Wayne Chin. Kathy Barrett was appointed, Deputy Group Head, News and Current Affairs. Other appointments in this department included Kerriann Lee to Television News Editor; Janice Budd Radio News Editor (acting); and Earl Moxam Special Assignments Editor.
Due to increased projects associated with TVJ’s growth in local programs and products, Michael Sharpe was reassigned from his role as Projects Manager in the News Centre, to the new position of Projects Manager for Television Jamaica Limited.
The launch of Reggae Entertainment Television (RETV) and Jamaican Network New (JNN) to gain national coverage, as well as to introduce RETV in more than ten Caribbean countries, also added to the rise in operating expenses. This coupled with the shakeup in the structure of senior management and the addition of an internal director impacted the bottom line during the period. (See related story in this issue)
These changes the company said will drive the implementation of several initiatives that will improve shareholder value and profitability in the group.
Footnote Directors Selling Shares: The Jamaica Stock Exchange (www.jamstockex.com) on Friday November 21, 2008 reported that Radio Jamaica Ltd. (RJR) has advised that a director sold 101,000 RJR shares between November 4, 2008 and November 11, 2008.
Also further advisory indicate that Radio Jamaica Ltd (RJR) has advised that a director has sold 170,509 RJR shares on December 3, 2008 and 9,663 RJR shares on December 4, 2008.
Source: Stocks and Securities Limited (SSL) notes from the financial results (except where noted, all comparisons are for the 6M period year over year):