The reaffirmation of Utusan Melayu (Malaysia) Berhad’s (Utusan/the group) rating of MARC-3 on the extended Revolving Underwritten Facility (RUF) reflects Utusan’s leading position in the Malay language newspaper and magazine segments coupled with improving financials following higher circulation figures and increasing advertising revenue. The rating is, however, moderated by Utusan’s exposure to rising newsprint prices and other operating costs.

Utusan Malaysia remained the highest circulated Malay daily newspaper with 256,247 copies per day for the 12-month period ended June 2004, followed closely by NSTP’s Berita Harian, which sold 244,475 copies daily. For Sunday editions, Utusan’s Mingguan Malaysia registered the highest circulation figure of 569,322 copies as compared to NSTP’s Berita Minggu of 383,220 copies. In the magazine segment, the group continued to dominate through the offering of various fortnightly and monthly-based magazines such as Mastika, Wanita, Mangga and URTV. In its efforts to expand the sources of revenue, the group launched a compact size newspaper, “Kosmo!” as well as “Harmoni” and “Umph”, women’s and men’s magazine, respectively, to the market during the third quarter of 2004.

For financial year ended December 2004 (FY2004), the group reported RM19.6 million
pre-tax profit on the back of RM364.6 million or 4.9% growth in revenue compared to the previous fiscal year. The improved results on turnover and profit before tax were mainly attributable to higher contribution from its advertising activity coupled with improved daily circulation. Operating profit margin, however, declined to 5.7% from 6.9% previously due to higher cost of sales, particularly resulting from higher newsprint prices.

The group’s net cash flow from operations, in FY2004, was at a deficit with RM9.15 million due to higher working capital requirement for newsprint purchase. Likewise, CFO interest coverage had dropped, although slightly, to 2.4 times (FY2003: 2.5 times).

The group’s debt leverage increased to 0.8 times due to higher short term borrowings to finance the rising newsprint’s cost. Debt composition for the year under review was also skewed towards short term with 94% (the bulk of which represented by the RUF). The group’s gearing ratio is expected to decrease in tandem with the scheduled reduction of the RUF. Overall, the group possesses somewhat moderate financial flexibility, with demonstrated access to the capital market and sizeable amount of unencumbered assets. Undrawn credit lines and unencumbered assets stood at approximately RM4.2 and RM 33.5 million, respectively, as at 31 December, 2004.