Tuesday, Aug 08, 2000
MARC has affirmed Utusan Melayu (Malaysia) Berhad’s corporate debt rating at MARC-3, reflecting the latter’s continued leading position, particularly in the Malay language daily and its improved financial performance. The rating is however moderated by the sensitivity of Utusan’s financial profile to changes in newsprint price, circulation figures and advertising revenue.
The publishing & distribution and advertising segments are the main contributors to the Group’s turnover and profitability. Utusan’s daily newspaper, Utusan Malaysia, leads in the daily circulation of Malay newspapers with 247,617 copies, topping its main rival, Berita Harian by 20,436 copies for the 12-month period ended June 1999. Its Sunday edition of Mingguan Malaysia continues to be the highest circulated newspaper with 468,152 copies during the same period. Utusan also has a strong position in the magazine segment, with its extensive range of magazines.
Advertising expenditure (adex) is sensitive to the economic climate and, therefore, tends to be highly cyclical. The economic recovery in 1999 saw a 15.9% increase in total adex to RM2.53 billion, with newspapers and television being the major recipients (90.8%) of the expenditure. Utusan’s advertising revenue rose 19.4% to RM127 million in FY99 and in the first quarter of year 2000 was up 43% over the corresponding period of 1999. Besides the print media, advertising revenue is also derived from outdoor advertising, undertaken by UPD Sdn Bhd. This Utusan subsidiary holds the exclusive advertising rights to the North-South Highway, Karak Highway and the Middle Ring Road. MARC expects advertising expenditure to increase in the near term driven by the improving economic fundamentals.
The Group sees multimedia and IT as a major profit generator in the future. Through its associate company, Asia Online Utusan Sdn Bhd (formerly known as Utusan Multimedia Sdn Bhd) and its subsidiary company, Net Space Learning Sdn Bhd, the Group has ventured into the provision of internet and web-related services as well as the production of online interactive education systems respectively.
As the most significant component of total production cost, newsprint has historically been subjected to price cycles reflecting patterns of global demand and supply. Since July 1999, the Group has been purchasing the standard form of newsprint manufactured locally by Malaysian Newsprint Industries (MNI) Sdn Bhd. Utusan nevertheless expects to continue importing newsprint, as MNI’s present newsprint production is not able to meet the current demand of the local newspaper industry.
The Group posted a pre-tax profit of RM12.98 million in FY99 compared to a loss of RM18.55 million in the previous year. The turnaround was attributed to the increased revenue contribution from the Group’s publishing & distribution and advertising business segments. Profitability was also boosted by the reduction in interest expense to RM11.4 million from RM12.64 million in FY98, reflecting the effect of the lower interest rate environment in 1999. Operating profit margin recovered to 7.4% in FY99 after slipping into negative territory the year before.
The Group’s capital structure is somewhat aggressive, with debt leverage of around one time. A slight improvement in leverage position was noted in FY99 (1.08x ; FY98:1.15x), arising from the growth in shareholders’ funds via retained earnings. Most of the debts are short term in nature.
The Group’s funds from operations swelled to RM54.05 million in FY99 on the back of the higher turnover figure. Cash flow protection measures consequently strengthened with the interest coverage ratio rising to 5.12x from 0.61x previously. Utusan’s cash flow position will also benefit from the sale of its Wangsa Maju Complex to FELCRA, the proceeds of which (RM59 million) are expected to be received within this year.
The publishing & distribution and advertising segments are the main contributors to the Group’s turnover and profitability. Utusan’s daily newspaper, Utusan Malaysia, leads in the daily circulation of Malay newspapers with 247,617 copies, topping its main rival, Berita Harian by 20,436 copies for the 12-month period ended June 1999. Its Sunday edition of Mingguan Malaysia continues to be the highest circulated newspaper with 468,152 copies during the same period. Utusan also has a strong position in the magazine segment, with its extensive range of magazines.
Advertising expenditure (adex) is sensitive to the economic climate and, therefore, tends to be highly cyclical. The economic recovery in 1999 saw a 15.9% increase in total adex to RM2.53 billion, with newspapers and television being the major recipients (90.8%) of the expenditure. Utusan’s advertising revenue rose 19.4% to RM127 million in FY99 and in the first quarter of year 2000 was up 43% over the corresponding period of 1999. Besides the print media, advertising revenue is also derived from outdoor advertising, undertaken by UPD Sdn Bhd. This Utusan subsidiary holds the exclusive advertising rights to the North-South Highway, Karak Highway and the Middle Ring Road. MARC expects advertising expenditure to increase in the near term driven by the improving economic fundamentals.
The Group sees multimedia and IT as a major profit generator in the future. Through its associate company, Asia Online Utusan Sdn Bhd (formerly known as Utusan Multimedia Sdn Bhd) and its subsidiary company, Net Space Learning Sdn Bhd, the Group has ventured into the provision of internet and web-related services as well as the production of online interactive education systems respectively.
As the most significant component of total production cost, newsprint has historically been subjected to price cycles reflecting patterns of global demand and supply. Since July 1999, the Group has been purchasing the standard form of newsprint manufactured locally by Malaysian Newsprint Industries (MNI) Sdn Bhd. Utusan nevertheless expects to continue importing newsprint, as MNI’s present newsprint production is not able to meet the current demand of the local newspaper industry.
The Group posted a pre-tax profit of RM12.98 million in FY99 compared to a loss of RM18.55 million in the previous year. The turnaround was attributed to the increased revenue contribution from the Group’s publishing & distribution and advertising business segments. Profitability was also boosted by the reduction in interest expense to RM11.4 million from RM12.64 million in FY98, reflecting the effect of the lower interest rate environment in 1999. Operating profit margin recovered to 7.4% in FY99 after slipping into negative territory the year before.
The Group’s capital structure is somewhat aggressive, with debt leverage of around one time. A slight improvement in leverage position was noted in FY99 (1.08x ; FY98:1.15x), arising from the growth in shareholders’ funds via retained earnings. Most of the debts are short term in nature.
The Group’s funds from operations swelled to RM54.05 million in FY99 on the back of the higher turnover figure. Cash flow protection measures consequently strengthened with the interest coverage ratio rising to 5.12x from 0.61x previously. Utusan’s cash flow position will also benefit from the sale of its Wangsa Maju Complex to FELCRA, the proceeds of which (RM59 million) are expected to be received within this year.