Financial Gleaner Media Writer
From left: Lester Spaulding, Gary Allen, Glenworth Francis and Ian Neita.
LESTER SPAULDING is not yet quite ready to head into retirement as chairman and CEO. But Spaulding, 65, has made clear his succession intent at RJR Communications Group and, he says, is further preparing the company for stiffening competition in Jamaica's media market.
So, last week, Spaulding announced the calling of Gary Allen, the group's director of operation, to the board and his formal appointment as deputy managing director.
Spaulding also named respected management professional, Ian Neita, the recently appointed executive director of the Tourism Enhancement Fund, as well as Glenworth Francis, the general manager of the Jamaica Co-operative Credit Union League to the RJR board.
"It's an addition to the board of skill sets that we need for the next five years and to meet the tasks that we have set for ourselves," Spaulding told the Financial Gleaner.
Allen's appointment, he confirmed, was a clear indication of his thinking on succession.
"I am 65," he said. "The date of my departure is not yet set, but I don't intend working until 70."
RJR Communications Group flagship operations include the free-to-air television service, TVJ as well as the radio channels, RJR 94 FM; FAME FM, a channel geared to young people; and the recently re-branded, sports and reggae music channel, Hitz 92 FM.
But with a national advertising market that, for several years has grown hardly beyond the rate of inflation, the increasing fragmentation of the media as well as the entry of well-muscled new investors, older companies like RJR Group are having to find ways to stay fresh and claw a bigger share of the market.
For the financial year, to the end of March, 2006, the group's turnover of $1.14 billion, a 16 per cent increase, confirmed it as the second largest Jamaican media company, after the Gleaner. Its net profit of $114.4 million, represented an increase of $29.26 million or 34 per cent on the previous year's net income.
For the nine months to December of 2005, the latest period for which figures are available, the group's turnover increased 12 per cent to $959 million, but net profit of $88 million was down 30 per cent. The company, however, explained that when this was adjusted for gains made on the disposal of assets in 2004/2005, there was actually an improvement in profit of 31 per cent over the corresponding period a year earlier.
However, in Jamaica's tight advertising market, Spaulding would have been concerned about the 53 per cent or $45.5 million increase in the cost of sales. "The purchase of expensive local programmes, as well as the major sporting events (eg., World Cup football) necessary to achieve brand differentiation, account for the increased cost of sales," the nine-month report explained.
In the circumstance, leveraging the RJR brand and seeking greater economies of scale is important to Spaulding, and time is of the essence.
For instance, News 93 FM, a station jointly-owned by Anthony Abrahams' Breakfast Club Ltd and the University of the West Indies (UWI) recently entered the relatively crowded radio market, seeking a share of Jamaica's estimated $4 billion advertising market. Additionally, the Government has formally permitted advertising of local cable television channels, further expanding competition for RJR and other media companies.
But what is likely to significantly concentrate the minds of Spaulding, his board, senior managers and others in the media industry is the entry of Michael Lee Chin, not only with a deep pocket but also with international connections.
Lee Chin, a Jamaican/Canadian, owns a large fund management company in Canada as well as the profitable National Commercial Bank in Jamaica, income from which he has been using to buy assets here.
Lee Chin has long been eyeing a place in Jamaican media and along with connected parties at first accumulated over 12 per cent of RJR Group, but was forced to shave his holding to 10 per cent when the group refused to remove the 10 per cent cap on ownership by a single shareholder or allied group.
But in April Lee Chin acquired the CVM Group, the owner of CVM TV, the radio station HOT 102 FM and a handful of lesser media assets as part of a bail-out of Neville Blythe's UGI Group, including the United General Insurance Company. Lee Chin recently named his brother, the supermarket tycoon, Wayne Chen, as chairman of CVM.
Critically, Lee Chin has bought cable television systems in the Bahamas and Trinidad and Tobago and is half owner in the fibre optic line operating company, Columbus Communications, which is offering telecommunications services in Jamaica under the brand name, Flow Communications.
Columbus has already bought one cable service operator, Sauce Communications, which operates in parts of Kingston and is in the market for others even as its pursues its application for an independent operating licence.
RJR, according to Spaulding, has a raft of plans on the table and is looking to grow, organically and through acquisitions.
A fortnight ago, for instance, it soft-launched a sports cable channel, hoping to attract new audiences and to take advantage of the rule changes allowing cable advertising.
"We will be accelerating the things we do, like going into cable," he said.
The strategies for "maximising the potentials", said Spaulding, will include, if possible, partnerships.
"If we can acquire, we will," he said. "We have to do new things." Specifically what, he won't say yet.
"It's too competitive a market out there," said Spaulding, although he emphasised that there is in place a five-year growth and development strategy.
RJR, however, is, as part of these plans, looking overseas. Last year it paid nearly $89 million for a 20 per cent stake in the Gleaner's UK subsidiary, VG Media Group, the flagship of which is the national ethnic newspaper, The Voice, acquired by the Gleaner Company two years ago. The partners are still attempting to make the group profitable and the RJR nine-month accounts recorded $11 million as its share of the loss by the UK company for the period.
Spaulding, nonetheless, is optimistic that VG provides a platform for some concepts his company has in mind.
"Some of the things we are initiating are overseas," he said.
But in the case of Britain, where RJR and the Gleaner have promised to participate in each other's ventures, the timetable is likely to be dictated by the turnaround of the Voice.
"It is taking a bit longer than we expected," said Spaulding, echoing the Gleaner's chairman and CEO, Oliver Clarke, at that company's recent shareholders' meeting.
