When Lester Spaulding stepped down at the end of September as chief executive officer of the RJR communications group, he left his handpicked heir, Gary Allen to fend in a media and communications market that is not only tough, but increasingly uncertain.
But the challenges ought not to be overwhelming, for Allen has been groomed for the job for more than three years.
So, he should be aware of the intensity of the competition in a fragmented media/communications sector where the national advertising spend has, for years, been hardly above the rate of inflation. And the scramble for the available advertising dollar will become even more hectic as government policy allowing cable television to accept domestic advertising begins to kick in
Add to all that the economic uncertainty in the face of the global credit crisis.
Satisfy shareholders
It is unlikely, in the circumstance, that these are times to which managers in the media and communications sector, having to satisfy shareholders of their ability to deliver value, are looking forward with great pleasure.
Based, however, on RJR Group's performance in this ranking of firms, an outcome of their recent deliverables to stockholders, Allen, is likely to in a better mood than his peers.
This group, which includes three radio channels, one free-to-air and two cable television channels as well as a multimedia operation, came out ahead of the much larger Gleaner Company in the sector standings, although both had the same scores — 193.
Radio Jamaica Group, however, received the highest score in the five of the 10 variables used to measure performance, compared to four by the Gleaner, its former partner in a United Kingdom based newspaper group, the Voice, from which RJR has pulled back.
RJR Group recorded the best profit margin of five per cent, against three per cent for the Gleaner Company. It s growth in profit of 242 per cent, rising from a loss of $60 million to net profit of $85 million during the review period - compared to the mild decline by the Gleaner Company - plus an eight per cent return on equity that was two percentage points better than the Gleaner's.
Most liquid company
It was also the most liquid of the companies in the sector with currents assets at 2.2 times current liabilities as well as being the least leveraged: total liabilities was 26 per cent of capital. In the case of the Gleaner, the ratio was 39 per cent, while for Cable & Wireless Jamaica, the other company in the sector, it was 55 per cent.
In this the mode, the dampening change in the market triggered by the global meltdown notwithstanding, Allen may have a good shot at keeping shareholders relatively happy.
In the quarter to June, the company returned net profit of $14.9 million or 5.26 cents per share, a big turnaround from the $18.4 million loss for the same period a year earlier. The quarter's performance was boosted by revenues associated with the broadcast of football World Cup qualifying games. At the same time, direct programming costs remained relatively flat.
It is expected that the performance for the quarter to the end of September would have similarly benefited from the broadcast of the Beijing Olympics where Jamaican athletes did especially well as well its continued exclusive broadcast of the World Cup qualifiers.
For media companies, the October-December quarter is usually a good time, with its heavy pre-Christmas advertising income. Conventional wisdom suggests that retailers will not be as aggressive with their advertising spend this year, but Allen, it is expected, will be working to ensure that this is not the case. At least for his company.
Sector Analysis - Communications
For calendar year 2007, the Jamaican economy grew in real terms by an estimated 1.2 per cent with the transport, storage and communication sector expanding by 1.5 per cent.
The sector's share of GDP was 14.2 per cent in 2007, remaining unchanged from 2006 and contributed 0.2 per cent to the overall growth of the economy.
The growth in the sector was driven by the buoyancy in the telecommunication sub-sector, which was strongly influenced by the improved performance in the mobile industry.
By the end of 2007, the number of mobile customers increased by 17 per cent to 2.7 million from 2.3 million a year earlier.
Meanwhile, the number of fixed lines grew at a slower pace moving up 8.0 per cent to 370,989 in 2007.
According to data from the Planning Institute of Jamaica (PIOJ), the 'transport, storage and communications' sector declined by 1.7 per cent for the January-June 2008 period.
This performance was largely attributed to the transport sub-sector as a decline in total passenger movements constrained airport activity.
On the other hand, growth in the telecommunications sub-sector continues to be propelled by aggressive competition.
The major players in the market have focused on expanding their customer base and improving efficiency through modernising their networks, introducing new services, adopting emerging technologies and employing a variety of marketing strategies.
