MEDIA PRIMA BERHAD ANNUAL REPORT 2017 54 55 SEC. TWO: OUR PERFORMANCE REVIEW SEGMENTAL ANALYSIS External Revenue 2016 2017 44.1% 40.6% 31.8% 26.5% 13.9% 12.2% 10.9% 5.6% 5.3% 4.8% 1.6% 1.5% 0.2% 1.0% HOME TVN RADIO OUTDOOR PRINT DIGITAL CONTENT SHOPPING (Loss)/Profit After Tax 2016 2017 178.0% 64.7% 34.7% 24.5% 16.9% 18.0% 1.2% 0.3% 0.1% 2.3% -3.5% -0.5% -14.9% -31.9% -36.8% -53.1% HOME CORPORATE & TVN RADIO OUTDOOR PRINT DIGITAL CONTENT SHOPPING ELIMINATION MEDIA PRIMA BERHAD ANNUAL REPORT 2017 54 55 SEC. TWO: OUR PERFORMANCE REVIEW STATEMENT OF VALUE ADDED & DISTRIBUTION OF VALUE ADDED FYE FYE RM’000 2017 2016 Revenue 1,195,672 1,289,008 Royalties (1,219) (3,221) Operating Expenses (1,811,643) (1,363,710) Value Added by the Group (617,190) (77,923) Other Operating Income (Excluding Finance Income) 22,050 21,040 Finance Income 9,161 14,388 Finance Costs (14,660) (13,325) Share of Results of an Associate (4,889) (10,089) Value Added for Distribution (605,528) (65,909) Distribution of Profits 1. Employee Cost 503,028 426,434 2. Taxation 64,137 3,874 3. Shareholders’ Dividends Declared for the Financial Year - Shareholders of Media Prima Berhad - 88,736 - Non-Controlling Interests - 378 4. Retain for Reinvestment and Future Growth - Depreciation, Amortisation (Excluding Programme and Film Rights) & Impairment 472,137 184,675 - Accumulated Losses (1,644,830) (770,006) (605,528) (65,909) MEDIA PRIMA BERHAD ANNUAL REPORT 2017 56 57 SEC. TWO: OUR PERFORMANCE REVIEW VIEWERSHIP, LISTENERSHIP & READERSHIP DATA Viewership Performance 30 30 30 30 Target Malay Urban Chinese Age 4+ 4+ 4+ 4-14 years 25 25 25 25 Channel / Share Share Share Share Variable 20 20 20 20 TV3 28.1 19.3 2.0 20.9 15 15 15 15 TV9 6.5 4.4 0.6 5.6 ntv7 1.0 3.6 12.8 2.1 10 10 10 10 8TV 0.8 6.1 26.7 3.9 5 5 5 5 Source: Nielsen Audience Measurement 0 TV3 TV9 ntv7 8TV Listenership Radio Networks Reach (‘000) 404 Kool FM 542 Measurement 392 Fly FM Fly FM (Age below 30) One FM Hot FM (Age below 30) 2017 One FM (Age below 30) (Wave 2) Kool FM 1,757 Hot FM Source: GFK Radio Audience Measurement Wave 2 Readership Trend 3500 3500 3500 3500 3500 3500 Newspaper Jul’16 - Jun’17 Jul’15 - Jun’16 (‘000) (‘000) 3000 3000 3000 3000 3000 3000 BH 946 1,190 2500 2500 2500 2500 2500 2500 BH Ahad 916 1,175 2000 2000 2000 2000 2000 2000 Harian Metro 2,584 3,165 Metro Ahad 3,027 3,451 1500 1500 1500 1500 1500 1500 New Straits Times 200 182 1000 1000 1000 1000 1000 1000 New Sunday Times 154 157 500 500 500 500 500 500 Source: Nielsen Consumer & Media View Jul 2015-Jun 2016 0 Jul’16- Jul’15- Jul’16- Jul’15- Jul’16- Jul’15- Jul’16- Jul’15- Jul’16- Jul’15- Jul’16- Jul’15- Nielsen Consumer & Media View Jul 2016-Jun 2017 Jun’17 Jun’16 Jun’17 Jun’16 Jun’17 Jun’16 Jun’17 Jun’16 Jun’17 Jun’16 Jun’17 Jun’16 MEDIA PRIMA BERHAD ANNUAL REPORT 2017 56 57 SEC. TWO: OUR PERFORMANCE REVIEW SHARE PRICE CHART Share Price (RM) Volume Traded (‘000) 3.0 18,000 2.5 15,000 2.0 12,000 1.5 9,000 1.0 6,000 0.5 3,000 0 0 29 JUN 31 DEC 28 JUN 31 DEC 30 JUN 31 DEC 30 JUN 31 DEC 30 JUN 30 DEC 30 JUN 29 DEC 2012 2013 2014 2015 2016 2017 Date 29.06.2012 31.12.2012 28.06.2013 31.12.2013 30.06.2014 31.12.2014 30.06.2015 31.12.2015 30.06.2016 30.12.2016 30.06.2017 29.12.2017 Share Price (RM) 2.21 2.34 2.80 2.62 2.58 1.76 1.46 1.27 1.38 1.15 0.94 0.76 Volume Traded 2,733,200 735,500 1,885,300 137,600 1,139,900 733,200 561,300 1,076,900 42,600 11,012,500 674,800 16,775,500 Source: Bloomberg MEDIA PRIMA BERHAD ANNUAL REPORT 2017 58 59 SEC. TWO: OUR PERFORMANCE REVIEW GROUP FINANCIAL REVIEW REVENUE NEWSPRINT AND NEWSPAPER PRODUCTION COSTS MPB Group revenue declined by 7% in 2017 to RM1,195.7 million against Newsprint and newspaper production costs decreased by 23% to RM85.3 2016 revenue of RM1,289.0 million. The decline was attributed to lower million (2016: RM111.2 million) as lower newsprint and printing material advertising and newspaper sales as a result of the shift from traditional consumption is in line with lower circulation volumes of newspapers. media to digital media. This is reflected by the 12% decline in total advertising revenue to RM950.8 million (2016: RM1,074.4 million), and 30% decline OUTDOOR DISPLAY AND PRODUCTION COSTS in newspaper sales to RM88.1 million (2016: RM125.2 million). Content Outdoor display and production costs in 2017 saw a 70% increase revenue reported growth of 2% to RM22.2 million (2016: RM21.8 million) against 2016 primarily due to Malaysian Highway Authority road reserve and consumer revenue from our home shopping network recorded a fees amounting to RM34.9 million and RM12.5 million of MRT site rental significant growth to RM129.5 million (2016: RM61.4 million). The Group’s and production costs. digital-based revenue achieved a growth of more than 100% from 2016 driven by increased advertising revenue from its digital properties. EMPLOYEE BENEFITS COSTS Total employee benefits costs increased by 18% to RM503.0 million • TELEVISION NETWORKS compared to RM426.4 million in 2016. The increase was mainly due to Lower advertising expenditure (“adex”) throughout the year for Group-wide termination costs of RM110.7 million which was also part Television Networks’ (“TVN”) contributed to 15% decline in revenue of our exceptional items for 2017. to RM491.7 million in 2017 from RM575.8 million in 2016. While TVN’s core free-to-air advertising revenue declined against the DEPRECIATION preceding year, its digital and commerce initiatives notably tonton Total depreciation of property, plant and equipment and investment subscription video-on-demand service had seen revenue growth properties decreased marginally by RM1.4 million to RM100.1 million in compared to 2016. 2017 compared to RM101.5 million in 2016. The depreciation includes the accelerated depreciation for television broadcasting equipments • PRINT MEDIA due to switch of analogue television broadcasting to digital terrestrial Revenue of RM322.6 million in 2017 was a 22% decline against RM415.5 television. million recorded in 2016. Newspaper advertising and circulation revenue declined by 24% and 29% respectively in line with the decline IMPAIRMENT OF NON-CURRENT ASSETS in newspaper market demand. The platform’s digital revenue was up Total impairment charges in relation to non-current assets amounted by 79% contributed by growth of its digital portals and subscription to RM364.1 million (2016: RM76.5 million). The carrying amount in our services. investment in an associate, MNI, of RM141.5 million was fully impaired consequent to MNI’s commencement of a creditors’ voluntary winding- • OUTDOOR MEDIA up in 2017. Impairment of our property, plant and equpment (“PPE”) of Revenue growth of 6% to RM167.9 million (2016: RM158.7 million) RM117.9 million was in relation to our printing plant and machinery as contributed by higher yield from digital sites. well as our broadcasting equipment. Another signficant impairment charge in 2017 was on our intangible assets in relation to our newspaper • RADIO NETWORKS business publishing rights of RM100.5 million. Revenue declined by 3% to RM66.6 million (2016:RM68.4 million) attributed to lower adex during the financial year. The summary of our impairment of non-current assets is set out in Note 7 to the consolidated financial statements. • DIGITAL MEDIA Significant increase in revenue by 71% contributed mainly from higher TAXATION internal shared service and digital advertising revenue. The acquisition Tax expense for 2017 of RM64.1 million was a significant increase against of Rev Asia Holdings Sdn Bhd and its subsidiaries (“Rev Asia Holdings RM3.9 million in 2016. The increase was attributed to net deferred group”) during the financial year has given a new catalyst for growth in tax charge of RM54.5 million (2016: (RM25.2 million)). However, the the digital advertisement for this segment. The details of the acquisition increase in deferred tax charge was offset by the reduction in current of Rev Asia Holdings group and its effects on the Group are set out in tax which reduced by 67% against prior year to RM9.6 million (2016: Note 16 to the consolidated financial statements. RM29.1 million). As a result of the net deferred tax charge, our Group effective tax rate stood higher than the statutory corporate tax rate of • CONTENT CREATION 24%. Content Creation recorded external revenues of RM18.1 million for 2017, which is a 11% decline from 2016. The decline was mainly due PROFITABILITY to lower box office revenues, advertiser content and film distribution We incurred a loss after tax of RM669.7 million for the financial year services. 2017 compared to RM69.8 million in 2016. If the exceptional items were excluded, we posted a normalised loss after tax of RM172.3 million AMORTISATION OF INTANGIBLE ASSETS detailed as follows: Amortisation of intangible assets decreased from RM198.7 million in 2016 to RM186.7 million in 2017.