Page 11 - CIMA SCS Workbook August 2018 - Day 1 Tasks

FINCH NEWS GROUP FAMILIARISATION

3 KEY THEMES

There are a number of important themes that emerge from the FNG pre-seen:

Decline in traditional revenue streams
Revenues from sale of printed newspapers and from advertising in such product is in decline, with
no sign that this will reverse. The company therefore has to look to other revenue streams to
safeguard the future.

Growth in digital sales
The whole market for advertising is moving increasingly towards digital platforms, and FNG must
adapt its offering to appeal to those in control of advertising budgets. It needs to increase its
presence in digital news offerings, via websites, apps, and subscription to digital newspapers (e.g.
via paywalls).

Cost control
Whilst FNG is developing its new revenue streams, it needs to exercise very strict cost control.
This could be done in a number of ways – closing premises, reducing staff numbers, streamlining
its portfolio of titles etc. However, this would be contrary to its sense of mission and could impact
on the quality of journalism provided.

Shareholder returns
The significant drop in the dividend received each year by shareholders will no doubt have caused
concern. Furthermore, the falling profits may well mean that dividends have to be suspended
altogether at some point in the near future. Shareholders will undoubtedly be looking for
reassurance about the company’s strategies for the future.

The Finch family

8 members of the Finch family collectively own 60% of the company’s issued share capital, and so,
as long as they act in unison, the family controls the company. However, with the falling returns it
is possible that a split might occur in the family members, with some wanting to dispose of their
shares and others wanting to keep their investment in the family business.

Accurate reporting
News stories have to go through a strict quality control process before they are published. Any
failure in such controls (perhaps because of lower numbers of editorial staff) could result in action
against the company and a loss of its reputation.

IT
All aspects of the company’s IT systems need to be robust and secure, as the business model will
become increasingly reliant on them. Interestingly, there is no IT presence at Board level; it may

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