Page 8 - CIMA SCS Workbook August 2018 - Day 1 Suggested Solutions

CIMA AUGUST 2018 – STRATEGIC CASE STUDY

Structure enables management to stay close to FNG titles and readers through 5 publishing
regions

Significant cost savings achieved during 2017, according to CEO’s statement

Use of third-party suppliers to protect data and systems

Improving gearing levels due to reduction in debt

Still profitable!

Generates net cash inflow of $15m from trading – suggests underlying business still viable

Weaknesses

Falling circulation in almost all titles from 2017 to 2018, leading to falling newspaper sales and
newspaper advertising

Operating profit has fallen by 95% over 5 years, from approx. $62m to $3m

Dividends have fallen from approx. $43m to $3m in last 5 years, meaning shareholders likely to be
concerned

No IT presence at Board level – IT becoming increasingly important

Lack of balance between Execs/Non-Execs at Board level

Falling interest cover in 2018 due to drop in profits (despite cut in debt and interest)

Growth in digital advertising and contract printing not enough to offset fall in printed newspaper
sales and advertising

Dividend payment in 2018 greater than profits for the year; policy not sustainable in the long run

Failure to meet operating profit % and managing decline of print advertising targets

Opportunities

Establish the paywall model for digital content

Continued success in contract printing services

Further diversification into event hosting

Close the print factories and outsource printing requirements to save costs

Stop printing some newspaper titles and offer digital version only – save costs

46 KAPLAN PUBLISHING