The most rapid growth rates in E&M revenues over the coming five years will be in less-developed markets and economies, where entertainment and media spending on a per capita basis is generally quite low. This is according to PwC’s Global entertainment and media outlook 2017 -2021. The report provides PwC’s most recent and up-to-date forecast of consumer and advertising spend data as well as related commentary for 17 entertainment and media segments, across 54 countries including Nigeria. It is a powerful online tool that provides deep knowledge and actionable insights about the trends that are shaping the E&M industry.
According to the latest report, Nigeria with a 12.1% CAGR (albeit strongly influenced by surging spending on mobile Internet access), will be the world’s fastest-growing E&M market over the coming five years while the slowest-growing will be Japan, growing at a 1.7% CAGR. While consumers in mature markets such as North America and Europe, and wealthier Asia-Pacific markets, spend a lot — more than US$500 per capita annually — on entertainment and media, growth rates are relatively slow in these areas. In contrast, less developed economies feature much lower per capita spending and faster growth albeit from a very low base – less than US$50 a year in many cases.
The report noted that dramatic shifts are underway in how entertainment and media companies compete and generate value, as the quality of the experience they deliver to consumers becomes their primary basis for strategic differentiation and revenue growth. To thrive in a marketplace that is increasingly competitive, crowded, and slower-growth, therefore, companies are developing strategies and building capabilities to engage and monetize their most loyal and passionate users — their fans. This means they must combine compelling content with breadth and depth of distribution, and then connect it all to a great user experience, where content is discoverable easily on an array of screens and at an attractive price.
Femi Osinubi, Technology, Information, Communications and Entertainment (TICE) Industry Leader at PwC Nigeria, comments:
“A raft of changes in technology, user behaviour and business models have opened up a gap between how consumers want to experience and pay for E&M offerings, and how companies produce and distribute them. The right user experience bridges this gap. To deliver it, companies must pursue two related strategies. First, build businesses and brands anchored by active, high-value communities of fans, united by shared passions, values, and interests. And second, capitalize on emerging technologies to delight users in new ways and provide superior user experiences.”
Rapid advances in technology drive direct-to-consumer strategies
As companies compete to create the most desired user experiences, advances in technology are at the heart of their strategies. Combined with a great user experience, companies can harness technology and data to create a virtuous circle – one in which increasing consumer engagement and attention lead to the capture of more data and more insights into what users want. This understanding enables companies to further target and engage their core audiences, opening up new opportunities to generate revenue. Increasingly the models used to achieve this monetization are founded on direct-to-consumer (D2C) strategies, which are enabled by technology and characterized by greater choice and user control: over the next five years, Internet video will grow at an 11.6% CAGR, and music streaming at a 20.7% CAGR.
E&M growth will lag GDP as advertising comes under pressure
The focus on realizing new revenues by turning consumers into fans is being intensified by a slowdown in overall entertainment and media industry growth and pressures on advertising models. Over the next five years, we project that the entertainment and media industry globally will grow at a compound annual growth rate (CAGR) of 4.2%, lagging behind the growth of global GDP. Within this overall increase, global advertising revenue will also grow at a CAGR of 4.2% – down from 5.1% in last year’s Global entertainment and media outlook. This slowdown reflects pressures on ad-supported business models, driven by consumers’ preference for ad-free experiences and advertisers’ dissatisfaction with the current measurement capabilities available with digital media. While advertisers are still willing to spend, growth in ad spend is now overwhelmingly driven by Internet advertising.
Mobile advertising is growing apace – but still needs better measurement practices
The growth of Internet advertising is being powered by mobile advertising, which grew by 58.7% in the past year, and will continue to expand at an 18.5% CAGR through 2021. But despite this growth, wired Internet advertising still accounted for 61.6% of total Internet advertising in 2016. Also, the robust growth of Internet advertising actually masks an embedded form of inertia. Without accepted measurement practices that can provide transparency on the efficacy and efficiency of the major platforms, premium brands are reluctant to take on the perceived risks inherent in concentrating more of their advertising in digital mediums, resulting in larger agencies and their clients holding back their ad dollars.
Osere Alakhume, Partner and TICE Industry leader for PwC West Africa adds:
“The steady march of digital technology has ushered in a more direct-to-consumer environment characterized by greater choice and user control. Amid an ever greater supply of media, businesses that are fan-centric will find themselves with audiences that are more engaged, more loyal, and spend more per capita. To thrive in the experience-driven marketplace characterized by this year’s Outlook, companies need to attract and harness the economic, social, and emotional power of fans. ”
Major digital tipping-points are occurring or in prospect across all segments…
- Internet advertising now generates more revenue than TV advertising globally. In 2016 an important tipping point was reached in the global advertising industry, with revenue from Internet advertising exceeding that generated by TV advertising for the first time. That lead, thanks to the rapid growth of mobile ad revenues in particular, is set to increase significantly in the next five years. However, at a global level we forecast TV ad revenues will also continue to rise, albeit at a more modest rate. Both platforms are important to consumers, so brands seeking to engage future audiences effectively will need to keep developing and growing their ability to plan, deliver and measure co-ordinated campaigns across multiple platforms.
- Internet video revenues will overtake physical home video in 2017. The Internet video segment has expanded rapidly in recent years, and will overtake the physical home video market for the first time in 2017. Internet video revenues are projected to grow at a CAGR of 11.6% to reach US$36.7bn in 2021, while the terminally declining market for DVDs and Blu rays will have fallen to US$13.9bn. Demand has shifted towards the more immediate and convenient video-on-demand (VOD) market, with content accessible via a wide range of connected devices allowing consumers to view when and where they desire. While there remains a strong market for ownership of content through transactional VOD (TVOD) services, growth will be mainly focused on subscription VOD (SVOD) platforms, with subscribers attracted to full seasons of original content and back-catalogues they can binge view.
- Global newspaper circulation revenue overtook global advertising revenue in 2016. While newspaper circulation revenue has been on a downward trajectory since 2015, publishers have had the useful lever of cover price rises to partly offset the rapid fall in units. However, the year-on-year falls in newspaper advertising revenue have been more pronounced, with advertisers deserting print editions in large numbers, and publishers increasingly being squeezed out of the digital ad space by Google and Facebook. The upshot is a historic shift in the dominant revenue streams, as newspaper circulation eclipses advertising. By 2021, global total newspaper circulation revenue will account for 54.0% of total newspaper revenue.
- In 2016, total digital recorded music revenue overtook physical – and streamed music overtook downloads. The digital recorded music segment was worth US$10.7bn in 2016, surpassing that for physical recorded music, at US$8.5bn, for the first time. Music streaming services grew apace during 2016, pushing global digital revenues up by US$1.8bn year-on-year, or 20.3%, as the physical segment declined 9.6%. While digital recorded music accounted for 55.7% of overall recorded music revenues in 2016, that proportion is set to rise to 80.3% in 2021. Digital music streaming revenue also overtook its download counterpart in 2016, with streaming revenues rising 65.3% to US$6.6bn, and downloading revenue slumping 18.4% to US$3.5bn. Downloaded music is expected to fall from 32.5% of digital revenue in 2016 to just 6.4% in 2021.
- Virtual reality video revenue will exceed interactive application/gaming revenue in 2019. The consumer virtual reality (VR) content market will grow at a CAGR of 77.0% over the forecast period to be worth US$15.1bn by 2021. Of this, US$8.0bn will be spending on VR video (rising at a CAGR of 91.2%), surpassing interactive experiences and games in 2019. Spending on VR apps – software that is neither video or game, such as communications apps or utilities – remains modest, and will total just US$163mn by 2021. Spending in this category will also be in decline from 2018 onwards, as purchased utilities that make up for platform or OS shortcomings become integrated into the core platform, in the same way as smartphone apps have increasingly been integrated into new versions of iOS or Android.
- Smartphone traffic will exceed fixed broadband data traffic in 2020. Although mobile usage is a key driver of growth in overall data traffic, fixed broadband will continue to account for the majority of data traffic in the 19 markets for which we have developed detailed forecasts. Many consumers still prefer to access data-heavy content – notably high-quality video – via fixed broadband rather than their mobile device. But the shift towards the smartphone will continue, especially in developing markets such as India and Indonesia, so that by 2020, overall smartphone data traffic across our 19 markets will exceed fixed broadband data traffic for the first time.
- Global physical OOH revenue will slip into decline in 2019. Global growth in physical out-of-home (OOH) revenue has been trending downwards for some time as an ever-growing share of advertising spending is diverted to digital out-of-home (DOOH). This trend will reach a tipping point in 2019, when physical OOH revenue slips into decline, falling by -0.2%. By 2021, the rate of year-on-year decline will have accelerated to -0.8%. While physical OOH revenue will continue to grow in many markets – especially emerging ones – globally, it will be in terminal decline by the end of the forecast period, as DOOH takes over.
…and in geographies worldwide
- China’s total number of cinema screens now exceeds those of the US. China had 41,056 cinema screens in 2016 compared to 40,928 in the US. This marks a significant shift, underlining the growing popularity of cinema among Chinese audiences of different ages and demographics – and especially among middle-class cinemagoers with disposable incomes. Although some of the cinemas being erected at such speed in shopping malls across China are not necessarily all premium quality, their existence will serve to hook yet more consumers on the cinema-going habit, and contribute to the longer-term replacement of the US as the number one market for box office revenue.
- Data consumption in Russia will overtake Japan in 2020, but the US and China will account between them for nearly half of all data traffic. Our analysis of data traffic in 19 countries shows that the US and China will continue to dominate traffic globally. They are not just the two largest markets individually, but together will account for nearly half of all the data traffic forecast across the 19 markets. Moreover, both will see high levels of growth in the next five years. However, the fastest levels of market growth will come from less developed markets, notably Russia and Brazil. Indeed, Russia is set to overtake Japan in 2020 to become the third-largest market for data traffic among the 19 countries, albeit some distance behind China in second place.
- By 2020, Asia Pacific will be the most digitised OOH region. Currently, North America gets a higher proportion of its OOH revenue from digital out-of-home (DOOH) than any other region – 37.9% in 2016. But there are signs that DOOH is approaching saturation point in North America; the region has lower-than-average public transport usage, and the digitisation of the billboard market is being limited by regulation. In Asia Pacific, by contrast, public transport usage is already high in markets such as Japan and South Korea, and soaring in others, as China and India invest in extending metro networks, and Indonesia, Vietnam and others open rapid transit systems. This increased room for growth in DOOH will allow Asia Pacific to overtake North America as the most digitised region in 2020; by 2021, DOOH will be approaching half of all OOH revenue in the region, with a share of 47.7%.
Femi Osinubi concludes:
“Alongside the tipping points being reached in specific segments and geographies, the whole entertainment and media industry may have arrived at its own global tipping point. In many of the largest markets, and hence in the industry as a whole, entertainment and media businesses are approaching or have reached a form of saturation. This effectively puts us on an industry plateau – one where some traditional, mature segments are in decline, the Internet and digital E&M content are growing but at a slowing rate, and the next wave of content and entertainment is in areas such as e-sports and virtual reality that are just beginning to ramp up. Thriving in a world of slower growth, intense competition for attention, and continual disruption will be challenging. But the opportunities inherent in this world are immense. And the data, analysis and perspectives in our Global entertainment and media outlook provide compelling insights into how companies are adapting, investing, experimenting, and innovating to succeed in this new world.”
Analysis: Total Nigeria needs a financial overhaul
Total Nigeria’s Q1’20 results are a testament that some might have it worse than others as it recorded a revenue drop of 9.3% to N70.2 billion
The Oil Industry has had a particularly tough year, owing primarily to the novel pandemic. The International Energy Agency (IEA) predicts that the global oil demand is expected to further decline this year as Covid-19 spreads around the world, constraining travel as well as other economic activities.
Organizations like Total depending on international trade will be forced to scale down operations until restrictions ease off. However, Total Nigeria’s Q1’20 results are a testament that some might have it worse than others.
The period recorded a revenue drop of 9.3% to N70.2 billion in the first quarter of this year compared to Q1 2019. Total earns its revenue from three main sectors namely: Networks, General Trade, and Aviation. Revenue from Aviation fell by 39.5%. The decline in Networks is attributed to the reduced demand as a result of the enforced lockdown and restriction on travel across the nation.
Yet, it is clear that the company had its own challenges pre-COVID-19. In the quarter, it attained a loss after tax of N163 million which was 65.6% better than the loss after tax of the comparative quarter; it is overwhelmed by a myriad of distinct issues.
First off, its revenue has experienced a steady fall over the years; reasons for this is tied largely to its lack of importation of petroleum products.
It is also burdened by inefficiencies in its operations evident in its high operational and direct expenses, as well as its high debt over the past years. The company has carried on huge loans and borrowings in its books: N40.6 billion in 2019 and only a marginal reduction of N2.2 billion in the current year.
Even higher are its expenses after an 8.38% reduction in the just-released results, it arrived at N69.7 billion for Q1 2020. Amongst its high operational expenses is the high and increasing technical fees it pays to its parent company. From N251 million in the first quarter of last year, it incurred around N700m in the year under review. It also has cash flow issues with about N22b in negative cash and cash equivalents. In its 2019 report, it revealed that the year had been tough with its cost of doing business rising exponentially as evident in its interest expense, 395% higher than the previous year as a result of repayment for products and a high level of borrowing.
The company, in its last full year annual report, noted that to make significant savings to both operational and capital expenditure costs, a series of initiatives relating to cost efficiency, process optimization, and significant reduction of working capital requirement and finance costs, were put in place and are in motion for this year.
As Dr. Fatih Birol, IEA’s Executive Director put it “The coronavirus crisis is affecting a wide range of energy markets – including coal, gas, and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand transport fuels.”
However, Total’s position goes beyond the impact of the pandemic. Its rebound rests on its ability to carry on with cost control and lower debt commitments, together with the speed of the containment of the virus. That said, the company might need to raise capital soon while also coming up with formidable strategies to strengthen its business model.
Merger, Tax incentive boosts BUA Cement FY 2019 result
BUA Cement Plc recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.
One of the industries set to experience the downsides of the Covid-19 pandemic is the construction industry. Given the slowdown in construction activities as a result of the lockdowns and constrained economic activities, the reasons are not farfetched.
Prior to the outbreak of the pandemic, Globe Newswire had predicted an accelerated growth pace of the global construction industry from 2.6% in 2019 to 3.1% in 2020. This growth has now been revised to 0.5%. What is even more daunting is that the revised growth rate is based on the assumption that the outbreak will be contained across all major markets by the end of the second quarter of 2020.
It is only after that (including freedom of movement in H2 2020) that events could facilitate reverting to the normal course of activities to foster businesses in the industry like BUA Cement or those that depend on it to restart activities.
Nigeria’s third-largest cement company, BUA Cement Plc, however, still has its 2019 victories in order. Involved in the manufacturing and sales of cement, BUA Cement has 3 major subsidiaries and plants in Northern and Southern Nigeria.
With a market capitalisation of N1.18 trillion ($3.3 billion), BUA is the third most capitalised company on the NSE. Its recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.
The company’s profits also increased by 69.1% from N39.17 billion in 2018 to N66.24 billion in 2019. Core operating performance was strong, and this was supported by strong cement sales in the domestic market, impairment writes back, and other income.
The main reason for the company’s increased earnings is from the cost synergy and increased revenue as a result of the merger that took place between CCNN Plc and Obu Cement Company Limited.
There was also a striking jump in its income statement on its tax for the year. For FY 2019, it incurred a tax expense of N5.6 billion, in comparison to the N24.9 billion tax credit it received in FY 2018.
This was as a result of a reversal of previous tax provision made on Obu Line 1; it received approvals for an extension of the company’s pioneer status on Obu line-1 and Kalambaina line-2 in February 2020, to leave effective tax rate at just over 8% in 2019. The pioneer status will help the company save funds that will otherwise have been spent on higher taxes.
(READ MORE:Dangote Cement to access more debt funding)
BUA reported an impressive FY’19 result. Its performance shows the growing strength of the company and its increasing market share. On the back of the strong performance, management declared an N1.75 dividend per share that translates to a dividend yield of 5.5% on current prices.
Cash flow position was also robust with a strong closing cash balance – from N2.8 billion in 2018 to N15.6 billion as at year ended 2019. The company’s growth, as well as the impact of its merger, present a great buy opportunity of the highly capitalized, low-cost stock. As of today when the market closed (21st May) its share price stood at N35.60 from a 52-week range of N27.6 and N41.
What we see is a great growth stock further heightened by the population expansion and increased urbanization. However, we expect the impact of the Covid-19 pandemic to be felt from the Q1 results of the company.
The industry could slow down for the year as the level of commercial construction also slows down. Yet the best part of holding stocks like this is that even with stalled operations for a period, a resurgence will always emerge.
Analysis: Airtel Nigeria is winning where it matters
Airtel has left no stones unturned in ensuring that its provisions are top-shelf – subscribers to the network, of course will have their own ideas.
Airtel might have won our hearts over with internet-war adverts starring our favourite tribal in-laws, but its fundamentals are what will make us the bucks that keep us happy. Airtel Africa Ltd is a subsidiary of Indian telecoms group, Bharti Airtel Ltd; the group has left no stones unturned in ensuring that its provision of prepaid plans, credit transfers, mobile internet services, messaging, roaming facilities and more, are top-shelf – subscribers to the network, of course, will have their own ideas.
Since last year when Airtel Nigeria became the second telecommunication company in Nigeria listed on the NSE, the company has experienced a steady level of growth. With a presence in 14 African countries, the group’s strength lies in its diversity with stronger companies mitigating the poor performances of others.
Performance Overview: Airtel Africa
Airtel Africa’s report for the year ended March 2020, revenue jumped by 10.9% from $3.1 billion at the year ended 2019 to $3.4 billion in 2020. The consolidated profit before tax also jumped by 71.8% from $348 million in 2019 to $598 million in 2020. However, profit for the period dropped by 4.23% with earnings of $408 million in 2020 from the $426 million it had earned in 2019. A reason for this is the tax figure that moved from a credit of $78 million in 2019 to tax payments as high as $190 million in 2020. Total assets also jumped by 2.41% from 2019’s value of $9.1 billion to $9.3 billion in 2020 primarily as a result of their acquisition of more property, plant, and equipment (PPE). The total customer base grew by 9.3% to 99.7 million for the year ended.
Full Report here.
Revenue growth of 10.9% was driven by double-digit growth in Nigeria and East Africa. However, the rest of its African operations experienced a decline in revenue. Its success in Nigeria is especially commendable, considering the fact that the company lost more than 100,000 subscribers in Nigeria between December 2019 and January 2020. Raghunath Mandava, Chief Executive Officer, remarked that the results which were in line with the group’s expectations, “are clear evidence of the effectiveness of our strategy across Voice, Data and Mobile Money.”
Behind The Numbers – Nigeria
Airtel Nigeria’s performance indicates the company is making the right calls in a very competitive industry. Nigerians are fickle when it comes to data and voice but will spend if the service is right. The company grew its data revenue by a whopping 58% to $435 million a sign that its strategy to focus on data is working. Voice Revenues for the year was up 15% to $850 million. In total, Airtel Nigeria’s revenue was up 24.4% to $1.37 billion. Ebitda margin, a number closely watched by foreign investors 54.2% from 49% a year earlier. Operating profit for the year ended also jumped by 52.6% for the year from 2019 and 32.4% from Q1 2019. Total customer base in Nigeria also grew by 12.5%.
Nigeria is surely critical to Airtel Africa’s future seeing that it contributes about one-third of its revenue. Recent results thus indicate it is winning where it matters most and it must continue to stay this way if it desires to survive a brutal post-COVID-19 2020. Telcos are expected to be among the winners as Nigerians rely more on data to work remotely but there are other players in this game. Concerning the impact of the pandemic, he explained that at the time of the approval of the Group Financial Statements, the group has not experienced any material impact arising from the impact of COVID-19 on its business.
On cash flows…
The group has also taken measures to enhance its liquidity. The CEO explained that it is moving its focus to enhance liquidity towards meeting possible contingencies.
“Having considered business performance, free cash flows, liquidity expectation for the next 12 months together with its other existing drawn and undrawn facilities, the group cancelled the remaining USD 1.2 billion New Airtel Africa Facility. As part of this evaluation, the group has further considered committed facilities of USD 814 million as of date authorisation of financial statements, which should take care of the group’s cash flow requirement under both base and reasonable worst-case scenarios.”
To this end, they have put in the required strategies to preserve its cash as its cash and cash equivalents, consequently, jumped by 19.1%.
Investors looking at this impressive result will be wondering if this portends a buying opportunity. Airtel Nigeria closed at N298 on Friday and has remained at this price for about a month. The stock is quite illiquid and is not readily available to buy.
It’s the price to earnings ratio of 4.56x makes it quite attractive. Further highlighting this opportunity is its price-to-book ratio which is as low as 0.5273, suggesting that the stock could be undervalued. Whether it is available to be bought, is anyone’s guess.