The Company
Magscene, now into its 4th year of operation,has continued its steady growth over the past
year however the structure of the company has
changed.
Earlier in the year Press Support, a major
shareholder in Magscene, was purchased by a
publicly listed (AltX Exchange) company One
Logix*. This in turn convinced Junk Mail
Distribution to relinquish their shareholding and
this was taken up by Marcus Gooderham and
Press Support. Felix Erken and Yaglin Naidoo
then resigned their directorships of the
company. However the strategic alliance with
JMD still remains as a key national distributor of
many titles.
The board is now made up of Jeremy Eaton,
Marcus Gooderham and David Ralph. However
a strategic addition to the management team
has been John da Silva who has joined the
company as Group Financial Manager. John
brings with him strong financial expertise and a
wealth of magazine experience having been
with CNA for 18 years.
Richard Wharton who manages the Cape Town
operation has also taken responsibility for the
picking and packing process which has been
relocated to Cape Town from Johannesburg.
Tarryn Freier has been promoted to Senior
Account Manager and has provided a pivotal
role in the organization over the past year. The
company organogram is attached.
The new computer system is up and running and
improvements are now being seen in terms of
allocations, sales efficiencies and order
regulation. The software package has already
been sold to other companies in Africa.
*More information on One Logix can be found on
www.onelogix.co.za
The Economy
Again the economy has proven to be extremely
unpredictable. The stock market reached its
highest ever level in July yet the current account
deficit remains high at over 7%. Yet both
business and consumer confidence is high.
Strong demand for credit has lead to an increase
in inflation which in turn has prompted the
Reserve Bank to increase interest rates. There
have been three increases this year of 50 basis
points each with the current consumer rate
sitting at 13,5% . A further increase of 0.5% is
expected at the beginning of October.
Exchange rates have again been extremely
volatile with the rand devaluing by 5 % against
the British pound and by 8 % against the
Australian dollar as at the beginning of
September. It has now become imperative to
purchase forward cover to ensure some level of
pricing consistency. (see attached charts)
The political objective of achieving 6% growth
every year until the 2010 World Cup has now
been rationalized to 4,5%, achieved growth in
the last quarter was only 4,1%.
The crime situation has not improved and has
been further exacerbated by the high influx of
illegal Zimbabwean immigrants through the
ineffectiveness of the government's quiet
diplomacy policy against that country.
The HIV/Aids endemic continues to cause
concern with the government's slow roll-out of
the anti retroviral scheme. Incidence is
estimated to be around 20% of the entire
population.
The implementation of the National Credit Act in
June has resulted in a further slowdown of the
economy particularly in the housing and motor
vehicle markets and the sector most affected
has been the emerging black middle class – the
“black diamonds”.
The population grew by just over 1% to 47.4
million with the white proportion dropping to
9.3%. Migration is again on the increase.
Political Scenario
As predicted before there are cracks showing
within the ANC tripartite alliance with the South
African Communist Party (SACP) and the
Congress of South African Trade Unions
(COSATU).
A major civil service strike caused major
disruptions to the economy earlier in the year
with even nurses and police going on strike as
the gap between rich and poor continues to
grow.
The succession battle for the leadership of the
ANC will be finalised at their national Congress
in December which will indicate the successor to
Thabo Mbeki and the political route the country
is likely to take post 2008.
The new leader of the Democratic Alliance,
Helen Zille, has shown she is not afraid to take
the government on but her support base is low.
However as Mayor of Cape Town she has
significantly improved service delivery in that
city.
The President has demonstrated recently that
he is unable to take criticism this has been
emphasized by his handling of the Health
Ministry fiasco as well as the situation in
Zimbabwe and recently the government
mouthpiece, the South African Broadcasting
Corporation (SABC) withdrew from the National
Editors Forum – the forum for press freedom.
These are concerning developments.
Trading Environment
With increasing interest rates and less
disposable income it would be anticipated that
sales would decrease however the sales
scenario has been relatively resilient.
It appears that there is a very loyal base to
international publications and sales have
actually increased year-on-year.
With the credit boom those retailers in the
clothing sector (Woolworths and Edcon)
experienced exceptional growth with the major
supermarkets not far behind. CNA is still
struggling to make up the ground that it lost
several years ago but is becoming more
organized under the Edcon management style.
Exclusive Books is opening around 5 new stores
a year yet their locations are reflecting the
changing face of the rainbow nation.
The local magazine market experienced a very
strange period (2005/2006) with 512 new titles
being launched yet overall circulation declining
by 1,1% (2006). The biggest loser was the
Woman's Interest category and 217 titles
ceased publication.
The access to advertising funds is becoming
more difficult with the increase in available
media.
2000 2007
TV Stations 56 71
Radio Stations 105 124
Consumer Magazines 480 670
More printing power and ancillary services have
been consolidated with the major players,
Caxton and Nasionale Pers, with the demise of
the largest independent printer, Printability,
during the year.
Retail Environment
CNA
As part of the Edcon group which has recently
been sold to the private equity group Bain it is
uncertain what will happen to CNA as it does not
fit the clothing profile of the rest of the group.
The chain has achieved strong results and
international titles have shown good growth but
it is still difficult to organize any meaningful
promotional activity.
CNA is, however, the largest retailer of
international titles and are continually looking for
added value for their customers.
EXCLUSIVE BOOKS
This group is essentially a bookstore with
magazines being stocked as an addition for their
customers. Many managers actively dislike
magazines but are forced to stock them as they
have proved a high income stream. Magazine
sales within Exclusive Books grew by 28% year
on year. They have opened 5 new stores within
the past year but in locations that are not ideal to
international magazine sales.
WOOLWORTHS
The customer profile of this group is particularly
important to those publishers trying to reach the
top end of the market. Whilst space is limited
within the queuing system it is an ideal outlet for
the more famous international titles. Listing
rationale has now changed from turnover cluster
to socio-demographic profiling but is difficult to
implement with the buyers not really
understanding the market and the shelving
systems not suiting the queuing process.
SUPERMARKETS
Pick'n Pay and Shoprite/Checkers dominate this
segment with Shoprite/Checkers showing good
growth on the previous year. However it is
extremely difficult to obtain listings for
international titles as these stores require high
volume titles.
SPAR
Selected Spars have proven very successful for
many international titles as the majority of the
stores are franchised and the owners can buy
for their specific stores. Category management
is now being implemented in many stores. Spar
is the biggest magazine retailer in the country
with over 750 stores.
FORECOURTS
Again the number is growing but, like the
supermarkets, these outlets tend to stock only
the best selling local titles.
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