Performance review

Customer value-added products

Key facts about the publishing, insurance and one2one (O2O) division:

2016 2015 /
Net income (Rm) 437,6 450,9
Growth in net income from publishing (%) 3,0 1,3
Growth in net income from insurance activities (%) (3,5) (1,8)
Growth in net income from O2O (%) (16,6) (2,3)
Number of new product/service launches 2 2

Most of the customer value-added products are currently offered exclusively to credit account holders. The difficult macroeconomic environment, coupled with the implementation of Affordability Regulations, impacted the growth of this unit. In this respect, the year under review proved especially challenging. The pool of potential new customers available to the product sales teams was reduced following muted new account growth. As a result, the overall net income decreased by 2,9%.

  Publishing portfolio   Insurance portfolio   O2O portfolio

highlights

This portfolio offers 13 titles to 1,3 million account holders on a monthly basis. The current bouquet of titles covers a wide range of themes that target various segments in our customer base. The launch of the Motor magazine late in the year was successful, reaching 14 500 subscriptions per month by March 2016, while MyKitchen doubled its circulation in the last year to almost 80 000 per month.

This portfolio offers short-term and long-term insurance products mainly to account holders. Fraud Alert, a product that provides purchase alerts on account transactions, was successfully launched in the last quarter of the financial year. In addition, certain existing products were extended to include benefits for family members.

This portfolio provides airtime contracts to existing account holders via the telemarketing channel. A review of the existing business model, taking into account a competitive and rapidly changing industry landscape, required the business be extended to include the selling of bundled products (combining airtime/data contracts with cellphone units and insurance products).

challenges

Consumption of media across a variety of multimedia platforms remains a significant challenge for the printing/publishing industry. Challenging economic times are forcing consumers to be more selective on where they spend their financial resources and exchange rates had an adverse impact on production costs. A further challenge to the industry is the decrease in advertising spend in print media as marketers allocate advertising budgets across alternative media channels.

The impact of the new Affordability Regulations, coupled with a difficult economic environment and increasing cost of compliance, posed significant challenges to the execution of the insurance growth strategy.

This industry will continue to be extremely competitive, with the major networks competing on price and putting pressure on margins. In the current economic climate, the challenge remains to provide a well-differentiated and attractive value proposition.

performance

In spite of the aforementioned industry conditions, the TFG publishing portfolio achieved a growth of 3% in net income. The business continues to retain its position as the market leader in the custom title space. Nine of the group’s 13 publications have the highest circulation in their respective categories. The total average monthly billed circulation of all publishing titles is 1,7 million.

Continued product innovation largely mitigated the challenging market conditions, resulting in a decline of 3,5% in net income.

Net income reduced by 16,6% as a result of pressure on margins and competitive industry pricing. Nevertheless, the business feels confident that the re-engineered business model will result in a greater contribution.

future focus

The focus will be on penetrating the cash market space and continuing the launch of magazine titles into the niche markets of our credit customer base. Furthermore, the strategy will evolve the current business model, with specific emphasis on playing a more inclusive role across a variety of multimedia platforms.

The focus for insurance will be on penetrating the cash market. The business also recognises the potential of a more pronounced store presence and strategies are being developed in this regard.

The bundled options previously mentioned will create further demand in our account base. A further strategy is to extend the sales channels into the TFG store environment.