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Public company info - Next Digital Ltd. , 00282.HK

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Next Digital Ltd., 00282.HK - Company Profile
Chairman Ip Yut Kin
Share Issued (share) 2,636,000,000
Par Currency
Par Value 0.0
Industry Publishing
Corporate Profile Business Summary: The Group is principally engaged in the publication of newspapers books and magazines the sales of advertising space in newspapers books and magazines the provision of printing and reprographic services internet subscription provision of internet content and the sales of advertising space on website. Performance for the year: For the year ended 31 March 2020, the Group’s overall revenue decreased by 11.2% to HK$1,158.3 million (2018/19: HK$1,304.3 million). the Company recorded a basic loss per share of HK15.8 cents for the year (2018/19: HK13.1 cents). Business Review In 2019, the Group successfully implemented a major strategic pivot by launching a paid subscription service for its digital content, reinforcing its reputation as a pioneer within the Hong Kong and Taiwan media sector. This innovative membership model outperformed expectations during the initial launch period, swiftly achieved promising market penetration and demonstrated strong upside potential. To ensure the model’s future growth and success, the Group has made key resource investments including a Customer Growth and Retention (“CGR”) team, a powerful new data management platform (“DMP”) and a world-class content management system (“CMS”). Overall, however, the Group experienced acute challenges in the market environment during the year under review, all of which negatively affected its revenue performance. A series of economic shocks depressed advertising spending across the board, while the online programmatic advertising offer of global tech giants continued to present keen competition, despite the Group’s progress towards generating more personalised, data-driven advertising opportunities. The Group’s print operations also faced difficult conditions during the year for the abovementioned reasons. Despite a long-term trend of declining circulations, however, the Group’s print publications still boast a dedicated mainstream readership. Content is the lifeblood of any media company, and the Group remained staunchly committed to investing in excellent print and digital content. During the year under review, it continued to develop new platforms for special-interest digital content and dedicated appropriate resources to attracting and retaining skilled and expert editorial staff. The Group won a number of awards for editorial excellence during the year, including awards from the Society of Publishers in Asia, the Hong Kong Press Photographers Association and the World Association of Newspapers and News Publisher. At the same time, the Group took measured and appropriate action to reallocate resources and cut costs during the year as required, which included some restructuring and consolidation of its portfolio. Eat & Travel Weekly was consolidated under the Apple Daily brand on 1 June 2019; Ketchup ceased operations with effect from 1 September 2019; and Taiwan Next Magazine ceased operations with effect from 29 February 2020. In addition, the Group’s film and video production arm, ND Incubation, was closed in February 2020. Finally, the sales teams of Apple Daily’s print and digital divisions were consolidated and merged in February 2020. Digital Business Division The Digital Business Division’s external revenues, which mainly consist of online subscription income, online advertising revenue, content licensing payments, games and content sponsorship, and in-app purchases of virtual products, stood at HK$546.3 million during the year under review. This represents a decrease of 5.3% from the HK$576.8 million achieved in the previous year. Around 80.4% of the Division’s external revenues derived from Hong Kong, while the remainder came from Taiwan and other regions. The Division made a segment loss of HK$124.9 million during the year (2018/19: HK$211.8 million). During the reporting year, the Group boldly transformed its core digital business model and revenue strategy by trialling and launching a membership model based on paid subscriptions for its digital content, with the aim of capturing more stable and reliable sources of income. Free membership was introduced in April, followed by a trial subscription price in June and the full launch of standard pricing on 2 September. The new membership model received a positive response from the Hong Kong market, where both subscriber and revenue growth met expectations. In Taiwan, however, subscription figures have lagged behind projections. Both markets experienced an initially high churn rate as readers became accustomed to the new model, whereupon subscriber numbers stabilised and began to consolidate, positioning the platform for future growth. Despite this promising development, however, the Division’s overall revenue performance continued to be negatively impacted by competition from online programmatic advertising as well as free online content available from rival titles and mobile platforms. Online advertising revenue was also adversely affected by the Group’s strategic shift from free content to a hard paywall, which caused a drop in page views and thus reduced the near-term monetisation potential of its digital assets. This initial trade-off between subscription revenue and advertising revenue was anticipated, however, based on the experiences of major global media brands with similar revenue models, such as The Wall Street Journal and The Washington Post. However, a key competitive advantage of the new subscription model is the exceptional degree of personalisation it offers. The Group’s DMP continues to produce ever-more differentiated and powerful behavioural insights, allowing the Group to both fine-tune reader content and create bespoke, precisiontargeted advertising opportunities for brands, thus giving the Group a significant edge over its competitors. Informed by the insights generated by the DMP system, the Group’s Business Development Department continued to develop more channels and opportunities for online advertising, including private market placements. Compelling content and additional services are especially important for subscription-driven media business models. With the aim of growing its subscription and advertising revenues, the Group stepped up investment in cutting-edge digital content creation capabilities throughout the year under review, increasing editorial headcount and rolling out a series of specialist mini-sites for topics of subscriber interest, such as investment, pets, health and fitness, cooking, family, horse racing and so on. The Group also created a CGR team to drive the expansion of the subscriber base. This multifunctional team continually optimised the subscription process and subscriber experience by learning from international best practices and adopting an agile and responsive approach. It built and maintained relationships with subscribers through a variety of channels including short message service (SMS), electronic direct mail, Facebook live chat and a telephone customer service line, while using renowned customer relationship management solutions to maximise retention and attract lapsed subscribers. The Group also created more sales channels for subscriptions, for example by offering in-app purchasing options that allow for seamless and convenient sign-up without the manual input of credit card details. These investments in innovative content creation and an improved subscriber experience led to higher costs during the year under review, but the Group expects this to contribute to a stronger retention rate for subscribers in the year ahead. However, it continues to carefully weigh the costs and benefits of its resource investments, leading to the closure of its film production arm in February 2020. During the year under review, Hong Kong and Taiwan Apple Daily had a large user base of approximately 10.3 million* monthly unique visitors in Hong Kong, approximately 12.0 million* monthly unique visitors in Taiwan, approximately 10.0 million* in the USA and 285,088* in Canada. Together, this represents impressive market penetration for a subscription-based news service, achieved within a relatively short period of time. The size of this user base, combined with the Group’s burgeoning capacity for data-driven insight, provides a dynamic basis for generating attractive and tailored opportunities for advertisers. Apple Daily’s signature online video and animated platforms, known as Apple Daily Digital in Hong Kong and Apple Online in Taiwan, remained one of the most popular news source for mobile devices in both markets. Readers can also access all of the Group’s magazines via the integrated Apple Daily platform. During the year, the Group continued to move its online titles over to the state-of-the-art ARC content management system, which will greatly enhance its operational capabilities. Online gaming continues to be a profit centre for the Group, with flagship titles including the Barcode Footballer series remaining popular in Hong Kong. With a variety of game content, online gaming also enhances the subscription proposition by making more virtual products available to paying members. Print Business Division During the year under review, the total revenue of the Print Business Division amounted to HK$612.0 million, a decrease of 15.9% or HK$115.5 million compared to the HK$727.5 million recorded in the previous year. The Division’s revenue accounted for 52.8% of the Group’s total revenue, with Apple Daily and Taiwan Apple Daily retaining their position as the Division’s largest contributors. This was mainly attributable to a sharp fall in print advertising revenues, which dropped by almost two-thirds, as well as a worse-than-expected decline in circulation income. Beyond the shock of COVID-19, Hong Kong advertising revenues dropped partly as a result of local social unrest combined with Apple Daily’s political stance, while in Taiwan ongoing economic difficulties contributed to the decline. Meanwhile, the secular downward trend in circulation income was accelerated by the disruptions to everyday life caused by COVID-19 and Hong Kong social unrest, which saw fewer people buying print newspapers. Newspaper Publications Apple Daily, known for its signature features of openness, liberalism, vibrancy and the quest for truth, is one of Hong Kong’s most widely read paid-for daily newspapers as well as one of the city’s best-selling newspapers. Its average sales were 88,685 copies per day during the year, compared with 102,500 copies per day in the previous year. Apple Daily recorded revenue of HK$234.4 million during the year, a decline of 4.3% or HK$10.6 million compared with the HK$245.0 million achieved in the previous year. Advertising revenue accounted for HK$42.6 million of its total revenue, a decrease of 31.6% or HK$19.7 million compared to the previous year’s figure of HK$62.3 million. Circulation income stood at HK$191.8 million, an increase of 5.0% or HK$9.1 million as compared to the HK$182.7 million recorded in the previous year. The advertising categories with the largest revenue contributions were the miscellaneous items, property, loan, pharmaceutical and health product sectors. Taiwan Apple Daily, known for its dynamic style of reporting and emphasis on layout design, is one of Taiwan’s most widely read paid-for daily newspapers. Its sales averaged 96,471 copies per day during the year, compared with 154,426 copies per day in the previous year. Its revenue amounted to HK$212.4 million during the reporting year, a decline of 22.9% or HK$63.1 million compared to the HK$275.5 million recorded in the previous year. Advertising revenue accounted for HK$118.9 million of its total revenue, a drop of 31.5% or HK$54.6 million compared to the previous year’s figure of HK$173.5 million. Its circulation income was HK$91.5 million, a decrease of 8.1% or HK$8.1 million compared to the HK$99.6 million earned in the previous year. Its main sources of advertising revenue were the property, government, miscellaneous items, decoration and furnishing as well as travel sectors. With combined revenues of HK$446.8 million, Apple Daily and Taiwan Apple Daily remained the largest contributors to the Division’s revenue and accounted for 38.6% of the Group’s total revenue. However, the titles’ combined revenues during the year under review declined by 14.2% or HK$73.7 million compared to the previous year’s combined total of HK$520.5 million. Printing Apple Daily Printing Limited (“ADPL”) is for the Group’s newspaper printing operation. During the year under review, its revenue amounted to HK$95.9 million, a decrease of 15.6% or HK$17.7 million compared to the HK$113.6 million achieved in the previous year. ADPL’s printing operations recorded HK$44.9 million in revenue (total revenue minus transactions related to printing the Group’s own publications) from external customers during the year under review. This was 33.9% or HK$23.0 million less than the figure of HK$67.9 million achieved in the previous year, as key media sector customers faced challenges in terms of declining circulations and advertising income. However, the Group’s outstanding printing capabilities were recognised by the industry through awards from International Newspaper Color Quality Club and NewsMediaWorks. During the year, the Group’s commercial printing operation recorded revenue of HK$86.4 million, which was 21.8% or HK$24.1 million less than its revenue of HK$110.5 million in the previous year. This was partly attributable to projects being delayed or cancelled because of the COVID-19 outbreak. Prospects: 2020 promises to be a tumultuous year that will test the strength and character of the entire media industry. Having taken decisive action to embrace a radical new business model, however, the Group has positioned itself well to consolidate emerging income streams, ride out the storm and sharpen its competitive edges with an unwavering eye on future growth. The launch of The Group’s paid membership model heralds a fresh strategic approach for the Group. By further diversifying The Group’s income base to include more stable and reliable subscription revenues, The Group have laid the cornerstone of a more sustainable and future-fit foundation for The Group’s business. In the coming year, The Group’s main strategic focus will be to consolidate and retain The Group’s existing subscriber base in Hong Kong while acting rapidly to address the disappointing initial performance of subscriber acquisition in Taiwan. Personalisation will serve as the lynchpin of The Group’s success. The Group’s new membership model, combined with The Group’s groundbreaking DMP system, allows us to get closer to The Group’s readers than ever before: using big data techniques to understand readers’ needs, interests and habits with ever-increasing precision and clarity, and crafting creative and compelling content in response. With such penetrating insights at The Group’s fingertips, The Group will be able to continually improve The Group’s retention rate by offering constantly evolving products and services. In addition, the Group’s Business Development Department will combine its cutting-edge market intelligence with the DMP’s data-driven insights in order to tailor increasingly bespoke and fine-grained private market ad placement opportunities, creating superior value for advertisers and meeting the competitive threat of online programmatic advertising headon. Content excellence will continue to act as the beating heart of the Group’s strategy as The Group seek to build a loyal and dedicated membership. The Group will continue to invest appropriately to attract, retain and nurture the right talent and creative capabilities, constantly enhance The Group’s portfolio of distinguished, world-class content, and use data-driven feedback to track the relative performance of different content categories and reallocate resources accordingly. In addition, the migration to the ARC content management system is expected to complete this year, opening up new operational advantages. Print is still a mainstay of the Group’s business and continues to make a significant contribution to its overall revenues, despite the gradual decline in the popularity of printed media in both Hong Kong and Taiwan. The Group’s core print publications retain a dedicated mainstream readership. The Group will continue to repay their loyalty with editorial excellence, in the form of investigative journalism, insightful feature stories, special supplements, agendasetting commentary and in-depth analysis. Cost control and efficiency will be the watchword for managing the print business through mounting challenges. While the Group is cautiously optimistic about The Group’s own medium-term prospects, the wider outlook is undoubtedly highly complex and will require great watchfulness and agility. The COVID-19 pandemic will continue to pose stark challenges to the economies of Hong Kong and Taiwan over the coming months, severely affecting advertiser expenditure and putting further pressure on the Group’s top line. That said, the outbreak must eventually end, and the economy will recover in time. Future consumer confidence will determine whether the two economies bounce back with strong growth momentum, or whether recovery will be slow and painstaking. Both the Taiwanese and Hong Kong SAR governments are committing substantial resources to fiscal stimulus and support. Even in a post-virus scenario, however, the uncertain fate of US-China trade negotiations and the social unrest in Hong Kong will also be critical factors. There are choppy waters ahead for the media sector and the economy as a whole, but the Group is well equipped to navigate them. With a steadfast commitment to innovation and agility, The Group will cultivate ever-closer bonds with The Group’s readers through The Group’s passion for editorial excellence and The Group’s smart use of cutting-edge data technologies, thus ensuring that The Group are ready to sail confidently ahead and seize new growth opportunities when the fog of uncertainty eventually clears.

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