NewsPrint Co (NPC) is long established publisher of local and national newspapers in a European country. In recent years, NPC like the other major newspaper publishers in its country, has started providing online versions of its newspapers. These are free to view, but they generate advertising revenue from the banner adverts in them.
However, tough economic conditions in NPC's country have led to a decline in advertising revenues since 20X7.
An extract of some key figures from NPC's financial statements is given below:
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20X4 ($m)
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20X9 ($m)
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Revenue
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382
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345
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Operating profit
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86
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72
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Net cash flow from operations
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46
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45
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Total debt
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175
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195
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At present, four major publishers have an aggregate market share of 90% of the newspaper market in NPC's country. The current market leader has a 27% market share. The market shares of the other three major publishers, including NPC, are equal in size. All the publishers offer a similar range of newspapers, for example including both broadsheet newspapers and tabloids, and daily and weekly papers.
The latest market research figures show that the newspaper market for printed newspapers in NPC's country grew 1% in the last year. Despite these finding, some of NPC's directors feel that the newspaper market is declining because fewer people can make time to read printed publications. They are concerned that people are increasingly more likely to watch a television news channel than read a newspaper.
Five years ago, NPC was the market leader with a market share of 29%. However, NPC was slower to develop online versions of its newspapers than its competitors. The main reason for this is that the Chief Executive felt strongly that people would prefer to read printed copies of a paper, and so he resisted the move to develop online versions, despite the remainder of the Directors being keen to do so. The reluctance to develop online versions has had an adverse impact on printed sales, rather than protecting them.
However, NPC has now introduced new IT systems across the business, which have enabled it to re- engineer how it publishes content across the printed and online versions of the newspapers. As a result, the business expects to be able to achieve efficiencies and cost savings without any detriment to quality. The new IT systems cost $30m, and NPC took out additional loan financing in 20X8 to pay for them.
However, a number of shareholders have expressed concern that NPC's loss of market share might lead to the end of the company as an organisation, and they have called on the directors to address this issue as a matter or urgency.
Required
Identify and evaluate the problems or indicators which could indicate that NPC might fail as a corporate entity.