Supernova Advertising Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Covid 19 pandemic has caused a significant disruption and turmoil in the media and advertising industry. The industry will see a shift in priorities and the immediate focus of companies will be sustenance and survival. There is likely to be a drastic fall in the capital expenditure and investment cycle by companies, which in turn constrain supply and growth of the industry in the near term.

The effect of the pandemic in certain media segments has been disastrous. As advertisers scale back spending, the print and television media is witnessing massive layoffs, retrenchment and salary cuts. The advertising agencies also have newer challenges to battle with. With widespread travel restrictions in place and may countries under complete lockdown, advertising agencies that are largely dependent on interpersonal connect and physical presence of staff are rethinking their way of operations. Agencies are encouraging its employees to work from home when need be. The key strategy is efficient cash management and profit protection with greater technology integration.

OUTLOOK

There is a rule of thumb in the advertising industry that advertising and media spend follows the rise or fall in GDP. According to a report of World Economic Forum, as global GDP has risen 3-6% each year over the last decade, the advertising revenues have grown with it to around US $646 billion in 2019. Pre-Covid 19 pandemic, the advertising market was forecast to grow to US $865 billion by 2024. With an immediate drop in advertising spending, Coronavirus has put a brake on this growth and forced a rethink. Data from a report by the leading advertising group Publicis showed that the first quarter revenue in China was down 15% as compared to same period last year. Countries in Europe saw an average reduction of 9%; Germany and France fell 7% and 12% respectively.

RISKS AND CONCERNS

The remainder of the year will be extremely challenging. According to a survey conducted by Interactive Advertising Bureau, almost 25% of media planners, buyers and brands have paused advertising spending until end of second quarter. The advertising industry is no stranger to disruption and turmoil. In the past, advertising agencies have overcome economic pressures, political tensions and even natural disasters but most of these episodes were short lived. In the case of the present pandemic, a majority of respondents expect that there will be a much bigger and more sustained impact than the 2008 financial crisis.

The various segments of media derive a significant percentage of their revenue from advertising, and the current pandemic has brought advertising almost to a standstill in may sectors including fast- moving consumer goods, financial services, automotive and e-commerce. The quick recovery of these sectors will play a critical role in helping media outlets and the advertising agencies to grow their business. Till then, leading advertising spenders will continue to keep a tight lid on expenditure and both the media outlets and advertising agencies will see their business shrinking.

ADEQUACY OF INTERNAL CONTROL

The Company through internal controls aims at achieving operational efficiency and optimum resource utilization. The Company ensures strict compliance with all the applicable laws and regulations. A qualified and independent Audit Committee of the Board, comprising non-executive directors, reviews the compliance process and adequacy of internal controls.

DISCLAIMER

Certain statements made in this report relating to the Companys objectives, projections, outlook, estimates, etc may constitute ‘forward looking statements within the meaning of applicable laws and regulations. Actual results may differ from such estimates or projections etc whether expressed or implied. Several factors including but not limited to economic conditions affecting demand and supply, government regulations and taxation, input prices, exchange rate fluctuation etc over which the company does not have any direct control, could make a significant difference to the Company operations. This statement should be read in conjunction with the Companys financial statements included herein and the notes thereto.