HT Media Q1FY18 Concall Summary

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Financial Highlights:

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  • Overall revenues witnessed 1.5% de-growth in the quarter. Total revenue stands atINR 652.18 Crores.
  • Consolidated EBITDA was up by 18.7% at INR 133.06Crores for the quarter.
  • EBITDA margin expanded by 3.4% QOQ. (20.4% versus 17%)
  • Advertising Revenue de-grew by (2.2%); Circulation Revenues de-grew by (7.7) % vs. last year.
  • Net Profit after Tax (PAT) up by 85.4% & stands at INR 41.5 Crores. PAT margin is 6.4% of top-line.
  • EPS for the quarter stood at INR 1.79 as compared to INR 0.96 last year.
  • New radio stations have accumulated total revenue of approximately 12 Crores in last 6 quarters (Without Chennai Station) & already in profit.
  • Net cash position currently stands close to 1200 Crores and assets are worth more than 400 Crores as of now.
  • Out of 1200 Crore net cash, 875 Crores is in the books of HMVL.
  • Reported loss in Digital vertical is about 12 Crores and thepossibility of 20-30% reduction of the same will come verysoon.
  • Effective tax rate is around 24-25% on aconsolidated basis.
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 Ad Revenues

  • There was a significant decline in ad revenues in Q4FY2017 due to demonetization. However, the new financial year started well & in April ad volumes increased.
  • Uncertainty around GST and macroeconomic concerns affected ad spends in May and June.
  • Ad revenues declined (5%) for English print business while Hindi print business showeda rather flat topline growth in the first quarter.
  • Digital Businesses continued to grow & stemming losses.
  • The momentum of tight cost control measures which is going on for last 12 months sustained for this quarter also.

GST Impact:

  • GST is likely to have apositive impact on print business in the long run.
  • Advertising in print business will be under 5% GST slab.
  • GST will have major near to short-term impact on advertising business until everything settles down.
  • GST impact on June revenue was very hard. In terms of revenue, April was thebest month of the quarter.
  • The GST volatility has affected the financials of both English and Hindi newspaper business and there are no signs of sustained improvement in this quarter.
  • Core business should be back to growth trajectory towards the second half of this year after GST stabilization.

Newsprint Vertical:

  • Discontinuation of certain operations, various schemes in market and price cuts in certain markets are responsible for softness in circulation revenues on the English side.
  • Right now what company is experiencing is a major slowdown in the advertising consumption due to customers are reluctant to advertise.
  • The company has implemented atwo-prongedcost-cuttingstrategy on both procurement and consumption side for its print business.
  • On the consumption side, Company shut down certain non-productive editions which impacted cost line in a positive manner.
  • On procurement side, the company has adopted multiple cost exercises such as revision of contracts, sourcing from multiple international vendors etc. which resulted in sharp 9% drop in raw material cost.
  • Strategic resource deployment, auto-pagination correction & cost reduction initiatives in both procurement & consumption side are some of the measure taken to rationalize English newsprint business.
  • In UP, Dainik Jagran is the incumbent leader and will take some time for HT media to get agrasp of entire UP market. Depending on various reports, we can see HT media is already a strong competitor to Dainik Jagran in UP market.

Radio Vertical:

  • Radio segment has been on a pretty handsome growth trajectory now for the last eight quarters & it is likely to continue in coming quarters. Total growth on radio business is around 30%.
  • Radio business has again recorded a stellar performance with QOQ revenue growth of INR 10 Crores.
  • HT media has invested more in expanding the capacity in radio. Also themarket is embracing radio as a medium much more proximately.
  • The inventory utilization in the old stations was already running over 90% for the last many quarters and therefore company decided to invest in Phase III of theradiobusiness.
  • There is no set benchmark for radio inventory. Dynamic pricing strategy in line with market demand enabled radio business to book good profit.

Company Overview:

  •  Though various government policies and the cautious mood in the economy has had its impact on the business, fundamentals remained strong.
  • The benefits of the cost restructuring exercise that HT media undertook last year is starting to show up in the financials.
  • The high amount of cash will be used as aninvestment in multiple business activities in near future.
  • The company is putting lots of effort into restructuring the HTDSL and it is maturing as a digital organization.
  • Though cost reduction initiative is complete on a time axis, the company is making this as new internal cultural paradigm & sustained effort will be there to maintain the benefit earned & also finding new avenues to cut cost.
  • The company is not too concerned about losses in digital business as this field will show healthy growth in future.
  • DQ is affected in last three quarters by frequent change of regulations & changes in policy of “Google”.
  • The business model of DQ isnow being reshaped over the last 12 months under thenew circumstance and it is expected to come on its own in future
  • The company has obtained regulatory permission to access the bond market for contingency funding requirement from its board.
  • Board is considering various proposals within its strategic space of media entertainment and information.
  • Employee cost is a sustained reduction.
  • AFE Division is constantly looking for strategic value investing opportunities in the market where core business can be augmented & there is enough headroom in the budget for the same.

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