“The quarter started on a good note with the festival season. However, subsequent economic dip hit sentiment and therefore the media spend. This in turn impacted advertising revenues for our English and Hindi print business,” Sandeep Jain, Chief Strategy Officer, HT Media, said on the company’s earnings conference call yesterday.

Overall ad revenues for HT Media, which also has radio and digital businesses, declined by 5.7%, hit primarily because of an 8.6% decline in print advertising revenues. Comparing this year to the last, for the quarter ended December 31st 2016, according to Jain, “English print ad revenues degrew by 9.5%, Hindi was down by 7%, also due to the bihar base effect.” Elections usually lead to an increase in spends, and the state elections in Bihar in the same quarter last year led to a higher base-line of ad spends.

Impact of demonetization

Advertising declined leading to lower newsprint costs, because “lower pagination” or fewer pages in newspapers. HT had “subdued revenues due to adverse economic sentiment post demonetization”

“I mean as a consequence of demonetisation, even if you look at our competitors who have already declared results, and the other guys who will, you know the volumes are substantially lower. Even in December, I mean the full flurry of demonetization has been felt both in November and December. We are hoping that January will be better, but December was also substantially down.”

“There are few categories and sectors which have had a significant impact. For example the government category has actually not contracted. It has actually expanded. To that extent that category has grown, but real estate, education have taken a very big brunt. E-commerce etc  have grown, but the weightages have shifted.”

“FMCG and retail are sectors which have suffered in a big way. You must have seen some of the results of the FMCG companies. Real estate has been underperforming for a while. Auto was slow, but it is coming back with some new launches. All the sectors except for Government and BFSI (E-wallets etc), have underperformed.

The next round of indication will come from the Union Budget.

Shutting down of editions will not impact revenues and circulation

Jain said that “margin erosion” (due to demonetization) was limited because of “very tight cost controls and better operational efficiency.”

“We continue to constantly challenge ourselves to innovate and do things more efficiently with leaner cost structures. This should bear fruit in the coming quarter, and further help us deliver on our promise to create value for shareholders”, Jain said, also adding on the conference call that “We continue to focus on our digital strategy and are aligning the organisation to leverage our considerable strength in traditional media and our brands in the digital world.”

The cost optimisation has been the closure of four editions, and its business bureau for Hindustan Times. When asked about the impact of these closures, Jain tried to shift focus to the lack of impact on the topline (which means that the editions weren’t earning significant revenue) and circulation (not selling many copies), instead of the cost savings for the business:

“The impact of the closure of editions is rather limited, and I must say that these editions have only been shelved for very, very small circulation as far as these editions are concerned, and it will not reflect at all in the overall numbers. The impact is very minimal, both in terms of copies and revenues.”

“All I can say is that as far as the topline impact is concerned, it is very very limited, both in terms of revenues and copies, and this is for the four editions and the bureaus that have been closed. Very very minimal impact on advertising revenues, copies and circulation revenues. At the EBITDA level, some of these were loss making to some extend, so there could be a little bit of value accretion to the bottom line to some extent. I would resist sharing numbers, but it’s not an impact that you will notice in the topline.”

More “cost optimisation”, and focus will be on print

HT isn’t done with the “cost optimisation” yet. Jain declined to comment on how much of the “cost optimisation” exercise has been completed, despite being asked for more details repeatedly, saying that “The first part of the exercise was on print, and we continue to focus on print. Different businesses are in different stages of growth. Print is obviously a mature business. The cost line had bulked, and our revenue growth expectations were becoming lower, and we had to look at to costs to ensure that we remain a sustainable business. On digital, we are taking action, but it’s not within the scope of this project that we had embarked on.”

“We had started cost rationalisation before demonetization, because we wanted to create a much more agile organisation. Demonetisation is a subsequent event that has happened and this has come in very handy, but nothing suggests that we will be off track on this agenda, because this agenda was embraced before demonetization. I, without giving any forward guidance would say that we would be at it for the longest time, to make a much more agile organisation cost wise.”

“Part of the results are already visible, which is why you see cost line items remaining in control. It’s an exercise which was initiatives a few months ago, and now we’re concluded with the diagnostics and are implementing the actions etc. The need became a little more urgent because of demonetization.”

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Revenues from Radio for the company increased 40% year on year to Rs 45 crore, because of the launch of new stations. The job portal Shine.com reported 29% higher revenues, HT Mobile Solutions degrew by 29%, and “the content business” grew 21%.