Points to note from HT Media’s earnings conference call for Q1-FY17. Our coverage of the results here.
1. GST impacts post demonetization recovery: GST concerns hit HT Media’s advertising revenues in May and June 2017, even as there was some recovery in April, after a tough last quarter of FY17 which was impacted by demonetization. Year-on-year, advertising revenues for the groups English Print business were down, while the Hindi print business reported a flat top line. Overall, print revenues were down 5% for HT media in the quarter. “English has taken the real brunt of the soft market sentiments,” Piyush Gupta, the company’s CFO, said on HT Media’s Q1FY18 earnings conference call. Broadly:
- April: “was a great month because we were seeing growth come back to the English revenues in the month of April.”
- May: “slightly less but still better than June:
- June: “is where really the whole GST volatility hit our financials.”
When will things improve? “…we believe in a quarter it [GST] should get settled out, the growth we have seen in April should rebound back if not in a couple of months then probably in a quarters’ time”
2. GST’s impact on print advertising: The problem, according to CEO Rajeev Verma: “there is going to be a major impact from the advertising in the near-to-short-term. Right now what we are experiencing is a major slowdown in the advertising consumption due to the fact that all our customers, people who advertise in the newspaper are all not consuming advertising. There is a likelihood of a slowdown in the advertising but from a medium to long-term standpoint, I think, GST will be a useful thing for the industry. ”
Verma also pointed out that with GST, print advertising is now being taxed at 5% GST (as opposed to 18% for digital advertising). This means two things for the company: firstly, which basically means “all the inputs which were not part of our pass-through because import duty on newsprint also has been levied, can now be offset due to the fact that the output is also going to be taxed.”
3. Digital Businesses continued to grow while stemming losses: HT Media reported around Rs 12 crores of losses for the digital business. Last year, it had reported losses of Rs 39 crores. In response to a question about the apparent increase in losses, Gupta said that digital losses will come down sharply in the next couple of quarters, adding that “We are currently in the mode of finalizing our plan on some of these digital properties and assets that we have which will not just prop up the growth but also bring down the losses at a sustained level as early as in couple of quarters from now.” It is restructuring its costs via HT Digital Streams Limited, which is their “multimedia content creation” business.
Gupta said that he sees the possibility of “a 20% to 30% reduction [in costs] coming very soon on a sustained quarter-on-quarter basis”.
4. Digital Quotient business being re-evaluated a tough year: Digital Quotient, HT Media’s digital and mobile marketing business, has been struggling for two years, and has been “under a lot of problem”, “for over three quarters clearly”:
- It was adversely impacted by government regulations which restricted mobile VAS businesses (essentially SMS spam).
- Gupta said that the other thing that impacted was “this whole thing around Google taking a position into various properties where DQ was operating for its revenues,” without specifying which areas/properties he is referring to.
Saying that the environment “has changed very substantially in the last 12 months”, the company is looking at DQ’s business model “and rehashing it, given the new market realities and the new regulatory realities”
5. Ads for equity; algorithm?: HT Media is “perpetually looking for value investing opportunities in the market, which will augment our core business as well”. How do they budget for it? “It is basically algorithm, which takes into consideration the kind of people that we would like to bring into the advertising fold, the kind of value picks that we can see in an investment space. Now within investment, we obviously also look through the listed markets and the public markets and the private markets that is how we set it up in our budgetary exercise which is year beginning process. I would say we have a lot of headroom in our budget to do these kinds of deals and we therefore are already trying to look deeply into the markets and pick wherever value can be picked up from an investment paradigm, which also augments our core business.”
Piyush Gupta: [Ads for Equity] Asset will be north of 400 Crores right now.
6. Cost savings on Newsprint: There has been a 9% drop in raw material cost for HT Media. Gupta said that the company is taking a two-pronged approach to newsprint: firstly on the procurement side, where they have gone to various newsprint sources, domestic and international. Secondly on consumption: HT Media had shut down loss-making editions last year, which helped reduce newsprint costs, without significantly impacting revenue. The other thing that has happened is the reduction in pagination in a soft ad market. The company says that “the moment you would see a bump up coming into ad revenues, these lines will automatically start rising in consonance basis the algorithms which companies like us follow very proximately.”
More from Gupta: “one thing that I would like to point out is that we are making the cost as a new cultural paradigm within our company, I think we will be trying to work towards bettering these numbers on a quarter-by-quarter basis so we are not just settling on a new baseline. This essentially I say because looking at the revenue and market scenario at this point in time, we really need to be very tight on our costs. So that is a new paradigm we have embraced and which we plan to better every quarter.
7. Number of times Gupta called a question a good/great on the call: 6 times.