Long established print and television media companies are increasingly depending on successful diversification for future growth and viability. Our recent profile of NDTV showed this phenomenon at work. The consolidated FY16 financial results for HT Media which publishes the Hindustan Times and Livemint reaffirm this trend.
This profitable media company is increasingly seeing its revenue growth come from its language, radio and digital businesses. Revenue growth doubled over the previous financial year, even as profit declined, the latter partly because of new investments. The company’s profits, however, were largely derived from advertising revenues generated by the print business.
A pickup in ad sales and traction in the non-print businesses helped HT Media’s sales growth improve in the financial year ended March 2016, even as a spike in costs and new investments led to a second year of profit declines.
The company’s consolidated revenue growth doubled to 8.1 per cent in FY16 from 4 per cent in FY15. This was powered mainly by ad revenue growth of 7.5 per cent, an improvement over last year’s 5.3 per cent. Assembly elections in states such as Bihar buoyed ad revenue for the Hindi language business and so did the Mumbai market which delivered double-digit advertising growth.
But circulation revenues lost speed to a 5.6 per cent growth in FY16 from a healthier 10 per cent in FY15 and 15 per cent the preceding year. HT has refrained from sharp cover price increases in the last couple of years, after making them in FY14. The group’s daily print circulation was about 45 lakh copies (as of December 2015) with the Hindi language business accounting for 28 lakh copies.
Circulation numbers do not really make a big impact on the firm’s overall numbers because it is heavily dependent on ad revenues (mainly print) for its topline. Ad revenues have consistently made up 68 to 70 per cent of consolidated revenues while circulation brings in about 11 per cent.
Interestingly, “other businesses” (radio, digital and ad for equity) contributed substantially more to the topline than newspaper circulation, chipping in with 16 per cent of the Rs 2655 crore consolidated revenues in FY16.
Profitability-wise, FY16 proved a good year for HT Media as EBIDTA (earnings before interest depreciation and tax) margins managed a steady climb from 13.8 per cent in the first quarter of FY16 to 18 per cent in the last quarter. In a December 2015 conference call with analysts, the management attributed these margin gains to better ad sales and the Mumbai business improving its profit margins to 12-13 per cent.
Net profits were at Rs 214.2 crore in FY16, 2 per cent lower than Rs 217.9 crore last year. The quality of profits improved as one-off incomes (from treasury, investments etc) fell to Rs 154 crore from Rs 176 crore, probably as cash balances shrank.
While raw material costs remained benign, margins still took a mild hit as the company’s employee costs shot up by 15 per cent this year to Rs 556 crore. In the conference call mentioned earlier, the management attributed this to new hires at the Hindi business, the radio division and digital initiatives, apart from increments. Interest costs on new borrowings to secure radio licences, investments to augment the integrated newsroom and the rollout of new stations - apart from higher employee costs - seem to have triggered the profit drop.
HT Media’s future plans are twofold: expand the radio footprint by operationalizing the newly acquired licences and improve the profitability of the digital business through “exponential growth”.
On the first, HT Media has recently flagged off its second radio franchise - Radio Nasha 107.2 through a launch in Delhi to play retro Bollywood music from the ’70s to the ‘90s. Plans are afoot to expand this brand to 13 cities with 15 stations, while it continues with its Fever FM franchise, in all five metros.
The digital business is made up of online news sites (Hindustantimes.com, Livehindustan.com, Livemint.com), job search portal Shine.com, Desimartini.com on showbiz, HT Mobile Solutions as well as HTCampus.com. Here, both the mobile business (63 per cent revenue growth) and Shine.com (29 per cent) grew well in FY16.
Effectively, HT’s digital and radio businesses have made good headway in the market with revenues expanding by 35 per cent and 17.7 per cent respectively in FY16. But it was their profitability which remained a challenge. The digital business saw its operating losses widen from Rs 55 crore in FY15 to Rs 64 crore in FY16. The highly profitable radio operations also received a setback with fresh borrowings to fund new licences and the Chennai launch. Its profits dipped from Rs 29 to Rs 20 crore. The print business continued to play cash cow, bankrolling these new ventures.
In FY16, HT Media paid down its long term debt to reduce it from Rs 68 crore to Rs 39 crore, but then more than made up for this by upping its short term borrowings fourfold to Rs 1017 crore (from Rs 276 crore), bumping up interest payouts. The borrowings seem to have been used to fund investments in augmenting the newsroom and the roll-out of the radio business.
Nevertheless, the company has a strong balance sheet to bankroll its planned capital expenditure with a combined (short term plus long term) debt equity ratio far less than 1. It has sizeable investments parked in debt mutual funds set to mature shortly. Net of long-term debt, the company’s cash coffers amounted to over Rs 891 crore by end-FY16.