The recent few quarters of FY12 and FY13 have been a tremendous challenge for print media companies in India. With the economic slowdown, there have been significantly fewer corporate India advertising campaigns. This reduction has directly hurt print media company revenues coming from the crucial advertisement segment.
Further, costlier newsprint has also lowered margins. And though newspaper companies did take some rate hikes in a few select regions, a tough competitive environment restricted hiking subscription rates.
We have been told time and again, that troubled times test the strength and stability of the business models of companies. Let's see how well print media companies have been able to weather this storm.
In this article, we analyse the most recent quarter (1QFY13) performance of the 3 main players in the industry, Jagran Prakashan, HT Media and DB Corp.
1QFY13 - Performance of the Big 3 print media Companies
Overall, sales in the quarter ended June 2012 was very disappointing.
The table below summarizes the key financial performance of these three companies.
|Big 3 print media Companies - Key Financials|
| ||Jagran||HT Media||DB Corp|
|Growth YoY (in %)|
|Sales|| ||4.2|| ||-0.9|| ||7|
|Operating expenses|| ||7.5|| ||4.6|| ||18.4|
|PAT|| ||12.1|| ||-21.1|| ||-28.7|
|Profit margins (in %)|
Jagran, managed a 4% YoY sales growth, helped by its strong increases in both subscriptions (10%) and advertising (8%). In terms of profit margins, Jagran outperformed its peers both at the operating and net profit levels. In fact, Jagran's 1QFY13 operating profit margin and net profit margin grew 24.8% and 17.6% respectively versus the same quarter in the previous year. This result was due to both weak but positive sales as well as good cost management.
HT Media on the other hand registered 1% fall in sales, with ad revenue dropping 3% YoY during the quarter. And, the company's profit margins dropped and its net profit fell by 21%.
DB Corp recorded a 7% YoY sales growth - the highest amongst the three companies. However higher operating expenditure that grew by 18.4% YoY resulted in the net profit declining by almost 29%. DB Corp also witnessed shrinking profit margins as compared to the previous year.
Why did Jagran do better than the others?
Advertising represent 65% to 80% of total revenues for these companies. And so it is a major driver of performance. It speaks about the company's ability to bargain with the advertisers and get the best rates in the industry. While we may consider Jagran's better performance as a one off case, a deeper analysis of ad revenue growth trends throws up some fascinating information.
Ad Revenue growth trends
|Ad growth (YoY, in %)||1QFY12||2QFY12||3QFY12||4QFY12||1QFY13|
Interestingly, when the economy started slowing down, Jagran's ad revenues rose in 3QFY12, and then held its ground. It seems that Jagran was better able to pave its way with advertisers and grow its ad revenue. Also, the company has reported good growth in subscription numbers on the back of recent price hikes.
In contrast, HT Media's ad revenues declined in 1QFY13.
Also, DB Corp had recorded huge ad revenue growth in the early FY12 quarters, it was not able to sustain these numbers as India's economy slowed.
Operating Expenditure - The table also highlights the fact that Jagran was able to manage its costs much better than the others.
Focus - Jagran has also focused on consolidating its business rather than chasing different business ideas. HT Media and DB Corp have instead.
Jagran has done better job getting ad revenues, managing its operating costs and maintaining its focus.
Essentially, Jagran has demonstrated that it has a strong business model, and that it is capable of weathering difficult times better than its peers. And when the economy picks up, Jagran seems to be well placed to capitalise on opportunities in the growing newspaper industry.
Jagran has shown that it can survive and thrive in storms, and with its consistent performance, we expect it to continue in the future too and be a good long term investment.
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