The last few months at HT Media have resulted in concerted efforts to take the organisation towards a leaner structure. Having chosen to discontinue with some of its offerings, the company management is certain that the editions which have been taken off the newsstands will not impact its advertising revenues or circulation standing. During Q3 FY 2017 Earnings Conference Call held on January 24, HT Media’s Group CFO Piyush Gupta and Chief Strategy Officer Sandeep Jain lent an insight into the company’s thought process behind the entire cost-rationalisation exercise.
Planned before demonetisation
Admitting that the “whole cost rationalisation exercise (was started) much before this whole demonetisation”, Gupta stated that the core aim was to create a “more agile organisation”. The need for such a measure was necessitated due to the company being unable to match its revenue expectations. “We thought this was the right moment when our revenue growth expectations were becoming lower, we had to look at the cost to ensure that print remained a sustainable business,” said Jain.
The transcripts of the conference call, which were made public recently, reveal that the cost rationalisation measures were focussed on HT’s print business and are likely to remain so. Digital is slated to not come under the scanner at present. However, HT Media is not yet completely done with reducing costs. “We will be at it for the longest time and the whole idea is to make a much more agile organisation going forward,” stated Gupta. So far, only the “diagnostic stage” has concluded.
Some of the shelved editions were in losses
The retrenchments at Hindustan Times resulted in the newspaper shutting down the editions in Bhopal, Kolkata, Indore and Ranchi. The local bureau in Allahabad, Kanpur and Varanasi were also closed. However, the HT management reasoned that a few of these editions were actually loss-making (EBITDA numbers) and the bureaus were simply coming out with a few pages of local news content.
“The impact of the closure of editions is rather limited. I would say that these editions have only been shelved, so very small circulation (may fall) as far as these editions are concerned. It will not reflect in the overall numbers,” said Jain. Not just the circulation figures but HT Media is confident that the defunct editions won’t even affect the company’s top line or revenue. On the contrary, the bottom line income could witness an increase owing to closure of a few loss-making business undertakings.
Reflection of results
The results of the retrenchments have been encouraging for HT Media as it has enabled them to rein in costs to a certain degree. In Q3 FY 17, the cost of raw materials came down by 5.9% while selling, general and administrative expenses (SG&A) declined by 4.7% when compared with the previous fiscal’s Q3 results. Two of the biggest contributors to HT Media’s expenses, SG&A expenditure and cost of raw materials stood at Rs 215.7 crore and Rs 178.9 crore, respectively. On the other hand, employee costs, though lesser than the other two, went up by 1.1% to Rs 144.8 crore.
Courtesy demonetisation, advertising revenues de-grew but it helped HT save costs in a way. “What has happened is because of the lower advertising, obviously, the pagination is lower and most of the consumption savings is a factor of lower pagination,” Jain asserted. With liquidity being gradually restored in the market, HT has pinned its hopes on getting back significant advertising revenues from its major clients such as automobile, FMCG and retail companies. Alongside real estate, these sectors reportedly underwent a slump in November and December.