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Tata Donnelley: bottomline blues - Views on News from Equitymaster

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Tata Donnelley: bottomline blues

Jun 28, 2000

Tata Donnelley has reported a 16.5% topline growth for the year FY2000. However, the bottomline has stagnated since the company took a huge write off on account of VRS. Out of 220 people, the company has relieved almost 115 people. The company has consistently toned down its commercial printing operations which now contribute around 16% of the company's turnover. (These contributed 71% of the turnover a decade back.) However, this business is very competitive and is actually in a loss.

(Rs m) FY1999 FY2000 Change
Sales 853 993 16.5%
Other Income 53 73 36.7%
Expenditure 690 819 18.6%
Operating Profit (EBDIT) 162 174 7.3%
Operating Profit Margin (%) 19.1% 17.6%  
Interest 3 2 -30.0%
Depreciation 57 55 -5.0%
Profit before Tax 155 190 22.9%
Other Adjustments 0 (32)  
Tax 50 53 6.0%
Profit after Tax/(Loss) 105 105 -0.2%
Net profit margin (%) 12.3% 10.6%  
Earnings per share 13.81 13.78  

The bread and butter business for the company remains the Yellow Pages business which contributes a bulk of the profits (the management would not specify the percentage). However, the business needs to transit to a web based one. Already the company licenses the exporters pages to other portals. It is planning to put in place its own portals in the current year. The company also has a special interest publishing business which publishes magazines catering to niche markets such as Photography, AV Max, Search (industrial product finder) and Overdrive (an auto magazine).

Overall value added products (which includes the Yellow Pages and the special interest publishing business) contributed 63% of the revenues with contractual printing contributing another 19.9%. (Contractual printing basically involves printing magazines such as Outlook, Femina, Filmfare, Intelligent Investor etc.) The coming year is unlikely to get any easier. The stock currently quotes at a price of Rs 258 which implies an earning multiple of 18.7 times. If one were to exclude the VRS expenditure, the earning multiple works out to around 15.5 times.

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