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Midday: Moving in right direction, but… - Views on News from Equitymaster
 
 
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  • Oct 18, 2001

    Midday: Moving in right direction, but…

    "We would continue to look at different ways to deliver our content". This is what Mr. Tariq Ansari, MD, Midday Multimedia Ltd, has been saying for some time now. The idea is to leverage existing content base on various platforms so that a bouquet of services can be offered to the advertiser.

    From a company primarily focused on the print business, MML has diversified into other media plays such outdoor, radio Interactive medium and more recently, television. MML recently announced its tie-up with Zee news for content delivery. While Mid-Day would bring its content, brand and ability to promote the programming in the city of Mumbai through print and outdoor media, Zee would provide the broadcast platform and strong distribution relationship throughout the country. MML has also picked up 50% stake in SS International, a Chennai based company focusing on outdoor advertising.

    (Rs m) H1FY01 H1FY02 % Change FY01
    Sales 443 433 -2.2% 950
    Other Income 4 21 NA 13
    Expenditure 371 408 10.0% 794
    Operating Profit (EBDIT) 72 25 -65.1% 156
    Operating Profit Margin (%) 16.2% 5.8% 16.4%
    Interest 3 7 140.0% 10
    Depreciation 11 14 27.7% 29
    Profit before Tax 61 25 -59.8% 130
    Extraordinary Income 0   -
    Tax 17 4 -78.9% 44
    Profit after Tax/(Loss) 45 21 -52.7% 86
    Net profit margin (%) 10.1% 4.9%   9.1%
    No. of Shares (eoy) (m) 27.0 34.0   34
    Diluted Earnings per share* 6.6 1.2   2.5
    P/E (at current price) 16   7.9
    (*- annualised)        

    However, the efforts of the company are yet to translate into numbers till date. For 1HFY01, MML reported a drop of 53% in net profit despite huge treasury income. While sales have remained almost stagnant over the corresponding period of the last year, operating margins fell sharply from around 16% last year to 6% for 1HFY01. The drop in performance could be explained as under.

    The drastic fall in operating margins was due to the fact that both the advertising scenario and newsprint prices, which primarily determine the profitability of the company, worked against it. Though newsprint prices are on a decline, average prices on a comparative basis were on the higher side compared to 1HFY01. While advertising volumes for print media industry fell by 21%, MML’s advertising revenues fell by 14%. Again, the general drop in advertising volumes affected profitability of the outdoor advertising business. The fall in contribution from Outdoor business was sharp as more than 80-85% of the costs in this business are fixed. Again the interactive business of the company is still at a nascent stage and this adds up to higher fixed costs.

    The outlook for the company would depend on the recovery in ad-spend and payback period of the new initiatives across different platforms. Competition in other media plays like radio is also expected to hot up. However, the differentiating factor of MML would be the low cost of content creation. In the near term, though the company is expected to benefit from softening newsprint prices, recovery in ad-spend seems unlikely. This is a major cause for concern.

    To summarize, it seems the company is moving in the right direction cautiously expanding into multimedia plays to create a robust business model. The business model, which MML is trying to create, is on the lines of international print medium industry i.e. to exploit content across different platforms including Internet and television to provide impetus to their advertising revenues, which are losing shine. Read more on Print Media .

     

     

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