Management discussion and analysisThe year 2009-10 saw a significant improvement in profit after tax of Rs.26,092 lakhsagainst Rs.14,007 lakhs in the previous year, an increase of 86%, primarily on account ofgrowth in revenues and reduction in newsprint cost.
Operations Review
• Income from Operations has increased by 9.5% from Rs.81,494 lakhs to Rs.89,250lakhs.
• Advertisement revenue increased by 10% from Rs.75,911 lakhs to Rs.83,434 lakhs.
• Circulation revenue increased by 4% from Rs.5,583 lakhs to Rs.5,816 lakhs.
The advertisement revenue increased mainly on account of better rate realisation, andalso during the year the company increased its advertisement tariff across all itseditions by 20%. The advertisement as a percentage of total revenue is 93%. DeccanChronicle, the flagship newspaper of the company continues to be the leading newspaper ofSouth India. The circulation grew by 3%; as per Audit Bureau of Circulations (ABC) for theperiod July-Dec 2009 the average daily circulation is 13.79 lakhs copies as againstJuly-Dec 2008 circulation of 13.34 lakhs copies.
The breakup of average daily circulation (in lakhs) is as under:
| July-Dec 2009 | July-Dec 2008 |
| Hyderabad | 5.72 | 5.26 |
| Rest of Andhra Pradesh | 2.51 | 2.59 |
| Chennai | 3.11 | 3.06 |
| Bengaluru | 2.45 | 2.43 |
| Total | 13.79 | 13.34 |
Industry Overview
The year under review showed improvement in the Indian Economy. The domestic growth islikely to lead to a further increase in advertisement spends by the corporates, and theprint media segment is likely to be a major gainer. The economic growth will further leadto increasing standards of living and literacy level which will fuel circulation growth.Thus the print media as a sector is considered to have a robust future within India for anumber of years to come.
Financial Review
Share Capital
The total shareholders’ fund as at March 31, 2010 is Rs.1,25,801 lakhs of whichequity capital is Rs.4,844.46 lakhs comprising 24,22,22,784 equity shares of Rs.2/- each.During the year under review the company pursuant to a buy back programme bought back andcancelled 26,54,761 equity shares.
Reserves and Surplus
As at March 31, 2010 the reserves and surplus of the Company aggregated to Rs.1,20,957lakhs as against Rs.1,10,089 lakhs in the previous year an increase of Rs.10,868 lakhsi.e., 9.87%.
Dividend
The Board of Directors of the Company had declared and paid interim dividendaggregating to Rs.3/- per share for the year under review. The total dividend is 150% forthe financial year 2009-10. The dividend outflow including dividend tax aggregated toRs.8,533 lakhs as against Rs.5,730 lakhs in the previous year.
Debt
The total secured debt as at March 31, 2010 is Rs.32,887 lakhs as against Rs.35,450lakhs in the previous year a decrease of Rs.2,563 lakhs.
Fixed Assets
The gross block of fixed assets is Rs.91,658 lakhs as against Rs.84,099 lakhs in theprevious year an increase of Rs.7,559 lakhs on account of amalgamation,expansion/modernization of the printing facilities.
Investments
The variation in the investments is on account of amalgamation of subsidiaries.
Inventories
Inventories as at March 31, 2010 was Rs.6,204 lakhs. The decrease is on account ofreduction in the news print prices and also due to the scaling down of inventory to normallevels in view of better availability of newsprint. Inventory primarily comprises ofnewsprint, ink and plates.
Debtors
Debtors for the year under review is Rs.19,555 lakhs as against Rs.19,425 lakhs, animprovement in the debtors days from 87 days in the previous year to 80 days for the yearunder review.
Loans and Advances
The loans and advances increased from Rs.9,849 lakhs in the previous year to Rs.18,551lakhs, primarily on account of funding support to subsidiaries.
Cash and Bank balances
The cash and bank balances increased from Rs.35,968 lakhs in the previous year toRs.59,164 lakhs.
Printing and Other Operative Expenses
The decrease in printing and operative cost from Rs.44,274 lakhs to Rs. 31,758 lakhs isprimarily an account of decline in newsprint prices.
Overheads
Overheads comprise personnel cost and sales and administrative expenses. The overheadsfor the year are Rs.12,334 lakhs compared to Rs.10,395 lakhs for the previous year.
Interest and Financial Charges
The interest and financial charges for the year is Rs.4,513 lakhs as against Rs.7,093lakhs in the previous year.
Depreciation
The Company provides depreciation on straight-line basis at the rates prescribed inSchedule XIV of the Companies Act, 1956. The depreciation charge has increased fromRs.3,206 lakhs to Rs.4,225 lakhs due to amalgamaion, expansion/modernization.
Tax Charge
The total tax charge has increased from Rs.5,499 lakhs to Rs.12,388 lakhs on account ofincreased profits.
Internal Control Systems
The Company has adequate internal control systems to monitor all aspects of operationsand managerial functions. There are well defined procedures and policies laid out toperform the various functions. All functions are regularly reviewed and the results of thesame are discussed by the senior management and Audit Committee. The recommendations areduly implemented.
Risk Management
All businesses are subject to internal and external risks. The internal risks arecontrollable risks and the senior management has identified such risks and formulated suchactions to mitigate the effect of such risks. The external risks like change in governmentpolicies are not within the control of the management.
Industry Risk
The print media industry is enjoying significant growth on the basis of the growingeconomy, high-income levels and increasing literacy amongst the people. Any variations inthese can have an impact on the industry
Raw Material Risk
Newsprint constitutes the major raw material for the newspaper industry. Thereforecontinuous supply of newsprint at competitive price is essential for the business.
Operational Risk
The Company has appointed good quality reporters who provide on daily basis proper andauthenticated information. The Company has also deployed good quality machines forprinting the newspaper without any breakdowns.
Outlook
The future of the industry and the company is expected to be good backed by a growingeconomy, higher income levels and literacy.
Cautionary Statement
Readers are cautioned that this section may contain forward looking statements by themanagement that involves certain risks and uncertainties. This section should be read inconjunction with the Company’s financial statements and relevant notes attachedthereto.