My notes from Q1FY18 concall:
Growth and margin : Top line de-grew by 5.8%. Radio is high operating leverage business. Top line drop resulted in significant drop in ebita margin and bottom line_(this has been explained very well by Dhwanil in his goa presentation)_
Reasons for drop in revenue:
* Lingering effects of demonetisation: impacts still persist affecting retail /small clients/real estate.
* Impact of RERA: Builders not allowed to advertise on new projects unless registered with RERA. Significant revenue for radio industry comes from real estate on new project launches which was impacted severely. Real estate is big contributor to radio industry ads. in volume terms its down by 21% for ENIL its down by....as in some markets the contribution from RE was high for ENIL.
*GST IMPACT: Advertising by all the sectors including real estate was down significantly during the month of june..
*Radio industry top 8 categories (govt,fmcg,automobile,education,real estate,media,travel and .com in the order) collectively dropped by 20%. Biggest drop was in govt/ political ad spend on high base of last year, around 19% of radio industry revenue is from govt. Typically govt ad spend is divided (volume)among all players equally but price varies for each player depending on listenership. Mirchi market share in govt ad spend is around 25%. For mirchi the govt ad drop is 70% against 30% for industry.
Comment about other radio players growth:
*one player has added two large metro city station on small base which contributed to growth .If we exclude the new stations contribution growth will b negative. One more player growth may be 2 to 3% after excluding the new stations. Their growth may be due to strategy of accepting ads at low price.(I think he was speaking about Music broad c ltd).
Non radio business : grew by 17% in Q1FY18. Contributed 27% of overall revenue in Q1. Margin contribution increased to 37% from 29%. It is fast growing segment in industry. ENIL focus is on profitability.
CAPACITY utilisation:( based on 13min/hr and 17hrs/day)
*core 36 stations:60% in Q1FY 18 v/s 93% in Q1FY17.
* top 8 stations : 86% in Q1FY 18 v/s 113% in Q1FY17.
*New stations: 20%.
Pricing and strategy: price is up by 11% yoy. Mirchi has established top price in all the cities. Even the second frequency/new channels have has kept at higher price. In cities like Bengaluru/Hyderabad price for new mirchi love station is higher than legacy mirchi station. Other cities pricing is at par or 2nd to mirchi. In media industry achieving higher price is important which gives sustainability for next 15 yrs. ENIL is not going to cut the price to increase volumes. Its very difficult to increase price again once reduced. High price resulted in low capacity utilisation.
During last year peak season(diwali) ad time cap was for 22min/hr. Plan to reduce this to 18min/hr to build listenership and maintain high price.
Market may take another 3 to 6 months to recover. July has been bad for advertising industry. With festival season/H2 it may recover with good volumes. Strategy of high pricing will be reviewed if current situation continues in H2/festive season.
Core 36 stations : de-growth is 15%, cost increased by only 1.5%. Wants to keep the cost low which results in improving margins when revenue recovers. Not much marketing spend for stations**. Core stations EBITA will be 30 to 35%.**
New stations: EBITA loss is reduced to 5 cr ,will be profitable by end of FY18. EXPECT THE CAPACITY UTILISATION IN NEW STATION TO REACH 60 TO 70% IN FESTIVE SEASON FROM CURRENT 20%. When new station is launched first few months is to build brand/listenership ,revenue by 3-4 quarter then to concentrate on margins by 8 quarters. Old mirchi stations is not loosing revenues to new station as not many common advertisers. local advertisers will contribute significantly (70%) when new station is launched. This will change over few years when national advertise increases. New channels are not empelled for govt ads.
Listenership/ research: no absolute increase in radio listenership due high ad time. ENIL does listenership survey with respected global companies whose data will be shared with customers to command high premium pricing. Maximum radio listening(80%) happens on mobile phones. 75% of cars are tuned to FM. Many of newer mobile phones doesn't have FM TUNER which is threat to fm industry. JIO smart phones which is going to be launched and expected to replace 50% of phones will have FM tuner.
DIGITAL : have 21 online streaming stations. Launching new digital channels for young who can listen to radio on smart phone with minimal data consumption. Making lot of video /content/programmes /online radio stations for sponsors for online business. Trying to monetise the online stations. presently revenue from digital is less than 1%. This can rise to 10% of revenue.
Capex/new launches: 25 crs for this FY. Only three stations from batch 1 auction yet to be launched. Jammu and Calicut will launched in august. Srinagar launch will take time. Batch 2 stations roll out starts in next 6-9 months. These are all small station. Not much spend is expected.