2005-2006 Highlights
• MML H1 PAT increases 38%
• H1 Radio topline increases 55%
• Midday Group has exited the Outdoor advertising business
• Results are with FM license fees at full charge. Radio & Group numbers will be substantially better    as per the revised radio norms, since new norms are effective from 1/4/2005.

At Mid-Day Multimedia Ltd we are focussed on key financial indicators which are tracked on a regular basis and compared to set benchmarks to ensure that shareholder wealth is being enhanced.

Turn around in the Group’s Net profit
Economic Environment
The Indian economy started the new financial year at a blistering pace growing at a phenomenal 8.1% in the first quarter. However, the Indian monsoon played truant in the second quarter. The deluge in different parts of the country laid consumer confidence low and impacted Q2 growth rate. The ever escalating crude oil price impacted the inflation rate adversely. The inflation is now quoting at 4.7% which is one of the highest in recent times. All this also impacted the stock markets and there has been an erosion of more than thousand points from the all time high the BSE sensex hit last month.

On the media front, the print media scene across the country continues to be very dynamic. The initial lead in expanding the print market was taken by the vernacular press but now the English dailies have caught on to the market expansion game. The Mumbai print market is extremely volatile due to the new newspaper launches. Other metro cities are going see some action soon on similar lines. But by far the incumbents in all the markets have come out trumps and a similar scenario is unfolding in Mumbai.

The newest and most exciting media opportunity in media space is the FM radio. It has shown phenomenal growth in the past and is expected to outgrow the advertisement industry for several years to come. We see an exciting opportunity in radio and are exploring several alternatives in this business.

Management Analysis
The Company has shown a topline growth of 9% for the first half of the current financial year. It has grown from Rs.4805 lacs to Rs.5241 lacs. However for Q2 FY06 the topline has declined by 6% to Rs.2280 lacs from Rs 2413 lacs in the corresponding period last year. This is because of a decline in turnover of the Outdoor business since we have completely exited the business.

The cost of printing has shown a significant increase of 27% from Rs.1591 lacs in H1 FY05 to Rs.2013 lacs for H1 FY06. This is due to both an increase in the price of newsprint as well as an increase in circulation of the flagship "Mid Day" newspaper. For the quarter, newsprint expenses have increased by 19% to Rs.1002 lacs in Q2 FY06 from Rs.843 lacs in the corresponding quarter last year.

News expenses have declined by 4% to Rs.120 lacs in H1 FY06 from Rs.125 lacs in the corresponding period last year. Staff expenses have increased marginally by 4% to Rs.895 lacs in H1 FY06 from Rs.863 lacs in H1 FY05.

Site rentals have declined to Rs.378 lacs from Rs.520 lacs, a decline of 27%. These expenses for the quarter have declined by 72%, from Rs.280 lacs in Q2 FY05 to Rs.79 lacs in Q2 FY06. This is because all outdoor contracts have expired in July 2005 and the Company has exited the outdoor business.

Selling and Distribution expenses have declined by 21% from Rs.340 lacs in H1 FY05 to Rs.268 lacs in H1 FY06. This is because in the last year we had focused on increasing our circulation. The fruits of the expenses and our efforts in increasing the circulation of our flagship "Mid Day" are now visible.

There has been a substantial increase of 63% in rent, rates, royalty and taxes from Rs.122 lacs in H1 FY05 to Rs.199 lacs in H1 FY06. This increase is due to our moving in to the new and bigger office as per our expansion plans.

Other expenses have shown an increase of 9% to Rs.663 lacs H1 FY06 from Rs.607 lacs in the corresponding period last year.

The Surplus from Operations has increased to Rs.705 lacs in for H1 FY06 from Rs.637 lacs in for H1 FY05, an increase of 11%. However, the same has declined in Q2 FY06 to Rs.141 lacs from Rs.264 lacs in Q2 FY05. This decline is due to lower revenues and higher printing costs.

Other income has increased by 244% in H1 FY06 to Rs.93 lacs from Rs.27 lacs in the corresponding period last year. The Other income for the quarter has increased by 113% from Rs.31 lacs in Q2 FY05 to Rs.66 lacs in Q2 FY06.

Interest costs have increased from Rs.38 lacs in H1 FY05 to Rs.59 lacs in H1 FY06. The increase in interest cost is due to our External Commercial Borrowings (ECB) of US $2 million to finance investments in new press equipments and office premises.

Depreciation has declined by 4% to Rs.146 lacs in H1 FY06 from Rs.152 lacs in H1 FY05.

Profit Before Tax has risen to Rs.582 lacs in H1 FY06 from Rs.441 lacs in H1 FY05, an increase of 32%. For the Quarter ended September 2005, the Profit Before Tax has declined from Rs.185 lacs to Rs.96 lacs, a decline of 48%.

Provision for tax (net of deferred tax) has increased to Rs.188 lacs in H1 FY06 from Rs.166 lacs in the corresponding period last year, an increase of 13%.

The Company has provided Rs.13 lacs as Fringe Benefit Tax for H1 FY06.

The Profit After Tax has increased by 39% to Rs.381 lacs in H1 FY06 from Rs.275 lacs in H1 FY05. For Q2 FY06, the Profit After Tax has declined by 41% to Rs.64 lacs from Rs.109 lacs in Q2 FY05.

The revenue for the Group has risen by 12% in the first half of the current year, from Rs.5220 lacs in H1 FY05 to Rs.5852 in H1 FY06. The Surplus from Operations has risen to Rs.250 lacs in H1 FY06 from Rs.119 lacs in H1 FY05, an increase of 110%.

The Group has shown a turn around in its Net Profit After Tax from a loss of Rs 210 lacs in H1 FY05 to a profit of Rs.28 lacs in the current half year.

Newsmedia : Revenue up 15%

Revenues for the newsmedia segment increased by 15% in H1 FY06 to Rs.4833 lacs from Rs.4219 lacs. For the quarter, the topline growth was lower at 6% from Rs.2097 lacs in Q2 FY05 to Rs.2214 lacs in Q2 FY06.

The PBIT for H1 FY06 grew by 7% to Rs.800 lacs from Rs.751 lacs in the corresponding period last year. However, for the quarter the PBIT fell by 45% from Rs.328 lacs in Q2 FY05 to Rs.180 lacs in Q2 FY06.

The reason for a decline in the profitability in Q2 FY06 over the corresponding quarter last year, in this segment is a faster rate of growth of expenses and a slower growth of the revenues.

Three new competitors have launched in Mumbai in the months of June and July 2005, an unprecedented event in the history of the newspaper business. However, our circulation has still grown in the last quarter over the corresponding quarter last year. Advertising revenue has shown a smaller growth due to the competition. We view it as a short-term phenomenon, because if our circulation remains intact, the advertising money will flow back to us.

The Return on Capital Employed for the newsmedia segment declined from 43% in HI FY05 to 27% in the current half year. This is due to an increase in the Capital Employed in the newsmedia business on account of our investment in the new press equipment and office and press premises.

The new press is expected to be ready by the end of this financial year, and should see us add more value for our readers in terms of more colour pages and supplements.

Outdoor: Making an exit
The Outdoor segment has recorded a 8% decline in topline for H1 FY06 to Rs.809 lacs from Rs.871 lacs in the corresponding period last year. For the quarter, the decline is more significant at 33% from Rs.435 lacs in Q2 FY05 to Rs.292 lacs in the current quarter. This is due to all our outdoor contracts in Mumbai expiring in July 2005.

The loss from this segment has declined by 22% in H1 FY06 to Rs.102 lacs from Rs.131 lacs in the corresponding period last year. The loss in Q2 FY06 is also lower to the tune of Rs.50 lacs compared to Rs.76 lacs in Q2 FY05.

The Group has now exited the outdoor advertising business. The Capital Employed by this business is represented by current assets including book debts and deposits.

Radio: Growth continues
The topline for H1 FY06 has shown a significant growth at 55% toRs.391 lacs from Rs.252 lacs in the corresponding period last year. For the quarter, revenues have grown to Rs.195 lacs from Rs.140 lacs in Q2 FY05, an increase of 39%.
The loss in this segment, for the half year is at Rs. 543 lacs against Rs.578 lacs in H1 FY05. For the quarter, the loss has declined to Rs.279 lacs from Rs.296 lacs in the Q2 FY05. This is despite a 15% increase in license fees. The total license fees booked for the quarter is at Rs.371 lacs and at Rs.726 lacs for the half year.

These results take into account license fees at full charge as per the old fixed license fees regime though the new revenue sharing license fees is applicable from April 1, 2005. This is done as the formalities for the shifting to the new regime are still to be completed.

The radio and group numbers will be significantly better if a revenue share of 4% replaces the fixed license fees expense.

The Government has come out with a tender document for licensing 338 new radio stations across 91 cities. The bidding for these stations will be done on various dates in January and February 2006. We are in the process of raising resources for participating in this bidding process.

We are very excited by the opportunities this business presents us with, and our wait for explosive growth in this business is now over.