CEO and Managing Director evaluates the company's FY21performance and lays out the strategy going forward.
Were you pleased with the performance of the company during the yearunder review?
Yes I am pleased that MPS achieved a new scale in FY21. I am even morepleased with the diversity in the business. The achievement of this unprecedented scaleand diversity came through in a year in which the COVID-19 Pandemic has posed severehumanitarian challenges for the world and significantly impacted the short- and long-termeconomics of several industries. This tremendous feat is the combined effort of the 2500+employees who live and breathe MPS.
What were the financial highlights of this performance?
The new scale of the business was reflected in the consolidatedforex-gain-adjusted revenues of INR 424.22 crores in FY21. Revenue growth of 26.89 percentand that too in the year of a pandemic has been a tremendous feat indeed. In addition tothe acquisition of HighWire the Content Solutions business grew by 11.6 percent. Andwhile our EBITDA margins improved slightly much work is still to be done to drive betterprofitability. EPS was suppressed by as much as INR 6.5 due to the one-time tax events inQ3 and Q4. The former was related to a long-overdue matter from the Macmillan days whichwas settled via the Vivad se Vishwas Scheme to avoid protracted litigation and theattendant uncertainty on the issues covered in those years. The latter relates to theimpact of the Finance Act 2021 which does not allow deduction of depreciation whilecomputing taxable business profits and affects past transactions.
Did the financials shed any light on how the business is now morediverse?
Absolutely! In terms of business segments Content SolutionsPlatforms and eLearning contributed 54 percent 55 percent and 15 percent of therevenue respectively which was an unprecedented spread. Also while North Americacontinues to be our largest market our customer concentration continues to improve withthe top 5 top 10 and top 15 segments accounting for 58 percent 50 percent and 59percent of the revenue respectively. This trend of progress can drive more stabilitytoward the longer-term growth aspirations of the business.
How did MPS adapt to the continuing COVID-19 pandemic?
During the early days of the pandemic the leadership team worked roundthe clock to put into action our Business Continuity Plan to minimize the impact of thecrisis on our commitment to our customers while still instating the necessary health andsafety protocols and organizing remote work for the majority of our workforce. MPSintroduced 'Mission 2020' to guide the organization and its people through difficulttimes. The business continuity plan included migration of equipment for remote workscaling up work-from-home security solutions facilitating the teams' in setting up ofremote work practices and organizing daily business continuity calls with representationfrom business unit heads across geographies. It was a daunting task but we managedbrilliantly with minimal hiccups in migration or performance.
I commend every member of the MPS family for stepping up to thechallenge managing the complexities during the transition and displaying commendableresilience through these difficult times. While the pandemic is still not behind us ourlearnings from this crisis
have made us better equipped to deal with uncertainty. I am confidentthat the principles gained during the year will take us a long way.
As the world went through and continues to do so in several regions andeconomic and humanitarian crises all of us at MPS wish for everyone's health andwell-being. The safety and health of our employees remain a top priority during our dailyoperations and almost the entire MPS team continues to work remotely as of this time.
What is so special about growth in the Content Solutions businesssegment and what were the main drivers?
The primary driver of the growth in the Content Solutions business isthe expansion of our Educational Publishing Practice which includes MPS North America andthe associated Content Production and Digital businesses driven from Indian operations. Inthe past year we have seen much more educational products being developed and that toofrom a broad set of customers. Additionally we saw certain key accounts in our JournalsContent Management grow organically resulting from exceptional delivery and quality evenduring the pandemic.
Ultimately Content Solutions is the highest- margin business for usand continues to be the largest. Any positive movement in this business segment doesproportionally impact the consolidated business. Sustainable growth in the ContentSolutions business is a great sign of the core strengthening ahead of Vision 2025.
Can you provide an update on the progress of the HighWire acquisition?Are you satisfied?
We are delighted with the progress of the HighWire Press acquisition.The HighWire acquisition is possibly our strongest start to post-acquisition integrationamongst the last seven acquisitions. In terms of financials we have generated a PBT ofINR 18 crores in the first nine months. We must put into context that the originalpurchase price for this business was INR 53 crores net of the working capital adjustments.
And yes there have also been challenges. We now recognize that thebusiness we have acquired is more like a USD 12-13 Million business. The HighWire businessdid lose some direction in the past two to three years and had as a result lost manycustomers as well. Our contribution then is to help HighWire find its true north. We havea complete understanding that HighWire was founded on Innovation Service and Communityprinciples. Our plan then is to invest to ensure that our product technology attractscustomers our exceptional customer service retains customers and our role as a thoughtleader and organizer of the scholarly community earns us the respect and admiration of themarketplace.
Our strategic intent is to use the HighWire brand to grow our entireplatform business in a meaningful way. Now that we have a critical mass in the platformbusiness we believe scaling from here should be more straightforward than before. Andinterestingly there have also been indirect positive consequences on the ContentSolutions business from HighWire customers who have been engaged in working with vendorpartners end-to-end as much as possible.
What is the big goal for the company? Could you walk us through theoverarching business strategy for the road ahead?
I have always believed in the business philosophy of Grow or Perish. Ina competitive environment like the one we operate in it is crucial to maintain steadygrowth and a competitive edge to remain relevant. Over the past five years we have grownthrough an active acquisition strategy enabling us to expand the scope of our businessofferings. The success of this strategy has been instrumental in the business's stabilityand our position as the market leader for content learning and platform solutions.
I oversaw the strategy of diversification to cement stability andgrowth for the business. This five-year BUILD phase now needs to actively transition intoa platform-led THRIVE phase introducing a new era of organic growth for the business.
As we bring in the new era of our growth my mission for FY22 is tolead the organic growth of MPS. This expansion in scale will bring us closer to our Visionfor 2023 and take us much closer to being the undisputed market leader loved and admiredby all our stakeholders.
To THRIVE to our potential we will Transform ourselves into aplatform-led business.
This shift will affect all aspects of our business including peopleculture process excellence and technology investments. And this will flow across allbusiness interests. The alignment of this strategy with customer needs and the enviablestarting point of our comprehensive platform ecosystem enables this strategy. Ourplatform-led approach will help us Innovate the operating models of our customers inmeaningful ways. The series of innovations we will introduce will help our customersnavigate their rapidly changing markets. Our ability to connect the dots for our customerswill help us finally Maximize our scale to its full potential across all our markets.Ultimately our compelling value proposition grounded in demonstrated and tangiblebusiness outcomes will Elevate our positioning in the marketplace.
Would acquisitions have any role to play in the business strategy inthe future given the shift in focus towards organic growth?
Acquisitions are not a special event at MPS. It's just something thatwe do! From our perspective we have certain factors that we examine. We want to ensurethat the business that we are acquiring has had some premier status at some point in thejourney so number one number two at some point. Second the business should addmeaningful capabilities to MPS so it's not just more of the same. And thirdly there's amotivated seller and you might have seen our track record. We are pretty competitive inthe way we allocate our capital. The acquisition has to check all the boxes and only oncethe target matches those boxes do we proceed. We have always been opportunistic. We neverpanic. We never rush. And when the opportunity presents itself we convert it veryquickly. Typically we close an acquisition in three to four months. That's how quick wego. And it's usually the seller setting the pace not us. As and when opportunitiespresent themselves we engage and as we speak we are engaging with many parties and ifit plays out it plays out.
Are you still on track for Vision 2023?
Yes definitely. Vision 2023 for us is really about getting to aspecific scale and type of business. I know we have not shared what that scale is inpublic. Seeing how FY21 has played out we are thrilled to report that we are on track.The acquisition of HighWire in the past year and the revival of the Content Solutionsbusiness give us the confidence that we are on the right track.