During 1998-99, strong export growth was the big gain of the year. Exports contributed 50 per cent of total revenues. This thrust on exports was a result of a major shift in the marketing strategy adopted over the last two years. Manugraph had consciously cut down its presence in the domestic market for high end printing presses. Instead, it has concentrated on the export markets, where the margins are higher. Over the last two years, it has raised the proportion of export revenues to almost 45 per cent of total revenues. Given the simultaneousreduction of emphasis on domestic sales, overall revenue growth has remained flat, but the profit margins improved tremendously in 1998-99.

This proportion of export revenues has changed once again in the current year. Export sales have slowed down in the first quarter and this has had a corresponding effect on operating margins. Exports are expected to contribute 40 per cent of the current year's revenues. Manugraph reported a topline growth of 20 per cent in the first quarter, while PBT was up by 50 per cent, but operating margins fell to just 15 per cent as compared to 20 per cent last year, reflecting the growth in domestic sales once again.The topline growth in the first quarter is a good sign for the rest of the year, since the company reports 60 per cent of revenues and profits in the second half.

Further, the order book already stands at Rs 80 crore for the full year. For the full year, the company expects that revenues will reach last year's level, but as a result of continuing cost cutting,profits should improve marginally, despite the fall in margins.

Manugraph had undertaken a successful restructuring of both its operations as well as its capital structure last year. The first part of the restructuring was to reduce the cost of debt, which it has done very successfully. Debentures worth Rs 10 crore were redeemed in February 1999, besides dues to IDBI and the EXIM bank being repaid. These long-term funds have not been replenished, with any fresh borrowing.

The second aspect of the restructuring was with the workforce. Last year's VRS cost the company Rs 2.5 crore, but reduced the workforce by 108 employees. The annual saving from this exercise will be Rs 0.76 crore. The company is planning another VRS exercise in the current year, and this time, the target is more ambitious. At least 200 workers are being targeted, with a cost to company of at least Rs 5 crore. The expectation is that this VRS will save the company Rs 1.8 crore in recurring costs. But unlike the accounting treatment in1998-99, the entire VRS amount will not be written off during the year, but a part of it will be treated on a deferred basis.