MUMBAI: Zee Entertainment Enterprises Ltd (ZEEL) has reported a 3.9 per cent dip in net profit as revenue has seen muted growth in the fiscal second quarter.
While the ad climate slowed down in the two months of the quarter, it picked up in September. ZEEL expects the momentum to last for the remaining part of the fiscal.
ZEEL's consolidated net profit stood at Rs 227 crore (Rs 2.27 billion) in the three-month period through to 30 September 2014, compared to Rs 236.31 crore (Rs. 2.36 billion) a year ago. While operating revenue grew 1.5 per cent, expenses increased by 0.8 per cent compared to the year-ago period.
ZEEL's consolidated operating profit (EBITDA) for the quarter was up marginally up (3.2 per cent) to Rs 320.5 crore (Rs 3.20 billion). EBITDA margin stood at 28.7 per cent.
Total revenue during the quarter stood at Rs 1,117.8 crore (Rs 11.18 crore) compared to Rs 1,101.3 crore (Rs 11.01 billion) in the corresponding quarter of the previous fiscal.
However, the company said that the consolidated revenue is not comparable to the corresponding figures of the previous fiscal owing to accounting changes in the reporting of domestic and international subscription revenue.
ZEEL chairman Subhash Chandra said, "Our performance during the quarter reflects the investments that Zee is making to grow its business and market share. The viewership market share is on an uptrend, which will help us to continue to grow ahead of the market. We will continue to pursue growth opportunities, which will enhance long term shareholder value. We have a strong balance sheet and we are confident that we would benefit from the growth opportunities ahead of us."
Ad revenue up 7.3%
Advertising revenue for the quarter stood at Rs 625.9 crore (Rs 6.26 billion), up 7.3 per cent. ZEEL said that its ad revenue growth, without sports business, is in low teens.
ZEEL MD and CEO Punit Goenka added, "It has been a mixed quarter as far as television industry advertising spend is concerned. Even though the overall economic sentiments was positive during the quarter, it translated into increased advertising spend only during the fag end of the quarter. Our expectation is that advertising spends will continue to increase during the rest of the year. Our performance in the quarter reflects the industry wide trend."
Subscription revenue falls due to accounting change
ZEEL's subscription revenues fell 7.3 per cent to Rs 424.5 (Rs 4.24 billion), compared to Rs 458.1 crore (Rs 4.58 billion) in the previous year.
Domestic subscription revenues stood at Rs 337.3 crore (Rs 3.37 billion), from Rs 335 crore (Rs 3.35 billion) in the year-ago period. The company said that domestic subscription revenue reflected a growth of 0.7 per cent and like-to-like growth was in high single digits. The difference is due to accounting change necessitated by change in the Telecom Regulatory Authority of India's (TRAI) content aggregator regulation.
International subscription income in the quarter was down to Rs 87.2 crore (Rs 872 million), from Rs 123.1 crore (Rs 1.23 billion).
"In case of international subscription revenue, due to change in arrangement with various operators across international territories, the reporting of subscription revenue for the current year has undergone a change and hence previous year figures are not comparable with that of current period. On a like-to-like basis, the international subscription revenue has increased in low single digits," the company explained.
On the subscription front, the transition of distribution of channels from MediaPro to Taj Television is now complete.
"Though the digitisation deadlines for Phases III and IV have been pushed back, timely implementation would greatly benefit the industry. The proposed move to scrap advertisement cap for FTA channels would be a welcome step for the industry. Also, the roll-out of BARC in the near future is expected to enhance the representativeness of the viewership data. Creation and acquisition of excellent quality content remains core to our business and we continue to channel investments to strengthen this core. We also continue to explore growth opportunities in domestic markets, international markets and in digital space," Goenka said.
Expenses under control
ZEEL's total expenses were under control and increased by just 0.8 per cent to Rs 797.4 crore (Rs 7.97 billion). Operating cost for the quarter saw a 6.7 per cent decrease to Rs 470.3 crore (Rs 4.70 billion), while employee cost rose 8.8 per cent to Rs 108 crore (Rs 1.08 billion).
Debt
As of September 30 2014, the company has a gross debt of Rs 26 million, and cash and cash equivalents of Rs 13.9 billion.
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