Zeel Q4 revenues and costs surprise on the upside

MUMBAI: Subhash Chandra-promoted Zee Entertainment Enterprises Ltd (Zeel) has reportd a consolidated net profit of Rs 1.63 billion for the fourth quarter ended 31 March, down 16 per cent from Rs 1.93 billion in the corresponding quarter of previous year.

Consolidated revenues in the fourth quarter were Rs 8.69 billion, up 9 per cent from Rs 7.95 billion from year ago.

A media analyst said revenues were higher than estimated because of the positive surprise on all fronts - ad revenues, domestic subscription revenues, and higher than expected syndication & other sales revenues.

The consolidated operating profit (EBITDA) for the quarter was down 28 per cent to Rs 1.60 billion, from Rs 2.22 billion a year ago as its expenses rose 24 per cent. Zeel?s expenses during the quarter rose to Rs 7.09 billion from Rs 5.73 billion a year ago.

During the quarter, Zeel?s advertising revenues stood at Rs 4.15 billion, showing a decline of 12 per cent. The company clarified that in the fourth quarter of previous year, it had more cricket properties in sports which had resulted in higher advertising revenues. Loss from sports business was Rs 588 mn in the fourth quarter and Rs 1.48 bn for the full year.

?Advertising revenues from non-sports businesses have increased, though marginally. This is reflective of the overall weakness in advertising spends,? Zeel said.

The total subscription revenues for the quarter stood at Rs 4.02 billion, registering an increase of 30 per cent over the corresponding quarter last fiscal. Domestic subscription revenues stood at Rs 2.97
billion, while international subscription revenues were Rs 1.05 billion.

Zeel said that domestic subscription revenues are not comparable with the previous year because the fourth quarter includes an amount of Rs 506 million representing 50 per cent share of net revenues of MediaPro, when consolidated under joint venture accounting. MediaPro is a joint venture between Zee Turner and Start Den.

This amount of Rs 506 million considered in this quarter pertains to nine month period from July 2011 to March 2012. Subscription revenues for the quarter from international operations are up by 1 per cent Q-o-Q from Rs 1.04 billion in Q3 FY12 to Rs 1.05 billion in Q4 FY12.

Zeel chairman Subhash Chandra said the slowdown in GDP growth has had a greater impact on advertising spends during the year, and advertising revenue growth has seen a much sharper slowdown.

Chandra said, ?FY2013 is expected to be a landmark year for the television media industry. The industry is gearing up for a big change with deadline for implementing Digital Addressable System (DAS) in the four metros approaching on 30 June, 2012. Digitisation will bring about improvements in addressability and capacity, thereby, improving the quality of service to consumers and creating a better financial model for all players in the value chain.?

Zeel board has recommended a dividend of Rs 1.50 per share.

Zeel MD and CEO Punit Goenka said, ?We are looking forward to the implementation of digitisation which will significantly improve transparency in the pay-TV ecosystem resulting in more choice to the consumers, better quality of viewing and better economies for all players. In fiscal 2012, 10.5 million subscribers have adopted satellite based television services via DTH, taking the gross DTH subscriber base to 44.6 million strong.?

?During the quarter, we have seen significant improvement in our operating performance across all genres. The flagship channel, Zee TV, has improved its market share noticeably. We are confident that we would further enhance our market share through our planned content lineup and continue to grow our business profitability in a sustained manner.?

?In line with our strategy of growth through focused disciplined investments, we launched India?s first and only OTT (over-the-top) distribution platform, Ditto TV, with an aim to offer Live TV Channels and On Demand Video Content to consumers on multiple platforms including mobile phones, tablets, laptops, desktops and connected TVs. We have also launched some of our content offerings in high definition format. Ten Golf is Zee?s latest premium offering targeted at urban up-market audiences?, he added.

Speaking about the outlook for the business, Goenka added, ?While the competitive intensity remains high in the Indian television industry, we continue to make efforts towards further enhancing our market share. Media Pro, our joint venture for subscription revenues, has started on a good note and we are very confident of a robust performance going forward. The impending digitization will further be able to create value for the business. Also, our content focused approach, combined with better monetization of subscription revenues, will contribute to Company delivering steady return in the year ahead.?

For the full year 2011-12, Zeel?s net profit stood at Rs 5.91 billion, down 6 per cent from Rs 6.25 billion in the previous fiscal. The revenue stayed flat (up 1 per cent) to Rs 30.41 billion, as against Rs 30.08 billion in the year-ago period. Total expenses, jumped 5 per cent to Rs 23.01 billion, from Rs 21.87 billion.

Shares of Zeel ended the day unchanged at Rs 123.20 on BSE.