Eros International profit margins up in FY 2018

BENGALURU: The Sunil Lulla-led Indian film and media company Eros International Media Ltd (Eros) saw EBITDA for the quarter ended 31 March 2018 (FY 2018, year, fiscal under review) of Rs 328.21 crore and a margin of 34.2 per cent of operating revenue, about 985 basis points more than the margin of 24.3 per cent for the previous year. PAT margin in FY 2018 also increased 606 basis points to 22.89 per cent of total revenue from 16.83 per cent in the previous fiscal. EBIT margin was 36.42 per cent of total income in FY 2018 as compared to 26.07 per cent of total income in the previous fiscal.

Eros says that in FY 2018 it redefined its portfolio mix - margin expansion by investing in content driven films with high ROI potential and where the content risk was largely covered, in turn making Eros lesser dependent on box office numbers. The company?s revenues declined sharply in the year under review as compared to the previous year. Eros net sales/income from operations declined 31.4 per cent to Rs 960.16 crore in fiscal 2018 from Rs 1,399.70 crore in the previous year. Total income reduced 30.1 per cent in FY 2018 to Rs 1,010.01 crore from Rs 1,445.28 crore in FY 2017.

Though EBITDA and EBIT margins were higher, overall, both these profit matrices declined in terms of rupees. EBITDA in FY 2018 at Rs 328.31 crore was 3.7 per cent lower than Rs 340.75 crore in FY 2017. EBIT in FY 2018 at Rs 367.88 crore was 2.4 per cent lower than the Rs 376.75 crore in the previous fiscal. PAT in the year under review at Rs 231.22 crore was five per cent lower than Rs 243.29 crore in FY 2017.

Eros reported 35.7 per cent decline in total expenditure in FY 2018 at Rs 722.66 crore from Rs 1,123.05 crore in FY 2017. Films rights costs including amortisation costs declined to almost half (down 49.1 per cent) in FY 2018 at Rs 399.27 crore from Rs 784.84 crore in the previous fiscal. Employee benefits expense in FY 2018 declined 16.4 per cent to Rs 58.94 crore from Rs 70.53 crore in FY 2017.

Finance costs increased 47.7 per cent in FY 2018 to Rs 80.53 crore from Rs 54.22 crore in the previous year. Other expenses reduced 12.8 per cent in FY 2018 to Rs 175.05 crore from Rs 200.64 crore in FY 2017.

In its investor presentation, Eros says that revenue breakup as percentage of revenue from operations for FY 2018 was theatrical revenue 42.8 per cent; television and others 46.3 per cent; and overseas 10.9 percent. For FY 2017, the company had indicated break up as theatrical 42.5 per cent; television and others 31.1 per cent; overseas 26.4 per cent. Hence, contribution of revenue from television and others in FY 2018 was much higher than in the previous year. Theatrical revenue was about the same in both the years, and revenue from overseas declined sharply in FY 2018 as compared to FY 2017.

The company released 25 films ? one high budget, four medium budget and 19 low budget films in FY 2018. Of these films, 14 were Hindi, one was Tamil/Telugu and nine were in regional language films.

In FY 2017, Eros had released 44 films ? five high budget films, 10 medium budget films and 29 low budget films. 11 films were Hindi, 18 in Tamil/Telugu and 15 were regional films.

Eros says that it remains focused on its film pipeline, with 40 to 50 films across languages slated to release during financial year 2019.

Eros Now

The company says that its subscriber base for its OTT platform Eros Now has grown to 100 million (10 crore, 1,000 lakh) in FY 2018 from 60 million (6 crore, 600 lakh) at the end of the previous year. Paying subscriber base for the platform has grown to 7.1 million (0.71 crore, 71 lakh) in FY 2018 from 2.1 millon (0.21 crore, 21 lakh) at the end of the previous year.

Company speak

Eros executive chairman and managing director Lulla said, ?This year has been an inflection point for Eros where we have truly turned the corner and grown in to India?s first fully vertically integrated independent studio. The pioneering spirit is prevalent in our leadership DNA as we further consolidate a fragmented market place as well as making Indian filmed entertainment truly global. As the dynamics of the country change with connectivity at the core of distribution we are uniquely positioned to leverage these trends with content being the key driving force. Our strategy of a content driven approach reflected in a robust green lighting process enables us to de-risk our model with an increasingly successful slate, with Newton India?s entry to the Oscars, hit comedy Shubh Mangal Savdhan and sports based drama Mukkabaaz.

?Additionally the democratisation of theatrical consumption of content has skewed our strategy to be increasingly focused on catering to the regional demographic which is reflected in our slate mix Aamhi Doghi (Marathi), Rong Beronger Kori (Bengali), Oru Kidayin Karunai Manu (Tamil), Aake (Kannada), Viswa  Vikhyatharaya Payyanmar (Malayalam) amongst others.

?Looking ahead to this coming year we are excited about our future slate with a trilingual remake of our classic library film Haathi Mere Saathi directed by Prabhu Salomon, starring Rana Daggubati as well as Bhavesh Joshi.  Leveraging our group?s strong talent relationships built over the past 40 years is also key to our growth trajectory. The relationship we share with Colour Yellow Productions and Anand L Rai has enabled us not to only to have a strong theatrical release pipeline with Manmarziyan and sequel to blockbuster film Happy Bhag Jayegi, Happy Phir Bhag Jayegi starring Sonakshi Sinha, but also to break the norms across the entertainment ecosystem. We successfully premiered India?s first straight to digital film, Eros Now original, Meri Nimmo on our platform. As we make strides foraying into original content, we are confident our film and originals slate will contribute further to accelerating Eros Now?s paying subs growth which this year itself is over 270 per cent.

?With content slate and scale being a key driver, we have also entered into the strategic content partnership with Reliance Industries to jointly produce and consolidate content across India. The $150 million joint venture adds significant scale to Eros? pre existing slate while mitigating investment risks as we benefit by leveraging our robust distribution network. We look forward to collaboratively growing this joint venture and further strengthening our fundamentals; content creation, distribution and a robust balance sheet allowing us to experience momentous improvements in our margins.

?We have ended the fiscal with a very strong quarter with an EBIT growth of 61.5 percent and a PAT growth of 80.4 per cent. For the full year FY2018, the company has witnessed the EBIT margin increase at 10.3 per cent and an increase of 4.9 per cent PAT margin. We look forward to fiscal 2019 by further proving our strategies and paving the road ahead for a truly global Indian entertainment experience.?

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