Network 18 board approves amalgamation of subsidiaries; adjusted operating profit down in Q3-17

BENGALURU: The Network 18 Media and Investments Limited (Network 18) board on the recommendations of the audit committee has given the nod for amalgamation of its wholly owned subsidiaries with itself to simplify the corporate structure, consolidate businesses, and gain synergy and scale benefits from 1 April 2016 (the beginning of the current fiscal). The amalgamation is subject to the necessary approvals.

These subsidiaries include Television Eighteen Media and Investments Limited, Television Eighteen Media Mauritius Limited, Web18 Holdings Limited, E-18 Limited, Web18 Software Services Limited, Capital18 Fincap Private Limited, RVT Finhold Private Limited, Colosceum Media Private Limited, RRK Finhold Private Limited, RRB Investments Private Limited, Setpro18 Distribution Limited, Reed Infomedia India Private Limited, Digital18 India Media Limited and Network18 Holdings Limited.

Network18 consolidated adjusted operating profit after adjusting the impact of new  one time initiatives in the year fell to Rs 8.5 crore in the quarter ended 31 December 2016 (Q3-17, current quarter) as compared to the consolidated operating profit of Rs 36.9 crore in the corresponding quarter of the previous year (y-o-y). The company?s consolidated revenue including proportionate share of revenues of joint ventures (JVs?) remained stable at Rs 905 crore in the current quarter as compared to Rs 903.1 in Q3-16.

The company?s consolidated Total Income from Operations excluding revenue related to JVs? and associates in Q3-17 declined 7.1 percent to Rs 372.81 crore from Rs 401.13 crore in Q3-16.

Network 18?s consolidated operating loss (EBIDTA) without adjusting for one time initiatives in Q3-17 was Rs 9.02 crore as compared to a consolidated operating profit of Rs 36.76 crore (9.2 percent margin) in Q3-16. The company reported a consolidated operating loss of Rs 79.79 crore in the current quarter as compared to a consolidated profit after tax (PAT) of Rs 50.37 crore (12.6 percent margin) in Q3-16. Total consolidated comprehensible loss in Q3-17 was Rs 80.32 crore as compared to a consolidated total comprehensible profit of Rs 49.70 crore in Q3-16.

Network 18 says that its listed subsidiary TV18 posted 1 percent  y-o-y topline growth, and its operating profits excluding impact of new initiatives and one-time expense was Rs. 52.3 crores in Q3-17 versus Rs. 49.2 crores in Q3-16.

Network 18?s new initiatives/one-time expenses include:

The aggregate operating loss of the new initiatives of Viacom18 (2nd Kannada 1) GEC Colors Super, OTT video destination VOOT and movie channel Rishtey Cineplex) considered in the consolidated segment results is Rs. 34.8 crores.

2) ?fyi TV18?, a lifestyle programming channel from the AETN18 stable (a JV between TV18 and A&E Network), was commercially launched on July 4, 2016. The channel incurred an operating loss of Rs. 5.2 crore during the quarter.

3) In the news space, the three regional news channels -- News18 Kerala, News18 Tamil Nadu and News18 Assam/N.E -- that were launched during the first quarter of the current year stabilized during the quarter and expanded their reach. These three new channels incurred an operating loss of Rs. 9.1 crores during the quarter

4) Hindi News channel IBN7 was re-branded and re-launched as ?News18 India? during the quarter for a one-time expense ofRs. 3.3 crores.

Let us look at the other numbers reported by the company:

Network 18?s consolidated total expenditure in the current quarter increased 6.8 percent y-o-y to Rs 405.19 crore (108.7 percent of TIO) as compared to Rs 379.38 crore (94.6 percent of TIO) in the corresponding quarter of the previous year.

Consolidated distribution, advertising and business promotion expense in Q3-17 declined 2.5 percent to Rs 119.60 crore (32.1 percent of TIO) as compared to Rs 122.60 crore (30.6 percent of TIO) in Q3-16.

Consolidated employee benefit expense in the current quarter increased 26.3 percent y-o-y to Rs 122.99 crore (33 percent of TIO) as compared to Rs 97.36 crore (24.3 percent of TIO).

Consolidated other expense reduced 3.7 percent y-o-y in Q3-17 to Rs 138.23 crore (37.1 percent of TIO) from Rs 143.55 crore (35.8 percent of TIO).

Consolidated finance cost in the current quarter increased 26.6 percent y-o-y to Rs 25.03 crore (6.7 percent of TIO) as compared to Rs 19.78 crore (4.9 percent of TIO).

Company speak

The major points in the company?s earning press release say:

The group (Network 18 group) continued to invest in digital and linear media, reiterating its commitment to deliver cutting-edge news and high quality content to the demanding new-age Indian. It consolidated its position by scaling up the new regional channels launched over the last year and gave further impetus todigital content and delivery via its multiple digital destinations.

A sharp pullback/deferment in spends by advertisers in November-December was only partially offset by good growth in the festive season (which fell entirely in October this year) and a mild revival at the fag-end of the quarter.

Network 18 chariman Adil Zainulbhai said: ?We are seeing an explosion of activity in the digital space, which adds to our confidence in our continuing impetus for multi-pronged digital growth. We have created a sizeable presence across both video and web, and intend to solidify our offerings via improved content and refreshed formats. Our growing strength in linear (especially regional) media provides a significant cross-synergy with the digital space, as vernacular content is in high-demand?.

Appointment of Director and CFO

The broad approved the appointment of PMS Prasad as non-executive director of the company along with with two other appointments which includes K.R Raja as non executive director and Ramesh Kumar Damani as Chief Financial Officer (CFO) of the company. The board noted the resignation of Rohit Bansal and Vinay Chhajlani from the Directorship of the company along with the Hariharan Mahadeven as CFO.

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