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Lower ad revenue and exceptional items pull down Zeel bottom-line for Q4, FY 2020

Operating revenue fell in Q4 2020 but increased in FY 2020

BENGALURU: Subhash Chandra’s Zee Entertainment Enterprises Ltd (Zeel) reported 2.5 percent growth in consolidated operating revenue for the year ended 31 March 2020 (FY 2020, year under review) as compared to the previous year (FY 2019). For the quarter ended 31 March 2020 (Q4 2020, quarter under review) Zeel consolidated operating revenue declined 4.8 percent as compared to the corresponding year ago quarter Q4 2019. EBITDA (operating profit) and PAT (Profit after tax) for the year under review declined 66.5 percent and 36.2 percent respectively as compared to FY 2019. Consolidated PAT for FY 2020 was Rs 524.59 crore and for FY 2019 it was Rs 1,567.34 crore. Consolidated operating EBITDA for FY 2020 was Rs 1,634.57 crore ((20.1 percent of operating revenue) and for FY 2019 it was Rs 2,563.94 crore (32.3 percent of operating revenue).

The company reported operating loss (negative consolidated operating EBITDA) of Rs 283.86 crore and consolidated loss after tax of Rs 765.82 crore for Q4 2020. Poor macroeconomic environment, conversion of two FTA channels into pay in March 2019, and market share loss in certain markets drove the decline in ad revenues said the company in its FY 2020 and Q4 2020 earnings release. The lockdown in March 2020 further impacted revenues, it added.

Bottomline numbers for the year and quarter under review were also lower on account of 47.7 percent higher operating costs in Q4 2020 and 24.5 percent higher in FY 2020. (Operating costs include programming costs). The company said in the earnings release that underlying cost increase led by higher movie amortisation, new channels and investments in its OTT platform ZEES. The reported operating cost included one-time accelerated amortisation of higher inventory of Rs. 259.80 crore.

Further, Zeel’s administration costs included Include a one-time provision of Rs. 343.30 crore for balances related to ad, subscription and other assets where recovery has become doubtful on account of COVID-19 led uncertainty. Also for FY 2020, exceptional items included goodwill write off of Rs. 113.70 crore pertaining to digital publishing business and provision of Rs. 170.60 crore relating to Inter Corporate Deposits (ICD). Another factor that impacted Zeel’s bottom-line for FY 2020 was  Rs. 383.50 crore loss in overseas investments in accordance with IND-AS 113 to, reflect the movement in fair value of these investments as on 31 March 2020.  

However, these factors were partly offset by 41 percent growth in domestic business in Q4 2020, driven by the implementation of Telecom Regulatory Authority of India’s (TRAI) new tariff order (NTO) and growth in ZEE5's subscription revenues revealed Zeel. Domestic subscription revenues grew by 33 percent in FY 2020 as compared to FY 2020 driven by improved monetization of viewership post NTO implementation and ramp-up of ZEE5's subscriber base.

Zeel’s ad revenue in Q4 2020 declined 14.7 percent to Rs 1,038.94 crore from Rs 1,217.49 crore in Q4 2019. Ad revenue for FY 2020 fell 7.1 percent to Rs 4,681.13 crore from Rs 5,036.66 crore in FY 2019. Subscription revenue in Q4 2020 increased 31.2 percent to Rs 741.36 crore from Rs 564.27 crore in Q4 2019. Subscription revenue in FY 2020 grew 25 percent to Rs 2,887.29 crore from Rs Rs 2,310.54 crore in FY 2019.

Let us look at the numbers reported by Zeel

Consolidated operating revenues for FY 2020, FY 2019, Q4 2020 and Q4 2019 were Rs 8,129.86 crore, Rs 7,933.90 crore, 1,951.08 crore and Rs 2,019.27 crore respectively. Consolidated total incomes (Operating revenue plus other income) for the same periods were Rs 8,413.50 crore, 8,185.35 crore, Rs 2,076.06 crore and Rs 1,991.76 crore respectively.

Consolidated total expenses in Q4 2020 increased 66.5 percent to Rs 2,677.77 crore from Rs 1,612.60 crore in Q4 2019. Consolidated total expenses in FY 2020 increased 25.1 percent to Rs 7,109.70 crore from Rs 5,731.48 crore in FY 2019. Operating cost in Q4 2020 at Rs 1,304.62 crore was 53.9 percent more that the Rs 883.32 crore in the corresponding year ago quarter. Employee benefits expense (EBE) in Q4 2020 declined 22.7 percent to Rs 160.39 crore from Rs 201.46 crore in Q4 2019. EBE in FY 2020 increased 7.7 percent to Rs 780.51 crore from Rs 724.94 crore.

Advertisement and publicity expenses (ad expenses) in Q4 2020 were 4.6 percent lower at Rs 184.12 crore as compared to Rs 193.01 crore in Q4 2019. Ad expenses in FY 2020 at Rs 695.60 crore were almost flat (declined 0.5 percent) as compared to Rs 699.27 crore in FY 2019. Other expenses in Q4 2020 more than tripled (up 238.3 percent) to Rs 585.81 crore as compared to Rs 173.17 crore in Q4 2019. Other expenses in FY 2020 increased 36.9 percent to Rs 1,190.49 crore from Rs 869.96 crore in FY 2020.

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