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After exiting sports biz, ZEEL sees 6% drop in subscription revenue to Rs 558 crore in Q4

MUMBAI: After selling its sports broadcasting business to Sony Pictures Networks India (SPNI), Zee Entertainment Enterprises Ltd (ZEEL) is seeing its subscription revenue fall. In the fiscal fourth quarter, subscription revenue declined 6.1% to Rs 558 crore compared to Rs 594.4 crore a year ago.

Consolidation of only two months of sports business impacted subscription revenue in the quarter ended 31 March 2017. Besides, there was high base due to catch-up revenues in the fourth quarter of FY16.

Domestic subscription revenue in the fourth quarter of FY17 fell 2.8% to Rs 455.4 crore. International subscription revenue, on the other hand, declined 18.7% to Rs 102.6 crore.

Advertising revenue in Q4 sees slow recovery

ZEEL saw some bounce-back in its advertising revenue in the fiscal fourth quarter after being hurt by demonetisation. The recovery is still slow, evident from the 8.1% growth in domestic advertising revenue to Rs 794.4 crore in the quarter ended 31 March 2017. After a couple of quarters of weakness, this showed a positive sentiment and the domestic ad growth appears to be back on track.

Overall, ZEEL’s ad revenue in the fourth quarter stayed flattish at Rs 846.9 crore. The negative impact was felt in the international business due to country-specific issues. The base quarter revenue was also aided by the telecast of popular cricket events in Pakistan. International ad revenue fell 52% over the year-ago period to Rs 52.5 crore in the quarter ended 31 March 2017.

Consolidated operating revenue flattish

Consolidated operating revenue for the fourth quarter of FY17 stood at Rs 1,528 crore, recording a growth of 0.4% from the earlier year.

REVENUE STREAMS Q4FY17
Operating expense falls 5%

Operating expense fell 5% to Rs 1059.3 crore. This was due to consolidation of sports business for two months and higher costs of the two cricket events telecast last year.

The drop in advertising, publicity and other expenses is mainly due to savings on placement cost.

EXPENDITURE Q4FY17
EBITDA and net profit

Operating profit for the quarter ended 31 March 2017 was Rs 468.7 crore, up 14% from the earlier year, amid a drop in expenses. EBITDA margin stood at 30.7%.

ZEEL reported net profit of Rs 1,514.2 crore, which includes exceptional gain of Rs 1,223.4 crore due to the sale of sports business.

The first phase of sale of sports business to SPNI has been completed and $330 million has been received, ZEEL said.

Punit GoenkaWith ZEEL exiting from the sports broadcasting business, this will have an impact on the company’s revenues. But ZEEL will focus on strengthening its national and regional channel portfolio while building new businesses.

Said ZEEL MD and CEO Punit Goenka, “We have completed the first phase of sale of sports business during the quarter. While this had an impact on revenues, our focus is to strengthen national and regional channel portfolio, along with growing new businesses. We are exploring ways to extinguish preference share liability using the proceeds from the sale of sports business.”

Full-fiscal performance

ZEEL reported ad revenue of Rs 3,673.5 crore in FY17, recording a growth of 9.2% over the earlier year. The growth on a full-fiscal basis was led by strong performance of regional channels and the cinema cluster. While growth in the first half of FY17 was 17.4%, the second half was impacted by demonetisation and sale of sports business.

Subscription revenue was Rs 2,262.9 crore, translating into a growth of 10% over FY16. Domestic subscription revenue grew 11.2% to Rs 1,822.6 crore. On a comparable basis, adjusted for sale of sports, the domestic subscription growth was 13.5%. International subscription revenue grew by 3% to Rs 440.3 crore.

EBITDA for FY17 stood at Rs 1,926.9 crore, registering a growth of 27.3% over FY16. EBITDA margin stood at 29.9%.

CONDENSED STATEMENT OF OPERATIONS Q4FY17

Broadcast business performance in Q4

In Q4 of FY17, ZEEL’s non-sports viewership share was 16.1%. While the pay Hindi GEC bouquet maintained its market share, the regional portfolio improved its share.

ZEEL’s two Hindi GECs, Zee TV and &TV, had a combined share of 21% among the top 7 channels in the pay Hindi GEC genre. Zee Anmol, Hindi GEC catering to the free-to-air (FTA) audience, was ranked third in the genre.

In the pay Hindi movie genre, ZEEL continued to retain leadership position through its four channels, the company said.

Regional entertainment portfolio once again exhibited a strong performance. Zee Marathi maintained its market share at the No. 1 position in the Mah/Goa market. Zee Bangla was the second most-watched channel in West Bengal. In the Telugu market, Zee Telugu was the No. 2 channel. Zee Kannada strengthened its position as the second-ranked channel in Karnataka. Zee Tamil was the No. 2 channel in the Tamil market. Sarthak TV continued to dominate the Odiya market, ZEEL said.

International business in Q4

ZEEL’s international business saw a decline in advertising and subscription revenues due to base effect. In Q4 of FY16, two popular cricket events were telecast on ZEEL’s network in Pakistan, which boosted the advertising income. Similarly, international subscription for Q4 of FY16 was helped by catch-up revenue.

For the quarter ended 31 March 2017, international business financials have been:

  • Advertisement revenue of Rs 52.5 crore
  • Subscription revenue of Rs 102.6 crore
  • Other sales and services of Rs 66.3 crore
  • Total revenue of Rs 221.4 crore

Investment in movies

ZEEL’s advance amount towards investments in movies stood at Rs 446.1 crore at the end of FY17. Advances are paid for acquisition of future rights and advance purchase of rights of movies under production.

“During FY17, we have significantly increased our investments in acquisition of movie rights and production of movies. A large part of increase in inventory and other current assets is on account of these investments,” ZEEL said.

ZEEL has a portfolio of 11 movie channels across Hindi and regional languages.

Corporate developments in Q4

  • Taj Television India Pvt Ltd, the erstwhile subsidiary of ZEEL, had paid interim dividend of Rs 65 million to the company.
  • The 1st phase of the transaction relating to sale of sports broadcasting business to the Sony Group was concluded on 28 February 2017, upon receipt of part consideration of $330 million by the company and/or its subsidiaries.

Consequently, Taj Television (India) Pvt Ltd ceased to be subsidiary of ZEEL with effect from 1 March 2017.

Events after March 2017

  • ATL Media Ltd, Mauritius, a wholly owned subsidiary, paid preference dividend of $6.19 million and equity dividend of $13 million to ZEEL in April 2017
  • On 13 April 2017, ZEEL paid preference dividend of Re 0.60 per share for FY 2016–17 on the bonus preference shares, to the preference shareholders as on record date of 31 March 2017
  • As per earlier Board approval, ZEEL had acquired 80% stake in the technology start-up Margo Networks Pvt Ltd at an aggregate investment of Rs 75 crore. Margo has become a subsidiary of the company on and from 17 April 2017.
  • Pursuant to Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the board of directors have approved a dividend distribution policy effective 10 May 2017. The board has recommended equity dividend of Rs 2.50 per equity share of Re 1 each (equivalent to 250%) for FY 2016–17, for approval of the shareholders at the ensuing AGM scheduled to be held on 12 July 2017.

Shareholding pattern

The total outstanding shares ZEEL as of 31 March 2017 were 960,448,720.

The shareholding pattern as of 31 March 2017 is given below:

 

SHAREHOLDING PATTERN zeel Q4 FY2017