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New channel launches dent ZMCL’s FY14 performance

MUMBAI: Zee Media Corporation Ltd (ZMCL) suffered a setback at the net level during the fourth quarter and financial year ended March 2014 (FY2014) due to new channel launches.

The company reported net loss of Rs 3.30 crore (Rs 33.0 million) in the fiscal fourth quarter compared to a net profit of Rs 8.03 crore (Rs 80.3 million) a year ago.

ZMCL launched channels to suit its new content format Terrestrial Entertainment Network (TEN) and expand reach. It incurred substantial expenditure on new channel launches and programming for Zee Madhya Pradesh Chhattisgarh, Zee Marudhara and Zee Kalinga in FY2014.

As per data provided by the company, it incurred expenses of Rs 11.20 crore (Rs 112.0 million) during the fourth quarter towards new channel launches. In the full-fiscal, new channel expenses stood at Rs 31.66 crore (Rs 316.6 million).

Typically, new channel launches result in higher operating expense during the launch period. However, continuing upward trend in subscription prevented the company’s losses from sliding further. ZMCL saw subscription revenues growing for the third consecutive quarter.

ZMCL’s operating expenses surged 18.8 per cent to Rs 88.39 crore (Rs 883.9 million) in the fourth quarter. Costs of goods and operations grew 43.4 per cent to Rs 20.28 crore (Rs 202.8 million) and accounted for 22.9 per cent (19 per cent) of the total operating expense. Employee costs edged up 8.3 per cent to Rs 25.13 crore (Rs 251.3 million) cornering 28.4 per cent share (31.2 per cent) of the operating expenditure.

Other sales and services expenses leaped 16 per cent to Rs 42.98 crore (Rs 429.8 million) and were 48.7 per cent (49.8 per cent) of operating expenses.

Operating revenues for the quarter grew at a much slower pace at 4.7 per cent to Rs 82.77 crore (Rs 827.7 million). Consequently, ZMCL suffered negatively on the operating level.

Hence, the company incurred an operating loss (EBITDA) of Rs 5.62 crore (Rs 56.2 million) compared to operating profit of Rs 4.67 crore (Rs 46.7 million) in the corresponding quarter previous fiscal.

Interestingly, advertisement and subscription revenues underwent a sizable change during the period. Ad revenue came in 2.1 per cent higher at Rs 53.3 crore (Rs 533 million) while its composition of operating revenue slid to 64.4 per cent as against 66 per cent in the corresponding quarter previous fiscal.

On the other hand, subscription revenues grew 21.6 per cent at Rs 27 crore (Rs 270 million) during the quarter under review and accounted for 32.6 per cent of operating revenues (28.1 per cent Q4FY13).

ZMCL group CEO, news cluster Dr Bhaskar Das said, “At a time when the media and entertainment industry was witnessing several challenges, both regulatory and business related, owing to economic slowdown, ZMCL expanded its horizon with new regional offering Zee Kalinga catering to the Odisha market. Our television and digital reach is now 137.5 million, consolidating our position as the largest private news network in the country. We are in tune with changes in television environment expecting that digitisation will result in further lowering of carriage fees. We continue to evolve synergy in our operations with optimum utilisation of technology and resources. Even in the midst of a sluggish macro-economic environment, our advertisement revenue, the mainstay of business, has grown by a significant 9.2 per cent to Rs 220.5 crore (Rs 2.20 billion) for the financial year 2013–14.”

Zee News reaches over 111.9 million viewers across India. Zee Business reaches 52.4 million audiences. 24 Ghanta, its Bengali news offering, serves 15.8 million audiences and Zee 24 Taas, the Marathi news channel, reaches 31.2 million viewers.

Zee Sangam, Zee Madhya Pradesh Chattisgarh, Zee Marudhara, Zee Punjab Haryana Himachal, Zee Kalinga Odisha are some of the regional channels offered by the network.

Full-fiscal showing stay muted

ZMCL’s net profit dropped 39.8 per cent to Rs 22.64 crore (Rs 226.4 million) in the fiscal ended 31 March 2014. In the year-ago period, net profit stood at Rs 37.61 crore (Rs 376.1 million).

Operating profit (EBITDA) expanded 32.1 per cent to Rs 25.47 crore (Rs 254.7 million) which translated into an EBITDA margin of 7.6 per cent (12.4 per cent).
Operating revenue increased 10.3 per cent to Rs 335.16 crore (Rs 3.35 billion), helped by steady rise in subscription and ad revenues.

Subscription revenue jumped 18.5 per cent to Rs 99.9 crore (Rs 999 million). Advertisement revenue grew 9.2 per cent to Rs 220.5 crore (Rs 2.20 billion).

Owing to the launch of new channels as well as stress on programming initiative, the company saw its operating expenses grow 16.3 per cent to Rs 309.69 crore (Rs 3.09 billion). This negatively impacted ZMCL’s operating efficiency.

Costs of goods and operations increased 24.9 per cent to Rs 66.13 crore (Rs 661.3 million), accounting for 21.4 per cent (19.9 per cent) of total operating expenses. Employee costs grew 13 per cent to Rs 99.10 crore (Rs 991 million), accounting for 32 per cent (32.9 per cent) of total operating expenses.

Other expenses expanded 15 per cent to Rs 144.46 crore (Rs 1.44 billion) and were 46.6 per cent (47.2 per cent) of total operating expenses.