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ZEEL Q1 net up despite 2% drop in operating rev; local businesses restructured

MUMBAI: Zee Entertainment Enterprises Ltd (ZEEL) reported a 16% rise in its consolidated net profit to Rs 251.6 crore for the fiscal first quarter but advertising revenue was impacted in the run-up to the implementation of goods and services tax (GST).

Consolidated operating revenue fell 2% to Rs 1,540.3 crore in the quarter ended 30 June 2017. This was led by a 9.3% drop in subscription revenue to Rs 471.9 crore on account of sale of its sports business to Sony.

NOTES A: Previous period figures have been regrouped wherever necessary. B: Numbers may not add up due to rounding

Advertising revenue

Revenue from advertising grew 6% to Rs 966.5 crore as it lost momentum in the month of June due to pull-back by advertisers because of GST implementation.

Domestic advertising grew by 6.9% year-on-year (YoY) on a comparable basis (excluding sports and RBNL) to Rs 868.8 crore. “The domestic advertising growth recovered from the impact of demonetisation in the first half of the quarter but the progress was halted in the month of June due to pull-back by advertisers because of GST implementation,” ZEEL said.


Advertising revenue of ZEEL’s international business was impacted due to currency appreciation and continuation of some region-specific issues.

“During the quarter, we recovered from the impact of demonetisation and the growth in the first two months was strong. However, the momentum was disrupted in June in the run-up to GST implementation. The advertisers reduced ad spends on existing brands and launched fewer products as distribution chain was not fully prepared for seamless transition to the new regime. Despite the challenge, our domestic ad revenue grew by 7%. Notwithstanding the short-term impact, we believe that GST will aid the advertising spends in the long-run,” said ZEEL managing director & CEO Punit Goenka.

Subscription revenue

Domestic and international subscription revenues for the quarter declined by 9.3% YoY and 9.1% YoY respectively, on account of sale of sports business. On a like to like basis, the domestic subscription revenue grew by 14.5% and the international subscription revenue declined by 0.6%.

“Our domestic subscription revenue, adjusted for the sale of sports business, grew by 14.5%. While there is still uncertainty regarding the implementation of the new tariff regulation due to pending litigations, we are confident of driving the subscription business on the back of the strong competitive positions of our channels in the key genres,” Goenka said.

ZEEL’s EBITDA for the quarter ended 30 June was Rs 484.4 crore. This translated into EBITDA margin of 31.4%.

Sports business revenue was Rs 20.1 crore. This included advertising revenue of Rs 19.8 crore. ZEEL has completed phase I of sale of sports business and is working towards the closure of phase II of the transaction. Sports business revenues in Q1FY18 relate to properties in international territories which are part of phase II of the transaction.

Expenditure

ZEEL cut down its placement cost while programming expense fell due to absence of sports-related content.

Total expenditure in the fiscal first quarter stood at Rs 1,055.9 crore, lower by 5.6% compared to the year-ago period. “This was primarily due to absence of sports-related programming costs. Savings in placement expense also led to a drop in the overall cost,” ZEEL said.


International business

During the quarter, ZEEL’s international business revenue (excluding sports business) was Rs 194.7 crore. The advertising and subscription revenues were lower by 12.6% and 0.6%, respectively.

“The adverse impact of currency appreciation and region-specific issues have contributed to the decline in revenues,” ZEEL said.

For the quarter ended 30 June 2017, international business financials (excluding sports) are:

  • Advertisement revenue of Rs 57.8 crore
  • Subscription revenue of Rs 100 crore
  • Other sales and services of Rs 36.9 crore
  • Total revenue of Rs 194.7 crore

Restructuring of local businesses

Zee Entertainment hived off three of its businesses into separate subsidiaries.

  • Zee Digital Convergence Ltd will be demerged into a separate entity. This includes the digital media and entertainment business. Ditto TV and OZEE will fall under this.
  • The online media business under India Webportal will be demerged.
  • The advertisement sales media business, which manages television and print ads, will be demerged into Zee Unimedia Ltd.
  • Sarthak Entertainment, which holds the Odiya general entertainment channel, will be merged with ZEEL.

Acquisition of Big Magic and Big Ganga complete

The acquisition of Anil Ambani-promoted Reliance Broadcast Network Ltd (RBNL), which includes two channels Big Magic and Big Ganga, has been completed. Its financial performance has been consolidated in the company’s Q1FY18 results.

Shareholding pattern

The total outstanding shares of the company as of 30 June 2017 were 960,448,720.
The shareholding pattern as of 30 June 2017 is given below: