ZEEL Q4 net profit stands at Rs 231 cr as ad rev jumps 24%

MUMBAI: Media conglomerate ZEEL’s net profit for the quarter ended 31 March has slipped 84.75% to Rs 231 crore compared to Rs 1515.2 crore in the same quarter of the previous fiscal.

EBITDA for the quarter increased 8% Rs 506.2 crore compared to Rs 468.7 crore. EBITDA margin stood at 29.3%.

Total revenue jumped 12.9% to Rs 1725.3 crore compared to Rs 1528 crore. Total expenses increased 15.1% to Rs 1219.1 crore compared to Rs 1059.3 crore.

Ad revenue for Q4 was up 23.9% at Rs 1049.6 crore compared to Rs 846.9 crore in the year-ago period. The company said that the advertising grew by 24.9% to Rs 983.4 crore adjusted for sports, domestic. On a comparable basis excluding sports, Reliance Broadcast Network Ltd (RBNL) and India Web Portal Ltd (IWPL), domestic advertising revenue grew by 21.5%.

Subscription revenue declined 2% to Rs 546.5 crore compared to Rs 558 crore. Other sales and services increased 5% to Rs 129.2 crore compared to Rs 123.1 crore.

According to ZEEL, the domestic subscription revenue grew by 18.1% on a like to like basis. Domestic subscription revenue growth for the quarter was helped by the deals that were closed in the quarter and the catchup revenues associated with the same.

Programming cost for the quarter increased by 6.7% at Rs 689.3 crore driven by higher original programming hours in regional channels, higher movie amortisation costs and content cost for ZEE5.

Advertising, publicity and other expenses for the quarter grew 44% to Rs 366 crore on account of ZEE5 launch expense and increased marketing activities for new properties. Additionally, the expense base for Q4FY17 was lower as some marketing and promotion events were held back due to demonetisation.

During the quarter, the company had released two Marathi movies ‘Yere Yere Paisa’ and ‘Gulaabjaam’.

For the full-fiscal, the net profit fell 33.54% to Rs 1479.1 crore compared to Rs 2221.3 crore in the previous fiscal. EBITDA was up 7.7% to Rs 2076.1 crore compared to Rs 1926.9 crore. EBITDA margin was at 31.1%.

Operating revenue grew at a modest pace of 3.9% to Rs 6685.7 crore compared to Rs 6434.1 crore. Expenditure was up 2.3% to Rs 4609.5 crore from Rs 4507.3 crore in the year ago period.

Ad revenue for the fiscal increased 14.5% to Rs 4204.8 crore compared to Rs 3673.5 crore. On a comparable basis (excluding sports, RBNL and IWPL) the domestic advertising revenue growth was 15.9%. The advertising spends in the first half were impacted due to roll-out of GST but bounced back sharply in the second half.

Subscription revenue was down 10.3% to Rs 2028.7 crore from Rs 2262.9 crore. Other sales and services was down 9.1% to Rs 452.5 crore from Rs 497.7 crore.

ZEEL’s domestic subscription revenue grew by 11.8% YoY. The subscription revenue growth for the year was slightly impacted by the delay in phase-III monetisation due to the uncertainty regarding TRAI’s tariff order.

The total costs for the fiscal increased by 2.3% to Rs 4609.5 crore from Rs 4507.3 crore. The underlying increase is higher but offset by the sale of sports business.

On a like to like basis, programming cost increased due to higher original content hours across the network and higher movie amortisation cost, while the reported programming cost declined due sale of sports business. Advertising, publicity and other expenses increased by 25.6% to Rs. 1416.4 crore on account of brand refresh, the launch of ZEE5 and costs related to silver jubilee events.

During the quarter, ZEEL’s international business revenue was Rs. 214.3 crore. The advertising revenue grew by 26.2% at Rs 66.2 crore while the subscription revenue declined by 8% at Rs 94.4 crore. Other sales and services stood at Rs 53.7 crore.

ZEEL MD and CEO Punit Goenka commented, “We launched our new digital platform ZEE5 with over 100,000 hours of content across 11 languages. We are happy with the initial response and are confident that the sheer depth and breadth of our content offering will enable it to become the number one digital entertainment platform in India. We have also focused on the peculiarities of the Indian market and designed technological features to improve the user experience. Unlike most of the existing apps which are either focused on the English-speaking segment or the youth audience, ZEE5’s vast content catalogue is designed with an objective to cater to all sections of video viewing audience.

“We are delighted with the strong operating and financial performance during the quarter. Domestic ad revenue growth of 24% is driven by broad-based recovery in advertising spends. With high visibility of product campaigns, improving consumer demand and GST related benefits trickling down to ad spends, we are confident of continued traction in advertising spending. The full-year domestic subscription revenue growth of 12% is a tad lower than our initial expectations due to some unforeseen events. However, there is no change in our medium-term outlook for the same.”

ZEE5 was launched during the quarter with 100,000+ hours of content. With exclusive original content, Indian and International movies, catch-up TV, international shows dubbed in multiple Indian languages, kids entertainment, music and lifestyle-related content and extensive live TV offering across languages, ZEE5 is a one-stop entertainment destination for Indian consumers. With a strong pipeline of original content in 6 languages, it will have one of the biggest digital exclusive content offering in Indian languages.

In FY18, ZEEL was the number 1 network in the non-sports entertainment segment with an all India viewership share of 18%. The network improved its performance in several regional language markets while becoming the leader in pay Hindi GEC segment. During 4Q FY18, ZEEL’s network market share was 18.5%.

Investment in movies

Movies are a crucial part of ZEEL’s content bouquet. Movies are a key long-term growth driver for the company and to cater to the portfolio of 11 movie channels across Hindi and regional languages and an expansive digital movie library for ZEE5, the Company has significantly increased the acquisition of satellite and digital rights of movies over the last two years.

It further stated that a large part of advances and increase in inventory during FY18 is on account of investments in the acquisition of current rights, future rights and advance purchase of rights of underproduction movies.

Effective Tax Rate

The effective tax rate for FY18 was at 41.4%, higher than the marginal tax rate. During the year, ZEEL’s foreign subsidiaries paid out a dividend of Rs 781.6 crore to the parent entity from the sale proceeds of sports business. As per Indian tax laws, dividend receipts from foreign subsidiaries attract a tax at the rate of 17%. Accordingly, the company paid a tax of Rs 135.2 crore on the dividend so received which is part of the current tax line item in P&L statement.

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