Zeel Q2 net up 26.7% amid flat revenue

Ravi budhwar

21 Apr 2011
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Zee Entertainment Enterprises Ltd (Zeel) has posted a healthy 26.7 per cent jump in its second-quarter net profit as revenue stayed flat in a weak advertising environment.

A 4.2 per cent drop in ad revenue has been cushioned by a 2.3 per cent cut in costs, helping the company to beat the profitability forecast made by market analysts.

Zeel's consolidated net profit for the three-month period ended 30 September stood at Rs 1.6 billion compared to Rs 1.26 billion a year ago. Analysts had forecast the company to earn a net profit of Rs 1.40 billion.

Operating revenue stood at Rs 7.18 billion, marginally up from Rs 7.12 billion. However, the company clarified that the operating revenues and expenditure for Q2 are not comparable to the earlier year because of the "change in accounting treatment of domestic subscription revenues, which are now being reported net of expenses."

Zeel chairman Subhash Chandra said, "The Indian economy continues to grow at a good pace but high inflation and the resultant tight money policy of RBI is taking its toll. While the economic situation in India is far better than most other countries, market sentiment continues to be cautious. This caution has affected advertising spends on television, which has witnessed some deceleration. The good part is that the television economy continues to grow robustly on the back of subscriber growth and digitisation."

The consolidated operating profit (Ebitda) for the quarter was up 10.1 per cent to Rs 2.07 billion, from Rs 1.88 billion in the year-ago period. Operating profit margin stood at 28.9 per cent.

Finance expenses during the quarter were Rs 56 million, up 1085 per cent year-on-year.

During the quarter, Zeel's advertising revenue saw a decline of 4.2 per cent to Rs 3.95 billion compared to the earlier year. Zeel clarified that the decline is due to the fact that the corresponding quarter last fiscal had some India-centric cricket properties. Excluding sports, advertising revenues have shown an increase.

The company, however, feels that the ad environment will stay weak this fiscal.

Subscription revenue for the quarter stood at Rs 2.91 billion, registering an increase of 6.3 per cent over the corresponding quarter of the previous fiscal. During the current quarter, domestic subscription revenue stood at Rs 1.95 billion, while international subscription income was at Rs 959 million, down 3 per cent. Domestic cable accounted for 12.8 per cent of the revenue, while domestic DTH accounted for 14.3 per cent.

Overall, programming and operating cost in the quarter was Rs 3.22 billion as against Rs 3.46 billion in the corresponding period of the previous fiscal, a reduction of 6.8 per cent.

Employee cost increased by 7 per cent; selling and other expenses in the quarter were at Rs 1.2 billion, as against Rs 1.13 billion in the earlier year. Total costs incurred by the company in this quarter stood at Rs 5.11 billion, showing a reduction of 2.3 per cent.

The numbers as published are after consolidating the financials of Taj TV Limited (Taj). It also includes financial results of regional general entertainment channel business (R-GEC) acquired from Zee News Limited (ZNL) and 9X business undertaking of 9X Media.

Zeel's sports business posted a revenue of Rs 881 million, while costs incurred in this quarter was Rs 1.11 billion.

Zeel MD and CEO Punit Goenka said, "Zee Entertainment has a wide portfolio of television channels and we have seen some gains and some losses in our market shares during the quarter. We are confident that we would continue to grow our business profitability in a sustained manner. During the quarter, we have seen a healthy increase in our operating margins, partly due to lower sports losses and partly due to better cost efficiency measures. Though advertising spends are better sequentially, overall trends remain subdued and FY'2012 does look to be a year of tepid growth in advertising spends on television. Our strategy during the last few years has been to create a formidable entertainment enterprise and invest in the business in a focused disciplined way."

The flagship channel, Zee TV, and Zee Marathi have lost market shares to competition.

"We are working towards correcting the loss in market shares in some of our businesses," said Goenka.
source:indian television
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