Zee Entertainment Enterprises Limited (ZEE) reported its third quarter fiscal 2014 consolidated revenue of Rs 11,884 million. The consolidated operating profit (EBITDA) for the quarter stood at Rs 2,907 million, recording a growth of 11.3% over corresponding period of previous fiscal. PAT for the quarter was Rs 2,136 million. The EBITDA margin for the quarter stood at 24.5% and the PAT margin was 18%.

The Board of Directors, in its meeting on January 22, 2014, has taken on record the unaudited consolidated financial results of ZEE and its subsidiaries for the quarter ended December 31, 2013.

Subhash Chandra, Chairman, ZEE, stated, “India’s economic health continues to remain precarious. Inflation has been rising, fueled by a spike in food prices and the currency’s fall earlier in the year. On the other hand, India’s current account deficit has narrowed, which should mute the impact of Fed policy (QE tapering) on the rupee. Prospects for 2014 are cautiously optimistic and most of the experts predict a gradual improvement in India’s economic growth. However, the optimistic outlook is clouded by political risks which continue to create uncertainties. Given the background, the growth of India’s Media and Entertainment Industry has been heartening. The Industry has shown a robust growth in 2013 and is expected to grow at a double digit growth in 2014 as well.”

Commenting on the results of the Company, Chandra added, “While the overall economic environment stays challenging, ZEE continues to grow its business at a healthy pace. The network shares are on an uptrend, buoyed with the addition of new channels in the network. Our investments in the sports business continued during the quarter. We also look to expand our portfolio to take advantage of the growth opportunities ahead of us. These investments are in line with our philosophy of enhancing long term shareholder value.”Punit Goenka, Managing Director and Chief Executive Officer, ZEE, commented, “ZEE has had a satisfactory quarter on the operational front. During the quarter, we have seen a robust growth in our network viewership share. The two new launches, & pictures and Zee Anmol, have made handsome gains and have added to the network strength. The Company has shown a healthy increase in advertisement revenues even though there has been a reduction in inventory across the board as per TRAI regulation. Once again we have outperformed the television industry advertising revenue growth and have delivered 34% yoy growth supported by good contribution from sports business. Operating margins were lower due to higher losses in sports business, due to a heavy event calendar. Rupee depreciation earlier this year has also had a negative impact on the sports business performance. We are hopeful of improved sports performance in the years ahead.”

Commenting on the advertising inventory regulation, Goenka added, “This quarter saw the implementation of advertising inventory cap as per TRAI regulations. From October 1, 2013, we have reduced ad inventory to 12 minutes per clock hour across our network. We are glad to report that the transition has been reasonably smooth. Ultimately, ad inventory reduction is better value to both consumers and advertisers. I believe that a cap on advertising, while being negative in the short term especially for smaller broadcasters, will in the long term prove beneficial for the industry by restricting inventory and eventually raising value.”

Speaking about the outlook for the business, Goenka continued, “The rollout of digitisation, even though with some delays, is a very good development for the industry and will provide new growth opportunities. Digitisation will lead to fragmentation of audiences. At ZEE, we believe this presents a huge opportunity to create new products for specific segments. Barring the short-term impact of reduction in inventory, advertising spends on television are expected to grow in healthy double digits over next many years. Rollout of BARC is expected to give it a positive fillip. We continue to make investments in creating excellent quality content for our existing channels. We also continue to explore growth opportunities in domestic markets, international markets and in new media space.”

Condensed Statement of Operations 

 Consolidated operating revenues for the third quarter of FY2014 stood at Rs 11,884 million, recording a growth of 26.6% as compared to the corresponding quarter last fiscal. Operating profit (EBITDA) for the quarter ended Dec. 31, 2013 was Rs 2,907 million, recording a growth of 11.3% on a y-o-y basis. EBITDA margin for the quarter stood at 24.5% as against 27.8% for the same quarter last year. Contraction in EBITDA margins is on account of sports loss during the quarter. Ex-sports, EBITDA margins have expanded from 32.5% in Q3FY13 to 39.6% during the quarter. Profit after Tax (PAT) for the quarter ended Dec. 31, 2013 was Rs 2,136 million, recording a growth of 10.5% over corresponding quarter last fiscal. PAT margin for the quarter stood at 18%.

Revenue Streams 

ZEE’s revenues are generated primarily from advertising sales and subscription revenues. ZEE’s advertising revenues during the quarter were Rs 6,843 million, showing an increase of 34.3% y-o-y. Advertisement growth during the quarter is boosted by a bigger sporting event during the quarter. Excluding sports, advertising revenue growth in Q3 FY14 is upwards of 20%. Total subscription revenues for the quarter were Rs 4,565 million, registering a growth of 11.4% over the corresponding quarter last fiscal. During the current quarter, domestic subscription revenues stood at Rs 3,322 million, while international subscription revenues were Rs 1,243 million. Domestic subscription revenues have shown an increase of 12.2% over the corresponding period last fiscal. Subscription revenues for the quarter from international operations are up by 9.4% y-o-y.

Other sales and services include syndication sales, play out & transmission services, commission on sales among others. During the quarter, other sales and services stood at Rs 476 million. The company had recorded revenue of Rs 197 million under this head during the corresponding period last fiscal.

Expenditure

ZEE’s main expenses include cost of goods and operations, employee cost, and administrative and selling expenses. Operating cost in the quarter was Rs 6,095 million as compared to Rs 4,185 million in the corresponding period last fiscal, an increase of 45.6%. Such a sharp increase in operating cost is due to higher programming cost on account of big sporting events during the quarter. Employee cost has gone up by 7.1% over the corresponding period last fiscal. Selling & other expenses in the quarter were at Rs 1,923 million, as compared to Rs 1,697 million in the corresponding period last fiscal, registering an increase of 13.3%. Total costs incurred by the Company in this quarter were Rs 8,976 million, an increase of 32.5% over the corresponding period last fiscal.

 

EARNINGS RELEASE FOR THE QUARTER ENDED DEC. 31, 2013

Advertising Revenues of Rs 6,843 Mn, Up 34.3% yoy

Subscription Revenues of Rs 4,565 Mn, Up 11.4% yoy

Consolidated Operating Revenues of Rs 11,884 Mn, Up 26.6% yoy

EBITDA of Rs 2,907 Mn, Up 11.3% yoy; EBITDA Margin of 24.5%

Profit After Tax of Rs 2,136 Mn, Up 10.5% yoy; PAT Margin of 18%

Q3 HIGHLIGHTS

• Advertising revenues for the quarter were Rs 6,843 million, recording a growth of 34.3% over Q3 FY13. Ex-sports, advertising growth for the quarter is upwards of 20%, which is higher than the industry growth rate. Ex-sports growth is boosted by investments in new channels.
• Subscription revenues were Rs 4,565 million for the quarter ended December 31, 2013, recording a growth of 11.4% over corresponding period last fiscal. During the quarter, domestic subscription revenues stood at Rs 3,322 million, while international subscription revenues were Rs 1,243 million.
• Consolidated operating revenues for the quarter stood at Rs 11,884 million, recording a growth of 26.6% as compared to the corresponding quarter last fiscal.
• Operating profit (EBITDA) for the quarter stood at Rs 2,907 million, recording a growth of 11.3% over the corresponding quarter last fiscal. EBITDA Margin contracted from 27.8% in Q3 FY13 to 24.5% in this quarter, because of higher sports losses during the quarter.
• Profit after Tax (PAT) for the quarter ended December 31, 2013 was Rs 2,136 million, recording a growth of 10.5% over corresponding period last fiscal.