Q1 2010: Zee Entertainment PAT at Rs 91.3 crore

Televisionpoint.com Correspondent | Mumbai
Zee Entertainment Enterprises Ltd (ZEEL) has reported its first quarter fiscal 2010 consolidated revenues of Rs 475.9 crore, representing a 12 per cent reduction over the corresponding period in the previous fiscal.

For Q1 of 2009, the consolidated operating profit stood at Rs 117 crore, profit before tax stood at Rs 132.9 crore and profit after tax at Rs 91.3 crore. Operating profit margin stood at 24.6 per cent.

Subhash Chandra, chairman, ZEEL, stated, "This quarter posed a big challenge on the advertising revenue front. On one hand the macro advertising environment remained weak and on the other, two major sports events (IPL and World T20) took away revenues from entertainment channels."

Chandra continues as, "Intense competition in the Hindi entertainment segment also had its impact. We do see early signs of recovery in advertising revenues though overall ad spends on television may not be as buoyant as they were in the last few years."

Explaining the subscription revenues, Chandra said, "Over the next few years, our business model would undergo a shift in favour of a subscription led model, as is the case globally. Being the largest pay network of this country, Zee will be an integral part and beneficiary of this success story."

Punit Goenka, chief executive officer, ZEEL, commented, "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."

"During the quarter, performance on advertising revenue stream was adversely affected by the macro situation. We focused on the factors under our control: operating efficiencies, content improvements and balance sheet management." Goenka adds.

Explaining the impact of content initiatives, Goenka said, "The heartening aspect of Zee TV's growth has been consecutive success of six of our latest shows, leading to a steady and sustainable rise in viewership. Going forward, our endeavour is to continue to gain viewership by offering best in class content."

"We focused on improving operating efficiencies across businesses and across functions. We made significant reductions across cost heads, without sacrificing quality. Our choice to strengthen subscription based service has proved correct and timely, and DTH revenue streams have performed better." Goenka says.

During the quarter under review, the flagship Hindi general entertainment channel (GEC) Zee TV attained a leadership position in the last week of June 2009. The channel delivered 231 weekly GRPs on an average during this quarter and attained a channel share of 21 per cent in its genre.

The Hindi movies channel Zee Cinema averaged 161 GRPs and captured over 35 per cent channel share on a like to like basis this quarter. The network operates three Hindi movies channels - Zee Premier, Zee Action and Zee Classic specifically for the digital platforms.

Zee Sports and Ten Sports continued their strong presence in the sports genre. During the quarter, Ten Sports aired the Indian cricket team's tour of West Indies. Domestic soccer tournaments such as the I-League and Santosh Trophy were aired during the quarter and met with relative success.

Ten Sports would be airing some of the key fixtures featuring the Indian cricket team this quarter, including a tri-series featuring New Zealand and Sri Lanka as also a one day series against Zimbabwe.

The sports business revenues during the first quarter of FY10 were Rs 87 crore, indicating a growth of 35 per cent year on year, while costs incurred this quarter were Rs 114.2 crore. During the quarter, the sports business incurred an operating loss of Rs 27.2 crore.

Zee Entertainment Studio (ZES), the film production & distribution business of the company released two feature films in the quarter - one each in Bengali and Marathi. ZES, as a division of ZEEL, registered revenues of Rs 3 crore and incurred costs of Rs 8.41 crore in the current quarter.

ZEEL's revenues are generated primarily from advertising, subscription and other sales and services which comprise revenues from syndication, film distribution and education sales. The quarter under review is a moment of quiet celebration for ZEEL, as the company's subscription revenue overtook its revenue from advertising.

ZEEL's advertising revenues were Rs 198 crore, a decrease of 29 per cent as compared to the corresponding quarter last fiscal. Advertising revenues in the first quarter were impacted due to the slow down in the macro economy coupled with the impact of two leading cricket properties aired on competing networks during the quarter.

Subscription or pay TV revenue in India is mostly generated through the (analogue and digital) cable and DTH (direct to home) networks of distributors. For most TV networks in India, the ratio of advertising to subscription is 70:30.

Total subscription revenues for the quarter were at Rs 241 crore, registering an increase of 12 per cent over the corresponding quarter last fiscal. During the current quarter, domestic subscription revenues stood at Rs 131.8 crore, while international subscription revenues were Rs 109.2 crore.

Revenues from domestic DTH operators, part of domestic subscription revenues, were Rs 46.7 crore as against Rs 38.1 crore in the fourth quarter of last fiscal. During 4Q FY2009, the company recovered Rs 3 crore arrears pertaining to the DTH revenues of 3Q FY2009.

Comparing on a like to like basis, DTH revenues grew 33 per cent sequentially from Rs 35.1 crore. Subscription revenues from international operations were maintained over the corresponding fiscal in 2009 and subscription revenues from domestic cable grew by 6 per cent over the corresponding fiscal in 2009.

Other sales and services, comprising syndication sales, income from education business, income from film distribution, play out and production services, events and commission on advertisements and subscription sales, stood at Rs 37 crore.

The company had recorded revenues of Rs 47.1 crore under this head during the corresponding period last fiscal. The decrease in the other sales and services is primarily due to a drop in revenues from the films business, which showed a drop of Rs 7.2 crore over the corresponding period last fiscal.

With a view to reward employees for their past contribution, encourage value creation and value sharing with employees, and to attract/retain best talent, the Board has recommended, implementation of an Employees Stock Option Scheme for benefit of employees/directors of the company.

The Board has also recommended Rs 2 dividend per share of Re 1 each on the equity shares of the company. This will amount to a dividend payout (excluding dividend tax) of Rs 86.8 crore (same as in FY 2008), representing 16.95 per cent payout of the consolidated profits.