ZEEL’s Q1 FY18 revenues dip 2%; net profit up 16% at Rs 2,516 mn

Zee Entertainment Enterprises Limited (ZEEL) has reported consolidated revenue of Rs 15,403 million for the first quarter ended June 30, 2017, recording a decline of 2.0 per cent on YoY basis. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) for Q1 FY2018 stood at Rs 4,844 million, registering a growth of 6.9 per cent over Q1 FY17. EBITDA margin stood at 31.4 per cent. 

Profit After Tax (PAT) for the quarter grew by 16.0 per cent over Q1FY17 to Rs 2,516 million. PAT margin was at 16.3 per cent. 

Advertising revenue for the quarter was Rs 9,665 million. Adjusted for the sale of the sports business and consolidation of Reliance Broadcast Network Ltd (RBNL), domestic advertising revenue grew by 6.9 per cent to Rs 8,688 million, while international advertising revenue was at Rs 578 million. 

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

Subscription revenue for Q1 FY18 stood at Rs 4,791 million. Domestic and international subscription revenues for the quarter declined by 9.3 per cent YoY and 9.1 per cent YoY, respectively, on account of sale of sports business. On a like to like basis, the domestic subscription revenue grew by 14.5 per cent to to Rs 3,788 million, while the international subscription revenue declined by 0.6 per cent to Rs 1,000 million. 

During the quarter, ZEEL completed Phase I of sale of its 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. As part of the arrangement, the economic risk and reward of these properties lies with Sony Pictures. Accordingly, the revenue earned by these properties is passed on to Sony Pictures and is included in costs for the quarter. There is no impact of sports business on the company’s profits. 

Meanwhile, the acquisition of 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. 

At a meeting held on July 24, 2017, the Board of Directors have approved a Composite Scheme of Arrangement and Amalgamation between the company and certain domestic wholly-owned subsidiaries inter alia for:

(a) Demerger of Digital Media and Entertainment Business undertaking from Zee Digital Convergence Ltd, vesting with the company

(b) Demerger of Advertisement Sales Media Business undertaking from Zee Unimedia, vesting with the company

(c) Demerger of Online Media Business undertaking from India Webportal Pvt Ltd, vesting with the company; and

(d) Amalgamation of Sarthak Entertainment with the company, with effect from April 1, 2017.

Commenting on the company’s performance, Punit Goenka, Managing Director & Chief Executive Officer, ZEEL, said, “It was yet another satisfying quarter with a strong financial and operating performance. 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 per cent. Notwithstanding the short-term impact, we believe that GST will aid the advertising spends in the long-run.” 

Goenka further said, “Our domestic subscription revenue, adjusted for the sale of sports business, grew by 14.5 per cent. 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.”