Zee Entertainment Enterprises Ltd, the largest Indian-owned media company, reported a strong quarter of advertisement growth in Jan-Mar, benefiting from a bounce-back from the lows of demonetization last year.

Advertising revenue for the Jan-Mar quarter rose 24% on year to Rs 1,050 cr. With this, full-year advertising revenue growth has recovered to 14.5%.

Subscription revenue fell 2% to Rs 547 cr due to the sale of its sports channels to Sony. On a like-to-like basis, subscription revenues paid by cable and DTH companies jumped 18% on year in India.

“The strong growth momentum in advertising spends witnessed in the last quarter continues. The recovery in rural demand is complementing the already strong urban demand which should continue to hold advertising in good stead,” the company said.

CEO Punit Goenka said domestic ad revenue growth of 24% was driven by a 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,” he added.

For the full year FY18, advertising growth was 14.5%, in line with previous years. On a like-to-like basis, it was at 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,” Zee said.

For the full year FY18, 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, it added.

Domestic subscription revenue growth for the quarter was helped by the deals that were closed in the quarter and the catch- up revenues associated with the same, the company added.

MARGINS

Despite the strong performance on the revenue front, operating profit could not keep up because of an even faster increase in expenses.

Against a growth of 12.9% in revenue, operating costs jumped 15.1%, thus constraining EBITDA increase to just 8% on year.

Despite this, profit before tax and exceptional items increased by Rs 84 cr to Rs 511 cr, thanks to a Rs 33 cr increase in non-operating income and a Rs 56 cr increase in revaluation benefits for the company’s investments.

Operating costs increased by Rs 160 cr, or 15.1%, primarily due to a jump of Rs 86 cr in ‘other expenses, an increase of Rs 26 cr in advertising and promotions and a jump of Rs 43 cr in programming costs.

It said the rise in programming costs was because of higher original programming hours in regional channels, higher movie amortization costs and content cost for ZEE5, its content app.

Advertising, publicity and other expenses for the quarter grew 44% YoY to Rs 3,66 cr on account of ZEE5 launch expense and increased marketing activities for new properties, it explained.

Additionally, the expense base for Q4FY17 was lower as some marketing and promotion events were held back due to demonetization, it added.

For the full year FY18, total operating costs increased by 2.3% on year. On a like to like basis, full-year programming cost increased due to higher original content hours across the network and higher movie amortization cost, while the reported programming cost declined due sale of sports business, it said.

Advertising revenue for the quarter was Rs 1,050 cr, recording a growth of 23.9%.

Adjusted for sports, domestic advertising grew by 24.9% to Rs. 9,83 cr. On a comparable basis (excluding sports, RBNL and IWPL), domestic advertising revenue grew by 21.5%.

International advertising revenue for the quarter was Rs. 66 cr .

Subscription revenue for the quarter was Rs. 547 cr. Adjusted for the sale of sports business, domestic subscription revenue grew by 18.1% to Rs. 452 cr.

Consolidated operating revenue for the fourth quarter of FY18 stood at Rs. 1,725 cr, EBITDA at Rs. 5,062 million, and Profit After Tax (PAT) at Rs 2,31 cr.

“Looking at our performance one might not realise that the first half of the year was not as smooth, which is a testimony to the strength of our team,” said Chairman Subhash Chandra.

“With the launch of ZEE5, we have taken a major leap towards our preparation for the future and we are confident that like TV business we will be in the leadership position in the digital space as well.”

CEO Punit Goenka said the initial response for ZEE5 has been encouraging.

“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,” he added.

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