Zee Entertainment Q1 Results: Profit Slumps 94% As Covid-19 Hits Ad Revenue
The broadcaster’s net profit declined 94% year-on-year to Rs 29.3 crore.
Zee Entertainment Enterprises Ltd.’s profit was nearly wiped out in the pandemic-marred quarter ended June as its advertisement revenue fell.
The broadcaster’s net profit slumped 94% year-on-year to Rs 29.3 crore in the April-June period, according to an exchange filing. That compares with the Rs 331-crore consensus estimate of analysts tracked by Bloomberg. The company had suffered a surprise loss of Rs 766.7 crore in the preceding three months because of an exceptional item.
Zee Entertainment’s revenue fell 35% over the year-ago period to Rs 1,312 crore in the three months through June.
India confined its 1.3-billion people to their homes for more than two months starting March-end as it aimed to contain the Covid-19 pandemic, stalling all activities but essential services. That hurt advertising revenue for broadcasters which has been drying up due to a sustained economic slowdown over the last year. That was further exacerbated by falling television viewership due to lack of new shows. ICICI Direct estimated broadcasters to lose up to 60% of revenue due to the lockdown.
Cheap data and smartphone penetration, however, led to a surge in online streaming. Zee, which owns a streaming platform ZEE5, saw higher subscription revenue offset some of the decline in its mainstay business.
Zee Entertainment's earnings before interest, tax, depreciation and amortisation fell 85% to Rs 108 crore, while Ebitda margin narrowed to 8% from 36% a year ago. The company's profitability was also impacted by a fair value loss worth Rs 112 crore related to its overseas investments in mutual fund.
Segment-Wise Performance
- Advertising revenue declined 65% to Rs 421 crore.
- Subscription revenue rose 5% to Rs 744 crore, driven by the implementation of the new tariff order and growth in ZEE5’s subscription revenue.
The company said that as lockdown restrictions begin to relax, it will start to produce new content in accordance with government directives. “This is expected to result in increase in business activity for the group.”
Board Reshuffle
Subhash Chandra has resigned as the non-executive director of Zee Entertainment. But he has been appointed as chairman emeritus at the broadcaster from Aug. 19 where he will play an advisory role. The position will not carry any remuneration.
R Gopalan, additional director at Zee Entertainment since 2019, has been appointed as the chairman of the board in place of Chandra.
Key Concall Takeaways
- Expecting to deliver more than 50% profit to free cash flow conversion from financial year 2022.
- Movie buying will be significantly moderate going ahead as library is built over last three to four years.
- Financial year 2021 will see significant reduction of working capital and movie buying.
- Receivables will be coming down in coming quarters.
- Ebitda margin will improve in the second quarter.
- Margins will go back to 30% or more in financial year 2022.
- Expect ad-revenues to grow starting from third quarter this year.
- Growth will come back from second half this year.
- ZEE5’s revenue and Ebitda disclosure along with operating metrics would be provided on quarterly basis.
Shares of Zee Entertainment closed 2.8% higher before the quarterly results were announced compared to a 1.26% gain in the benchmark Nifty 50 Index.