Zee Entertainment Q4 Results: Higher Operating Costs, Exceptional Items Trigger Surprise Loss
Zee Entertainment Enterprises Ltd. reported a surprise loss in the March quarter due to higher other operating costs and exceptional items.
Net loss stood at Rs 766.7 crore compared with a net profit of Rs 291.7 crore in the quarter ended March 2019, according to its exchange filing. Analysts’ estimates compiled by Bloomberg had pegged profit at Rs 287 crore.
Revenue fell 3.38% year-on-year to Rs 1,951 crore—higher than the Rs 1,868-crore estimate. Operating loss stood at Rs 562.5 crore versus operating profit of Rs 577.7 crore in the year-ago period.
- Higher movie amortisation, new channels and investments in the company’s digital offering, ZEE5, pushed up operational costs by 48% to Rs 1,304.62 crore.
- One-time provision of Rs 343 crore due to doubtful recovery of ad, subscription and other assets on account of Covid-19 increased the administrative costs.
- Zee Entertainment booked one-time accelerated inventory amortisation of Rs 259.8-crore.
- The company also reported an exceptional loss of Rs 113.7 crore on account of impairment of goodwill pertaining to its digital publishing business.
- Advertising revenue declined 15% to Rs 1,039 crore due to the weak macro environment, conversion from free-to-air to pay model, and market share loss in certain markets, the company said.
- Subscription revenue rose 31% to Rs 741.4 crore driven by implementation of the new tariff order and growth in ZEE5's subscription revenues.
Advertising revenue for broadcasters has been drying up due to sustained economic slowdown over the last year. While advertising volumes have already jumped over pre-pandemic levels, deals continued to be negotiated at a significantly lower price, ICICI Direct said in a report. That has put pressure on the revenue of broadcasters.
But the quarter ahead will throw up more challenges. Lack of new shows as a result of the lockdown meant television viewership was relatively lower in April-June. Viewership started improving towards the end of June but remained lower than what it was before the lockdown. ICICI Direct estimates broadcasters to lose up to 60% of revenue due to the lockdown.
Shares of Zee Entertainment have slumped 48% so far in 2020, significantly more than NSE Nifty 50 Index’s 8% fall.