Zee net jumps 27% as subscriptions climb, costs drop

Zee Entertainment Enterprises Ltd, one of India’s leading media and entertainment companies, on Monday reported a 26.7% rise in its consolidated net profit for the July-September quarter as it cut costs and increased subscription revenues.

Consolidated net profit for the second quarter rose to Rs160 crore as against the Rs126.3 crore recorded in the same period of the previous fiscal.

Its consolidated revenues stood at Rs718.4 crore, while earnings before interest, tax, depreciation and amortisation (Ebitda) margins stood at 28.9%.

Consolidated operating profit for the reporting quarter rose 10.1% to Rs207.5 crore in the second quarter over Rs188.5 crore in the year-ago period.

Zee’s total expenses at Rs518.7 crore during July-September declined 2%, while programming and operating costs were down 7% at Rs322.38 crore.

Subscription revenues, at Rs291 crore, increased 6.3% over July-September 2010. While the domestic subscription revenues stood at Rs195.1 crore, Zee garnered Rs95.9 crore from international subscriptions.

However, advertising revenues in the second quarter, at Rs394.9 crore, were 4.2% lower owing to subdued market sentiments.
The decline, according to Zee top management, has been mainly in the sports segment, and excluding sports advertising revenues showed an increase.

Subhash Chandra, chairman, Zee, said the Indian economy continues to grow at a good pace but high inflation and the resultant tight money policy of the Reserve Bank of India are taking its toll.

“While the economic situation in India is far better than most other countries, market sentiment continues to be cautious. This caution has affected advertising spends on television, which has witnessed some deceleration. The good part is that the television economy continues to grow robustly on the back of subscriber growth and digitisation,” said Chandra. 

Calling the Cabinet’s recent nod for ordinance on digitisation as a very positive move, Chandra said it will definitely give a boost to the cable and satellite industry and help create a more sustainable business model for the television industry.

The cable and DTH industry now has a great opportunity to consolidate the distribution business in the country, he said.
“I believe over the next 4-5 years, the television distribution business can completely transform itself from a fragmented unorganised set-up to a more transparent, organised and service-oriented industry if digitisation process is implemented well.

Digitisation will also help in wider adoption of new content formats, like high definition (HD) and 3D, and will open up new revenue streams for the broadcasters,” said Chandra.

Punit Goenka, managing director and chief executive officer, Zee, said the company has a wide portfolio of television channels and there have been some gains and some losses in market shares during the quarter.

“We are confident that we would continue to grow our business profitability in a sustained manner. During the quarter, we have seen a healthy increase in our operating margins, partly due to lower sports losses and better cost-efficiency measures. Though advertising spends are better sequentially, overall trends remain subdued and fiscal 2012 does look to be a year of tepid growth in advertising spends on television,” said Goenka.

About the outlook for the business, Goenka said, “We are working towards correcting the loss in market shares in some of our businesses and look forward to further increase in those where we have gained.

Media Pro, our joint venture for subscription revenues, has started operations during the quarter and we are very confident of good performance going forward.”