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Zee Entertainment reports mixed Q4 results

Zee Entertainment Enterprises Ltd, the country’s largest home-grown television and broadcasting company, reported a modest year-on-year improvement in its advertising and subscription revenue, but also saw the usual sequential decline when compared to the preceding, holiday quarter.

The company’s results have become more difficult to compare due to the fact that the seasonally strong third quarter (Oct-Dec period) had been marred by the impact of COVID-19, and it was therefore supposed to improve its performance during Jan-Mar.

The company did improve its performance, but on a year-on-year basis. On the other hand, those expecting a marked improvement on a sequential basis (vs the holiday quarter) had reason to be disappointed.

Overall advertising revenue was up 9% on year at Rs 1,123 cr, but this was also significantly less than the Rs 1,302 cr of advertising revenue posted during the holiday quarter. While such a decline is not unusual for the company due to the fact that advertising spends tend to be high during the holiday season, some analysts were hoping that the decline will not be so steep given that the COVID-19 situation has been improving steadily throughout.

Subscription revenue too increased by 5.6%, but showed a sequential decline. Normally, subscription revenue tends to be stable as the company moves from the holiday quarter to the Jan-Mar quarter.

The decline could indicate increasing pressure on viewers/consumers to cut their expenditure.

In terms of profitability, the company did an excellent job of shoring up margins in a difficult operating and growth environment.

It cut its direct operational costs drastically from Rs 1,305 cr during Jan-Mar 2020 to just Rs 844 cr during the same three months of this year. Direct operating costs, which majorly comprises production costs related to the various shows that run on its entertainment channels, were at an elevated level of Rs 1,414 cr during the holiday quarter too.

“Programming cost (excluding one-time inventory write-off of Rs. 2,598mn in Q4FY20) declined by 19.2% during the quarter, primarily due to lower accelerated inventory amortization this quarter; adjusted programming cost for the year declined by 8.2% due to lower original programming during first quarter,” Zee Entertainment said.

The company also cut down on advertising and promotional costs, which were reduced to Rs 150 cr in the latest quarter from Rs 180 cr three months earlier and Rs 184 cr in the year-ago period.

Even though overall revenue was more or less static on a year-on-year basis at Rs 1,966 cr, the company was able to improve its EBITDA — a measure of the profitability of its operations — by 69% to Rs 541 cr.

Net profit came in at Rs 2,76 cr vs a loss of Rs 767 cr during the same quarter of the previous year.

With this, the company has managed to narrow the decline in its full year revenue to 4.9% at Rs 7,730 cr compared with 8,130 cr.

Full-year net profit, however, improved by 52% to Rs 800 cr from Rs 527 cr.

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