ZEEL Q2 profit is Rs 413 crore with a 7% YoY growth

image-ZEEL Q2FY20 Earnings & Financial Results MediabriefThe Board of Directors has approved and taken on record the unaudited consolidated financial results of Zee Entertainment Enterprises Limited (ZEEL) (BSE: 505537, NSE: ZEEL.EQ) and its subsidiaries for the quarter ended September 30, 2019.

For the second quarter of FY20, ZEEL reported consolidated revenue of Rs. 21,220 million. Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) was Rs.6,929 million with an EBITDA margin of 32.7%. PAT for the quarter was Rs. 4,132 million. 

image-Punit Goenka -Punit Goenka, Managing Director, and CEO, ZEEL, commented, “I am pleased with the performance we have exhibited during the quarter. Our entertainment portfolio continues to grow from strength to strength across all formats and maintained its leading position. Our television network has emerged stronger post the implementation of tariff order on the back of a strong customer connect and brand pull of its channels. ZEE5 continued to gain traction across audience segments and markets, driven by its compelling content library and expanding the list of partnerships across the digital eco-system. 

This strong operating performance allowed us to deliver industry-leading growth in both advertising and subscription despite the tough macro-economic environment. Domestic subscription growth of 27% has reaffirmed the value proposition our television network has built over the years. The impact of tariff order has now largely settled down and has brought increased transparency along with improved monetization.

Our domestic advertising revenue growth, though significantly lower than the historical trend, is higher than the industry growth. We have witnessed an improvement in ad spends through the quarter and we believe that the onset of the festive season along with measures taken by the government will help revive the consumption growth.” 

BUSINESS PERFORMANCE 

(From a ZEEL announcement)

Domestic Broadcast Business

During 2QFY20, our television network had an all-India viewership share of 18.4%. While we have maintained our viewership share in the Hindi GEC segment, the network continues to strengthen its position in the Hindi movie cluster and Regional portfolio. 

Our channels have seen strong acceptance across markets under the new tariff regime, especially in the regional markets. Reach of all the pay channels had been impacted during the implementation of a new tariff order. In the regional markets, there has been a strong revival of reach post the disruption in the early days of the NTO, and in almost all these markets, recovery in reach has been better than the competition.

Zee TV was the #2 channel in the pay Hindi GEC segment, led by leadership in the core weekday primetime viewership band. Our strong movie library helped further consolidate our #1 position in the pay Hindi movie genre, recording its highest ever viewership share. 

Our regional portfolio continued to gain traction across markets during the quarter. We maintained the leadership position in the Marathi, Bangla and Kannada markets. While Zee Tamil and Zee Telugu witnessed a marginal decline in overall viewership due to high impact non-fiction shows launched by competition, the channels have maintained their share in the fiction genre. Zee Keralam, continued to gain share in the Malayalam market led by the performance of fiction shows, reaching 8% viewership share in less than a year of launch.

Our portfolio of regional movie channels – Zee Talkies, Zee Bangla Cinema, and Zee Cinemalu continued to perform strongly. We continue to be on track for the launch of new regional channels, in line with our plans. 

Digital Business 

ZEE5, one of India’s leading digital entertainment platform, continued to delight its audience with exciting and innovative content. 

  • ZEE5 recorded a peak DAU (Daily Active User) base of 8.9mn in September’19 
  • ZEE5 users watched an average of 120 minutes of content on the platform in September’19 
  • 23 original shows and movies in 5 languages launched during the quarter 
  • Launched ad-suite products Ampli5, Ad Vault, Infonomics, Play5 and Wish Box to offer holistic advertising solutions 

ZEE5 continues to be the biggest producer of digital original content in India. Further strengthening its position during the quarter, ZEE5 launched 23 original shows and movies, of which 13 were in regional languages. While shows like Rejctx were targeted at millennials and early adopters of OTT, TV spin-off shows like Ishq Aaj Kal and Jamai 2.0 were created to leverage the huge AVOD user base and drive them towards becoming paid subscribers.

During the quarter, we entered into a content co-production deal with one of India’s leading production houses, putting us in the pole position for the original content line up. As part of this deal, 3 Hindi shows were released in the month of September, increasing the pace of expansion of original content library. ZEE5 also premiered 52 movies across languages, making it the default destination for an audience seeking premium content. 

To strengthen its proposition to advertisers, ZEE5 launched 5 ad-suite products – Ampli5, Ad Vault, Infonomics, Play5, and Wish Box. These products will allow ZEE5 to offer wide-ranging and customized advertising solutions to brands. It will help ZEE5 cater to a wider advertiser base and create deeper partnerships. 

ZEE5 is one of the most widely available entertainment platforms across telcos, OEMs, ISPs, and e-commerce platforms. During the quarter, ZEE5 entered into partnerships with TataSky Binge, IRCTC, OYO, Flipkart Coins and several other players in the digital eco-system. It is also available as a pre-installed app on select Samsung smartphones.

Tapping one of the fastest-growing Smart TV ecosystems with presence across 45 brands and comprehensive delivery across all Operating Systems gives ZEE5 an added advantage in distribution. Along with increasing reach, ZEE5 is gearing up to launch a renewed platform with a new UI/UX and additional functionalities on both app and web this quarter. 

ZEE5’s international expansion initiatives witnessed strong traction in APAC and MENA markets of Sri Lanka, Bangladesh, Dubai, and UAE. A mix of high-decibel launch campaigns and ground connect events has helped ZEE5 attract an audience looking for quality Indian content. To maximize reach and revenue, ZEE5 is partnering with local telcos and content distributors in these countries. ZEE5 won the ‘Digital Content Service of The Year’ at the Telecoms World Middle East Awards 2019, Dubai, one of the most prestigious awards in the region. 

International Business During the quarter, ZEEL’s International business revenue was Rs. 2,082 million. The advertising and subscription revenues declined by 4.0% YoY and 21.5% YoY, respectively. Break-down of international business revenues for the first quarter is as below: 

  • Advertisement Revenue of Rs. 557 mn 
  • Subscription Revenue of Rs. 776 mn 
  • Other Sales and Services Revenue of Rs. 749 mn 

Movies & Music Business 

Zee Studios, our movie production, and distribution business produced Pal Pal Dil Ke Paas (Hindi) and Surkhi Bindi (Punjabi) and distributed 2 movies in India. In addition, 6 films across 3 languages were distributed in the international territories during the quarter. 

Zee Music Company, our music label, continued with the library expansion of both Bollywood and regional music. The music label registered ~7.1 billion views on YouTube in Q2. Zee Music Company is the second most subscribed Indian music channel on YouTube with over 44 million subscribers. 

Live Events 

Zee Live hosted Russel Peters for the second season of Supermoon Comic with shows across Pune, Hyderabad, and Ahmedabad. The upcoming events under Zee Live will see new IPs targeted at kids and an extension of Supermoon format to music events. 

CONDENSED STATEMENT OF OPERATIONS 

Consolidated operating revenue for the second quarter of FY20 stood at Rs. 21,120 million, recording a growth of 7.4% on a YoY basis. EBITDA for the quarter ended September 30, 2019, was Rs. 6,929 million, translating into an EBITDA margin of 32.7%. Profit After Tax (PAT) for the quarter was Rs. 4,132 million. 

The following table presents the consolidated financial statement of ZEEL and its subsidiaries for the second quarter of FY20: 

REVENUE STREAMS 

ZEEL has three sources of revenue – advertising, subscription, and other sales and services. Other sales and services include revenues from our movie production business, music label, content syndication, and commission on sales amongst others. The following table contains a break-down of consolidated revenues.

Advertising revenues 

During the second quarter, ZEEL’s consolidated advertising revenue grew by 1.2% YoY to Rs. 12,247 million. Domestic advertising revenues grew by 1.4% YoY to Rs. 11,690 million. The domestic advertising revenue growth was impacted by the tough macro-economic environment which had a negative effect on demand across categories. The impact on growth due to the conversion of two channels from FTA to pay in March continued during the quarter. As the quarter progressed, advertising spends witnessed a gradual improvement helped by the onset of the festive season. The full-year advertising growth will depend on the sustenance of this trend post the festive season. 

Subscription revenues 

ZEEL’s consolidated subscription revenue grew by 19.0% to Rs. 7,235 million during the quarter. Domestic subscription revenue grew by 26.8% YoY while the International subscription revenue declined by 21.5% YoY. The acceleration in domestic subscription revenue growth is driven by sustained growth in viewership of our network. ZEEL’s viewership share has almost doubled over the past decade due to the success of the regional portfolio and genre expansion.

However, this growth in viewership was not adequately monetized. The implementation of the new tariff order has led to the alignment of channel prices with their popularity, allowing us to effectively monetize the viewership built over the years. 

EXPENDITURE 

ZEEL’s total expenditure in Q2FY20 stood at Rs. 14,291 million, higher by 9.9% YoY compared to Q2FY19. The following table gives the break-down of costs. 

Programming cost for the quarter increased by 23.4% YoY to Rs. 8,962 million. This increase was primarily driven by content cost for ZEE5 and higher movie amortization costs for our Hindi and regional channel portfolio. Advertising, Publicity, and Other expenses at Rs. 3,206 million declined by 20.9% YoY. This fall is explained by a higher base in the corresponding quarter due to a one-off provision pertaining to certain investments and higher CSR spends. The decline in ad spends is due to lower marketing spends by ZEE5 during the quarter.

BALANCE SHEET 

 

 

BALANCE SHEET 

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