BackPVR: content is king
Movies that hit the screens in the June quarter did not perform as well as those that came out in the same quarter last year
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Forget cash. Content is king in the multiplex business.
That’s what PVR Ltd’s dull June quarter financial results tell us.
There was a lack of quality content during the quarter, thanks to the general election. Sadly, the movies that did release in the June quarter did not perform as well as those that came out in the same quarter last year.
The occupancy of the top 10 movies for comparable properties in the June quarter was down by 7% against the same period last year, maintains PVR. Even so, the company’s consolidated revenue rose 8% for the quarter on a year-on-year (y-o-y) basis to ₹ 362 crore. Revenue growth was mainly driven by new properties. In 2013-14, PVR added 73 screens, and 23 screens were added in the last quarter, taking the company’s total number of screens to 444.
While that augurs well, operating profit margin declined by 260 basis points (bps) in the last quarter on a y-o-y basis to 15.1%. One basis point is one-hundredth of a percentage point.
Operating margin was adversely affected due to the higher cost of food and beverages consumed, rent and repairs and maintenance charges. Operating profit thus fell by about 8% to ₹ 54.7 crore. However, the drop in net profit was far more pronounced on account of higher depreciation costs. PVR’s net profit fell to ₹ 7.6 crore from ₹ 13.60 crore, a 44% decline y-o-y.
The good news, however, is that the company has managed to increase its average ticket prices for comparable properties by 5%. An anticipated urban revival and PVR’s expansion plans will help the company’s growth prospects.
The company’s shares have gone up by 30% so far in this fiscal, suggesting that most of the positives are captured already. Investors will need to follow the content closely.
“Even at a very low (ticket) price, people are not willing to come if they don’t like the content," Ajay Bijli, chairman and managing director, PVR, said in an interview to CNBC-TV18 news channel, adding that it is not just the ticket price that drives people in.
“It is the quality of the content because I think the time is valued more than the price that they pay for a ticket. So if movies don’t perform, people don’t want to come," he said.
Fortunately for investors, content is expected to be comparatively better in the current quarter and the next one.
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