The Q4FY2009 results of Zee Entertainment Enterprises Ltd (ZEEL) are below street expectations both on revenue and adjusted net profit fronts. However the operating margins for the quarter are better than expected.
The operating revenues declined by 2.3% year-on-year (y-o-y) due to a 7.4% dip in advertisement revenues and a lower other sales and services.
However, the subscription revenues were up by 13.3% y-o-y primarily led by higher revenues from direct to home (DTH), which were up by 35% quarter on quarter (q-o-q) to Rs38.1 crore, while the revenues from the domestic and international cable were almost flat.
The operating margins for the quarter stood at 23.4% against 24.8% in Q4FY2008. However the same is above expectations primarily as the programming cost has come down significantly from 49.2% to 43.6% of the revenues on a quarter-on-quarter (q-o-q) basis.
This is mainly attributable to replacing of existing shows (which were also loss making) with new shows with lower cost per hour.
Thus, despite a 0.5% year-on-year (y-o-y) reduction in operating costs the decline in overall revenues led to a 7.8% fall in y-o-y operating profits.
A sharp increase in interest cost, higher depreciation and a marginally higher tax rate on a y-o-y basis led to a 25.8% decline in adjusted net profit to Rs70.5 crore.
For FY2009, while the revenues increased by 18.5% (backed by a strong growth of 40.9% in the first half of the year), the operating profit dropped by 2.2% as the operating margins declined to 24.3% in FY2009 against 29.4% in FY2008. Thus the adjusted net profit declined by 9.8% y-o-y.
An extraordinary gain of Rs19.5 crore on divestment of a subsidiary, Asia Today, led the reported net profit to be up by 4.4% y-o-y to Rs96.5 crore.