Shares of movie theatre chain operator PVR Ltd have underperformed the small-cap index of the Bombay Stock Exchange since the beginning of 2011. The fourth quarter (Q4) results of the company are unlikely to change that trend.
PVR posted a consolidated loss of Rs 1 crore in the three months ended March compared with a loss of Rs 4.7 crore in the preceding quarter and a net profit of Rs 40 lakh in the same period last year.
Why were the March quarter numbers disappointing? Firstly, depreciation costs were high. Secondly, the general operating environment was weak for companies such as PVR, as the quarter felt the impact of the cricket World Cup 2011, which was anticipated.
Also See | Flop show (PDF)
Then there were no blockbuster movies released during the quarter. Footfalls fell. As a result, occupancy levels of movie exhibition stood at 20% in the March quarter compared with 28% in the same period last year. Thus, revenue increased a mere 1.4% from a year earlier and fell compared with the December quarter.
For the year as a whole though, the company has done relatively well by posting a consolidated net profit of Rs 8 crore against Rs 1.35 crore in the previous year. However, PVR highlights in its quarterly report that “overall revenue for the year ended March was impacted on account of poor performance of PVR own production Khelein Hum Jee Jaan Sey at the box office. As a result, the company incurred a loss of Rs 22 crore at PAT (profit after tax) level during 2010-11”.
The good news is that PVR has decided to slow the production business and has just one project Shanghaiunder production, which is expected to be released this fiscal.
On 5 May, the company announced that it would sell and lease back its Phoenix Mills multiplex property in Mumbai. PVR expects this move to provide significant funds for the company’s expansion plans and improve its return on capital employed. PVR has ambitious expansion plans and intends to add 50-55 new screens in the current fiscal. The company currently has 142 screens.
While those developments augur well, analysts maintain that a delay in the expansion plan and the performance of Shanghai are the main risks for the stock this fiscal. Further, lack of quality content would be a dampener for multiplex companies in general.
Graphic by Yogesh Kumar/Mint