Zee Entertainment Enterprises Limited Quarter Three Financial Year 2010- Earnings Conference Call January 19 2010, 1300Hrs IST
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3Q (October- December 2009) FY 2010 Teleconference January 19, 2010 Zee Entertainment Enterprises Limited Quarter Three Financial Year 2010- Earnings Conference Call January 19 2010, 1300hrs IST Moderator Ladies and gentlemen good afternoon and welcome to the Zee Entertainment Enterprises Ltd. Q3 FY2010 results conference call. Please note that this conference is being recorded. At this time I would like to hand the conference over to Mr. Harshdeep Chhabra from Zee Entertainment. Thank you and over to you sir. Harshdeep Chhabra Ladies and gentlemen, thank you for joining us today. This conference call has been organized to update our investors on the company’s performance in the third quarter of fiscal 2010 and to share with you the outlook of the management of Zee Entertainment Enterprises Limited. We do hope that you had a chance to go through copies of the earnings release and the results, both of which are uploaded on our website www.zeetelevision.com. To discuss the results and performance joining me today is Mr. Punit Goenka, Managing Director and CEO of ZEEL, along with members of the senior management team of the company including Mr. Hitesh Vakil, CFO & Mr. Atul Das, Head- Corporate Strategy & Business Development. We will start with a brief statement from Mr. Punit Goenka on the third quarter performance and will then open the discussion for question and answers. I would like to remind everybody that anything we say during this call that refers to our outlook for the future is a forward-looking statement that must be taken in the context of the risk that we face. I now request Mr. Goenka to address the audience. Punit Goenka Thank you, Harsh. I would like to welcome everybody to this call and appreciate you joining us for the discussions on the results of the third quarter of FY2010. Let us begin with details of some of the key financials of the quarter, which should give a clearer picture of our performance. Advertising revenues were Rs 2.71 billion, an increase of 1% as compared to the corresponding quarter last fiscal. On a sequential basis, advertising revenues were up 9%. I am happy that after a period of three quarters, we have recorded a positive YoY growth in advertising revenues. This is reflective of our product strength as well as the fact that market sentiments on ad spends have improved considerably compared to a few quarters ago. Page 1 of 17 3Q (October- December 2009) FY 2010 Teleconference January 19, 2010 Total subscription revenues for the quarter were at Rs 2.47 billion, registering an increase of 8% over the corresponding quarter last fiscal. During the current quarter, domestic subscription revenues stood at Rs 1.46 billion while international subscription revenues were Rs 1.01 billion. Subscription revenues from domestic DTH were Rs 632 million during this quarter, an increase of 124% YoY and 23% QoQ. The DTH number this quarter includes a non recurring amount of Rs 49.8 million. Positive steps continue to be taken by industry players and regulators for a fast growing pay television market. With around 2.4 million DTH households being added across the industry during the quarter, leading to 6.4 million DTH additions in the fiscal, signs are that digitization continues at a heartening pace. Other sales and services registered revenues of Rs 135 million. The Company had recorded revenues of Rs. 497 million under this head during the corresponding period last fiscal. These led to consolidated revenues of Rs 5.31 billion for the quarter. On the cost front, total expenses were Rs 3.74 billion. This indicates a 12% decrease on year on year basis and a 4% decrease on a quarter on quarter basis. Programming & operating cost was Rs 2.31 billion as compared to the Rs 2.68 billion in the corresponding period last year. Despite this reduction in costs, we have delivered a strong performance across network channels on the viewership front. During the quarter, the company’s operating profit was Rs 1.57 billion, an increase of 31% over the corresponding period last fiscal. Operating profit margin improved both year on year as well as sequentially and stood at 29.6%. Profit Before Tax stood at Rs 1.75 billion while Profit After Tax was Rs 1.46 billion. This represents an increase of 55% and 74% respectively over the corresponding quarter last fiscal. I would now like to cover the business performance. The flagship Hindi General Entertainment Channel Zee TV delivered 250 weekly GRPs on an average during this quarter and attained a channel share of 20% in its genre. Zee TV reached its highest rating of the year during this quarter and had the highest rated fiction-Pavitra Rishta as well as non-fiction show-Dance India Dance in the genre. The company’s Hindi movies bouquet garnered a leading 33% genre viewership share this quarter. Zee Cinema aired various blockbusters in the quarter including God Tussi Great Ho, 123, Dasavatar etc. Page 2 of 17 3Q (October- December 2009) FY 2010 Teleconference January 19, 2010 Zee Café, the network’s English entertainment offering, premiered the latest season of Gary Unmarried, Brothers & Sisters 3, The Celebrity Apprentice- Season 2 etc. and garnered 27% channel share for the quarter in its genre. The English movie channel Zee Studio premiered movies such as Vicky Cristina Barcelona, Wrestler, Duchess, Peaceful Warrior, How To Lose Friends & Alienate People etc. Highlights of our International operations included distribution tie-ups in new geographies with platforms such as Comcast, Bright House Cable etc. Zing UK continuing as the highest rating Asian channel on Broadcasters’ Audience Research Board (BARB) and the network’s Arabic offering Zee Aflam bagging a Gold Award in the prestigious Effies MENA 2009 were the other key highlights. Zee Aflam continued to dominate the local market, featuring in the top 3 movie channels of Kingdom Of Saudi Arabia during this quarter. Ten Sports and Zee Sports continued their dominating presence in the sports genre. Key fixtures of the quarter included coverage of the Pakistan-New Zealand cricket series, the South Africa- England cricket series and the Men’s Champions Trophy Hockey. In the coming quarter, the channels are slated to air the live coverage of the Pakistan- England cricket series, the Chennai Open tennis tournament and the Hockey World Cup. The Board of Directors of the company in its meeting yesterday approved the acquisition of an additional 45% stake in the Company’s 50% subsidiary Taj TV Limited for a consideration of USD 44.145 million. With this, I would like to summarize by saying Zee’s performance over the last couple of quarters is reflective of its ability to grow viewership and revenues even under difficult market conditions. The operating profits and net profits this quarter have reached a new high despite intense competition and I am confident that we would continue to deliver strong results in the times to come as well. I thank you again for joining us and would now like to open the floor for the questions and answers session. Moderator Thank you sir. Ladies and gentlemen we will now begin with the question and answer session. The first question is from the line of Abneesh Roy of Edelweiss. Please go ahead. Abneesh Roy Sir, congratulations on the advertising revenues and DTH revenue front. My question is on the international subscription revenues, where we see that the developed markets are making a comeback slowly in terms of GDP so where do we see the international subscription revenue because this quarter there was a 12% year-on-year decline and plus Colors is Page 3 of 17 3Q (October- December 2009) FY 2010 Teleconference January 19, 2010 getting somewhat aggressive on this front, so overall if you can give some outlook on this? Atul Das On the international revenue there is a mix of slight weakness on the revenue front as well as on the currency fluctuation. We have seen some subscriber churn, though with the international scenario improving we should hopefully be able to see some bit of stability there and going forward that turning into growth. Abneesh Roy Is it possible to share the ex-currency numbers? Atul Das The ex-currency would be normally 6% decline and as far as your second question is concerned on the Colors, yes we are watching the scenario closely. As you know that despite availability of major competing channels including Sony and Star in most of the international markets we have had a lion share of the revenues in those genres for many years now. We will watch with interest how the launch happens but we are confident that our ability to have a touch-point with the viewers will enable us to keep our shares. Abneesh Roy Sir if you see the ad market all the ad pundits are saying that the growth rates are going to be better than expectations. India is going to be one of the major leaders in recovery. My question is from a three-player market suddenly we are seeing trends of a four-player market into the Hindi GEC space, so your comments on the overall outlook on the ad revenue front. Punit Goenka Who is the fourth player Abneesh? Abneesh Roy See YRF shows have disappointed but Sony’s ratings have picked up. Punit Goenka Well I would not comment on any particular competitor, though I would say that the three-player market existed in this entire year of operations and I do expect that to be a reality even going forward.