ZEEL revenues up 11.6% in Q1FY15

Revenue from advertising grows 18%, subscription 4.4%

Zee Entertainment Enterprises Limited's(ZEEL) consolidated revenues for the quarter ended June 30 fell marginally short of street expectations at Rs. 1085.7 crore(expectation was Rs 1120 crore). The revenues showed a growth of 11.6per cent on year on year basis from Rs 973.3 crore in Q1FY14.

The Q1FY15 consolidated EBITDA reportedby ZEEL was Rs 309.2 crore, up 6.1% from last year. However,this is also lower than the market prediction of Rs 339.7 crore. TheEBITDA has been impacted due to increased costs in the adming andsales department which was recently restructured to follow theTelecom Regulatory Authority of India's (TRAI's) regulation oncontent aggregators.

EBITDA margin declined 150bps YoY to28.5%. Programming costs increased six% YoY to Rs 434crore. This is due to the launch of Zee Zindagi which shows contentacquired from Pakistan. "Admin and selling expenses increased 32per cent YoY which could be on account of change in accounting,"says a report by ICICI Securities.

Profit after tax was slightly above thestreet expectation of Rs 198 crore at Rs 210.57 crore. This is down6.2% when compared to last fiscal's PAT of Rs 224.64 crore.

The company's advertising revenuesstood at Rs 622.1 crore, up 17.4% from Rs 530.1 crore last year. The ex-sports advertising revenue grew by 20% YoY. Thecompany has beaten the industry's ad revenue growth for the quarter (10 to 11%) by a hefty margin.

The TRAI regulation was also responsible for decline in subscription revenues by 4.5% quarter on quarter to Rs 442.8 crore. "During the quarter, domestic subscription revenues stood at Rs 323.8 crore. Though the reported revenue reflects growth of 2.2% (YoY), like-to-like growth is in the high single digits (the difference is due to  accounting changes necessitated by change in TRAI's content aggregator regulation).

During the quarter, international subscription revenues were Rs 118.9 crore, recording a growth of 10.8% over thelast fiscal," said the company in it's earnings release.

The main reason for growth is subscription revenues from overseas was the depreciation of the rupee. The surprise came in the form of profit from sports business to the tune of Rs 1.2 crore. The company was expected to make a small loss from its sports business for the fiscal, but due to the absence for major sports events on its Taj Television Network (which runs Ten Sports and other sports channels), the cost has been minimal, accounting for profits. Last year, the sports business brought in loss of Rs 9.5 crore for the first quarter.