Zee Entertainment dips 4% as Q3 profit plunges on low ad revenue, high cost

Shares of Zee Entertainment Enterprises skid 4 per cent to Rs 272.45 on the BSE on Wednesday after the broadcasting company put up a weak December quarter (Q3FY20) show. It's profit before tax (PBT) declined 37 per cent to Rs 510.8 crore, coupled with a cut of 16 per cent in advertising revenue at Rs 1,230.8 crore.

For the quarter under review, the company posted a consolidated net profit of Rs 349.4 crore, as against profit of Rs 562.4 crore in the corresponding quarter of the previous fiscal. Operating revenue, meanwhile, came in at Rs 2,048.7 crore, down 5.5 per cent from Rs 2,166.8 crore in the year ago period. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) was Rs 565.8 crore with an EBITDA margin of 27.6 per cent. 

The advertising revenue for the quarter came in at Rs 1,230.8 crore, down 15.8 per cent YoY; the domestic advertising revenue declined 15.7 per cent. The international ad revenue came in at Rs 73.8 crore.

“Third quarter is normally a strong growth period for us. However, tough macroeconomic environment led to a decline in ad revenues,” Punit Goenka, managing director and chief executive officer of ZEEL said.

According to the management, the domestic ad revenue was hit by the persisting slowdown in the key consumer sectors. It, however, expects the revenue to revive from the next quarter.

"As the volume growth for most consumer companies did not see any uptick during the quarter, they cut advertising spends to protect their margins... The festive month of October saw a pick-up in advertising spends, but the growth slumped after that," it said in a statement.

The subscription revenue, however, grew 15.4 per cent to Rs 713.7 crore in Q3FY20, riding primarily on last February's new tariff order (NTO)-induced changes in subscription patterns. Zee's India subscription revenue grew 21.7 per cent to Rs 631 crore, the company said.

The company's total expenses were up 3 per cent YoY.

At 10:02 am, the stock was trading 3 per cent lower at Rs 275.15 apiece, as against a 0.16 per cent gain in the S&P BSE Sensex. A total of 10.6 million shares have changed hands on the counter on NSE and BSE till the time of writing of this report. 

During the company's conference call, the management said that the Audit Committee has begun internal audit in the Related Party Transaction (RPT).