Zee Entertainment Enterprises (ZEEL) Q4 03/04 earnings summary

Executive summary

• FY04 consolidated revenue rose 12.5% to Rs. 14,478m; operating profit increased 12.0% to Rs. 5,086m and profit for the year grew 37.7% to Rs. 2,942m.

• Subscription revenue grew 24.3% to Rs. 6,026m, increasing to 44% of operating revenue; advertising revenue was Rs. 6,355m, or 46%.

• Performance reflected lower finance costs, channel launches and stronger subscription income; consolidated comparisons are affected by a full year of ETC and Padmalaya results versus partial-year consolidation in FY03.

Financial highlights

• Consolidated operating revenue was Rs. 13,702m, up 13.4% YoY; total revenue including other income was Rs. 14,478m, up 12.5%.

• Operating profit reached Rs. 5,086m, up 12.0%; operating margin was 35.13%, down 18 bps YoY.

• Profit before tax and exceptional items rose 20.3% to Rs. 4,183m; profit for the year increased 37.7% to Rs. 2,942m.

• Advertising revenue was Rs. 6,355m versus Rs. 6,265m; subscription revenue rose 24.3% to Rs. 6,026m from Rs. 4,849m.

• Consolidated financial expenses declined 24.0% to Rs. 583m, while total expenditure increased 12.9% to Rs. 9,393m.

Outlook and guidance

• Strategy centered on growing subscription income through CAS and DTH, expanding channel offerings, strengthening cable and satellite distribution, and selectively growing international markets.

• DTH was viewed as a route to direct viewer access, higher subscription revenue per viewer and improved transparency; Dish TV had more than 130,000 subscribers at the time of the Chairman’s letter.

• Management expected subscription revenue’s share of turnover to continue rising; CAS implementation and cable addressability remained dependent on regulatory direction.

• The stated long-term priority was sustainable shareholder value through customer focus, operational excellence, people development and technology; no numerical FY05 financial guidance was stated.