The Company's consolidated revenues stood at Rs79,339 million for the year ended 31st March 2019, compared to Rs66,857 million in the previous year, a growth of 18.7%. Advertising revenues grew by 19.8% YoY to Rs50,367 million. Domestic advertising revenues witnessed a growth 20.9% YoY during the year ended 31st March 2019. Domestic ad revenue growth in the first nine-months was strong led by market share gains by our broadcast business. In addition, monetization of fast-growing ZEE5 users also aided advertising revenues during the year. The growth slowed during the fourth quarter due to implementation of tariff order and rejigging of ZEEL's FTA portfolio. Subscription revenues grew by 13.9% YoY to Rs23,105 million. Domestic subscription revenues were at Rs19,232 million, a growth of 17.4% YoY. The growth during the first nine-month period was 22.5%, led by monetization of phase-III subscribers. The full year growth came down due to the impact of TRAI tariff order in the fourth quarter. While all the stakeholders are working towards a smooth transition to the new regime, ZEEL has seen satisfactory uptake of its channels and bouquets.
The Company's operating expenses for the year ended 31st March 2019 grew by 16.5% to Rs53,700 million, compared to Rs46,095 million in the previous year. Programming related costs increased 21.7% YoY to Rs30,578 million. This increase was driven by content cost for ZEE5 which was absent in the base year, increase in programming cost for domestic broadcast business due to higher movie amortization cost and increase in original programming hours in regional markets, and elevated costs for the movie production and distribution business. Advertising, publicity and other expenses for the year grew 10.8% YoY to Rs15,693 million despite a higher base, due to increase in marketing and promotion costs associated with ZEE5, new channel launches (Zee Keralam, Zee Keralam HD, Zee Kannada HD) and brand refresh campaign of one English and several regional channels during the year. EBITDA at Rs25,639 million, witnessed an increase of 23.5%. EBITDA margins for the year ended 31st March 2019 stood at 32.3%, as compared to 31.1% for the year ended 31st March 2018.
Depreciation and Amortization expense witnessed an increase of 28.9% YoY, led by higher amortization expense of intangible assets. During the year, the company recorded an exceptional loss of Rs218 million relating to partial impairment of goodwill in its online media business. During the previous year, the company had reported an exceptional gain of Rs1,346 million pertaining to sale of Sports business. Consolidated income tax expense at Rs8,673 million witnessed an increase of 3.1% over the previous year. Effective tax rate for the year ended 31st March 2019 was at 35.6%. Consolidated profits after taxes including exceptional items stood at Rs15,671 million.
Liquidity and Funding
As on 31st March 2019, the Company had cash and cash equivalents of ₹12,218 million and treasury investments of ₹8,576 million. During the year ended 31st March 2019, the Company's consolidated long-term debt reduced to ₹7,429 million from ₹11,452 million during 31st March 2018. Part redemption of preference shares led to the decline in the overall debt position of the Company.
Consolidated cash flow from operations stood at ₹1,352 million for the year ended 31st March 2019 as compared to ₹5,544 million during the previous year. Higher investments in acquisition of movie rights (satellite, digital and international rights, including future rights) led to increase in inventories. The company has given advances to various content aggregators and production houses for acquisition of movie libraries and output deals which led to increase in overall working capital, thereby impacting operating cash flow during the year. Cash flow from financial activities was impacted due to part redemption of preference shares and payment of equity dividend to the shareholders.
External Risk Factors
Ever-changing trends in media sector
Audience tastes are constantly evolving and difficult to predict with accuracy. People's tastes are also influenced by new trends and the environment they live in. With the kind of investments made in content, non-performance of the shows/movies would have an adverse impact on the bottom-line of the Company.
Competition from Other Broadcasters
The Company operates in a highly competitive environment that is subject to innovations and changes. Viewership share is the key monitorable for all the advertisers and hence the most relevant metric to all the television broadcasters. Any new competition in the space can have an impact on the Company's revenues.
Faster than expected shift to Digital platforms
With mobile data prices coming down, digital content consumption has grown exponentially. This can lead to a slower growth of advertising revenues for the profitable television business.
Business environment risk:
Macro-economic environment can be a potential source of risk. Moderating growth, along with high inflation, can adversely impact advertising revenues of the Company, which forms it's the largest component of revenues.
Exchange rate fluctuations
Being present in 170+ countries, the Company receives a significant portion of its revenues and incurs a significant portion of its expenses in foreign currencies. As such, the Company is exposed to fluctuations in the exchange rates. Any extreme fluctuations of foreign currencies with Indian Rupee could have a substantial impact on its revenues and expenses.
Uncertainties in rules and regulations
The M&E industry is governed by the rules and regulations framed by the authorities and regulatory bodies of the different countries the Company operates in. The policies and regulations issued by them have a bearing on the industry landscape as well as business of the Company.
Internal Risk Factors
Increase in content costs
The Company spends a significant amount for acquisition of rights to movies and music across its broadcast, digital and international business. With increasing competition, content creation and content acquisitioncosts could rise to a level not commensurate to monetization potential and estimated cost recovery.
Failure to hire and retain best talent
Failure to evolve organization structure and culture could lead to loss of ability to attract, develop and retain key creative, commercial and management talent.
Failure to make proper use of technology
Absence of processes embedded with Big Data technologies and advanced analytics which complement management decision making could restrict the ability to leverage data repositories and tools existing in ecosystem.
HUMAN RESOURCE DEVELOPMENT
ZEEL believes that its people are the biggest driver of success and the Company has a strong focus on attracting, developing and retaining talent. The people strategy of the Company is founded on three pillars – improving the employer brand, creating an organizational context that inspires employees to do their best and being future-ready through capability building and talent pipelining. All current and future interventions are focused on driving one or more of these outcomes. Last year, the focus has been on articulating the people strategy and kicking off the interventions required to deliver on the identified vectors. The Company has inked strategic partnerships with global learning institutions to enable employees to upgrade their skills. Its initiatives for improving employee experience – implementation of Success Factors (leading cloud-tech HR platform), strengthening its wellness offering and enhancing the quality and consistency of employee engagement, have resulted in ZEEL being recognized in the ‘Top 100 Great Places to Work in India' by the GPTW Institute. The Company's people strategy is geared for making ZEEL India's number one entertainment content company.
Company's internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company's internal control processes and monitors the implementation of audit recommendations, including those relating to strengthening of the Company's risk management policies and systems. As part of Enterprise Risk Assessment and Internal Control evaluation and with a view to enhance related effectiveness of control, your Company is modifying its systems and processes with technology enablement for film acquisition.