MUMBAI: A spurt in programming and personnel costs has led to a fall in ETC's net profit for the year 2004 -2005.
While a marginal increase of eight per cent in total income was recorded for the year 2004-2005, programming costs increased by 35 per cent from Rs 53.7 million last year to Rs 72.4 million this year. Personnel costs also rose by 37 per cent from Rs 36.4 million to Rs 50 million. Net profit, as a result, fell to Rs 72 million in 2004-2005 from Rs 158 million in 2003-2004.
Mega events like Baisakhi Blast, Punjabi Music Awards as well as collaborations for the mega release of the Bollywood flick Mughale-e-Azam led to the hike in programming costs, resulting in a seven per cent decrease in EBIDTA (earnings before interest, depreciation and tax).
Personnel costs went up in the backdrop of an exponential growth in the media and entertainment sector. Amortization cost was mainly on account of depreciation of fixed assets.
ETC also undertook a major initiative to increase visibility of its channels resulting in a higher outlay on distribution, outdoor, publicity, software amortization and other industry media.
Another factor contributing to the loss is tax provision. While for the 2003-2004, tax provision was based on MAT (minimum alternate tax), the unabsorbed losses resulted in a deferred tax asset while the absorption of the same resulted in the deferred tax liability in the current year.
Coming to working capital and financial management, the aggregate of the outstanding secured loans went down from Rs 37.8 million in 2003-2004 to Rs 16 million in the current year. Similarly, the operating cashflows were directed towards effective working capital management and meeting the capital expenditure.
The company also maintained the average age of 233 days of its debtors compared to 240 days in the previous year.
ETC is also taking conscious steps towards strict credit controls with enhanced focus on continuously monitoring receivables and collections.
Challenges posed in front of ETC for the year 2005-2006 is advertising revenue which is directly dependent on the new releases of films and music albums. Hence growth in ad sales will be linked to the development of Bollywood and the music industry. Another area of concern is the trend of relatively high credit periods extended by music channels. Add to that, a significant chunk of the company's business comes from music companies.
