PVR Company plans to add 42 additional screens during the current fiscal

Highlights of the call

The company during the quarter ended March 2009 reported just 5% growth in net operating revenues at Rs 58.01 crore. After providing for tax credit during the quarter, the net loss was Rs 1.11 crore as compared to a net profit of Rs 2.70 crore during the corresponding quarter of the previous year.

During the full year ended March 2009, on standalone basis, PVR reported 15% growth in net revenues to Rs 274.73 crore. Operating margins dipped 320bps at 16.8% due to higher other operating expenses and the staff cost. PAT for the year dipped 40% at Rs 12.65 crore.

The movie pipeline was weak during the year and the performance of some of the big budget movies, was dismal thus impacting the overall performance during the year.

The security concerns due to bomb blasts in various cities and the terrorist attacks in Mumbai also had its sober impact.

During the year under review there was only handful of successful movies, including GHAJINI, JAANE TU YA JAANE NA, RAB NE BANA DI JODI and SINGH IS KING!

The exhibition industry witnessed one of its low years, leading to decline in occupancies and overall profitability.

During the quarter ended March 2009, ticket sales grew 19% at Rs 35.1 crore, the F&B revenues grew 5% at Rs 10.97 crore whereas the income from revenue sharing however fell 54% at Rs 2.29 crore, and advertising & royalty income fell 6% at Rs 8.39 crore.

For the quarter footfalls increased 2% at 3.75 million however average occupancy decreased to 27.3% from 31.9% in the corresponding quarter of the previous year. The footfall during the full year was up by 7% at 17 million patrons.

The fall in occupancy was due to lack of good quality content and below expected performance of big-budget movies such as Chandni Chowk to China and Delhi-6. Besides there was hardly any content being released at the cinemas since March 2009.

The new properties, which are yet to stabilize, operated at sub-30% occupancy and further pulled down the overall occupancy for the year.

The properties under operation at the end of March 2009 were 26. The screens under operation at the end of March 2009 were 108 against 84 in the corresponding quarter previous year. Seat capacity at the end of March 2009 was 27,827 against 21,853 seats in the corresponding quarter previous year.

Geographical distribution, 49% seats are in North, 11% in South and 40% in West. The company plans to expand to the eastern market as well by launching a project in Kolkata during FY 2010-2011.

On comparable basis, the ATP (Average ticket price) was flat at Rs 133 during the previous quarter ended March 2009. Non-comparable/new properties ATP were at Rs 154. The overall ATP for the quarter was up 6% at Rs 140.

The average entertainment tax, as a % of gross ticket sales and income from revenue sharing fell to 14.67% during Q4 as compared to 16% during the corresponding quarter of the previous year. 46 screens of the 108 screens under E-Tax exemption. Currently, 42% seats enjoy E-Tax exemption.

The average ticket price increased 6% at Rs 140. ATP of comparable properties was flat at Rs 133.

During the quarter under review, PVR Blu-O, a joint Venture Company between PVR Ltd and Major Cineplex Group Plc based out of Thailand, opened its first and India’s largest Bowling Alley Center located at prestigious Ambience Mall in Gurgaon giving fillip to out door retail entertainment. Additional 2 more centers would be opened during the current fiscal.

During its 18-days of operation, the subsidiary grossed an income of Rs 68 Lakh and a net loss of Rs 36 lakh, largely on account of opening launch cost at the time of commencement of the property.

During the quarter under review, M/s CR Retail Malls (India) Pvt Ltd, a wholly owned subsidiary of PVR Ltd which operates a seven screen multiplex with 1847 seats, situated at Phoenix Mills Compound, Lower Parel, Mumbai, has been granted the exemption from the payment of Entertainment Tax under the provisions of Bombay Entertainment Duty Act, 1923, by the Maharashtra Government for a period of 5 years With this property, PVR now has 42% of its overall seat capacity and 39% of overall screen capacity under entertainment tax exemption.

The company opened 24 screens, including Mumbai’s largest multiplex at Phoenix Mills. During the year under review the company also opened India’s largest 24-lane, bowling center at Ambience Mall, Gurgaon.

The company is expecting a handover of approx. 30-40 screens over next six months from various real estate developers for fit outs.

For FY10, the company plans to add 42 more screens thus increasing the seat capacity by 10,000 by the end of the current year. The average capex per screen was Rs 80,000 – Rs 90,000 and the company plans to reduce it by further 10-15% during the current fiscal.

The upcoming screens locations are well chosen at prime locality in order to attract viable business.

The Karnataka Government has reduced the rate of entertainment tax applicable to cinemas from 40% to 30% with effect from April 2009. The company currently operates India’s largest, eleven screen cinema at Koramangla (Karnataka) and is expected to open another eleven Screen cinema in Bangalore during the year.

The Andhra Pradesh government has increased the maximum number of shows that can be showcased in a day from 4 to 5 shows per day. The company currently operates a three-screen cinema in Hyderabad, which will get benefited by the aforementioned change in regulatory scenario.

The ongoing tussle between the producers and multiplex operators has adversely impacted the availability of content during the current quarter. However this issue would be settled in a week’s time.

During the latter part of the year there are around 30-40 big-budget movies slated for a release. Thus this is expected to improve the performance of the company going ahead.

The exemption of service tax on lease rentals, reduction of Entertainment tax in Karnataka and relaxation on number of movie shows in Hyderabad is expected to drive the growth of the company in the current fiscal.

The consolidated cash in the book is Rs 115 crore (Rs 10 crore in PVR and Rs 105 crore in PVR Pictures) and the consolidated debt in the book is Rs 145 crore.

The company declared a dividend for the year ended March 2009 at 10% per share (Re. 1 each) on equity shares.