Eros bows as profits fail to hit the mark

published 13 July 2012

Shares in Bollywood film studio Eros International took a hit on Friday as profits were dented by the group being on the wrong side of an interest rate swap.

Pre-tax profit for the year to March 31st was $53.6m (2011: $55.8m) on revenues of $206.5m (2011: $164.6m). Underlying earnings before interest, tax, depreciation and amortisation rose to $154.8m from $127.3m the year before. Basic earnings per share dropped from 38.6c per share to 31.9c.

Eros took a $4.26m net loss on "held for trading" financial liabilities, principally relating to losses arising on a previously effective interest swap as a result of a change in hedging strategy.

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The firm also saw a rise in outgoings, which it attributed to an increase in film amortisation costs, higher film release slate expenses and higher advertising costs, along with higher admin outgoings.

Higher revenue was partially offset by the negative impact of foreign exchange rate fluctuations, in particular in the quarter ended December 2011.

Administration costs leapt from $20.5m to $28.0m year-on-year, while cost of sales soared from $88.0m to $117.0m. Operating profit increased from $56.1m to $61.4m.

The company released 77 films in the year ended March 31st 2012 compared to 78 in the previous year.

The Executive Chairman, Kishore Lulla, said: "These results are all the more impressive as they have been achieved despite the 13.8% depreciation of the Indian rupee against the US dollar in the twelve months ended 31st March 2012. Expected growth in the Indian entertainment sector, our global film distribution network and our ongoing investment in content will position us well for the future.

"Our revenue growth was primarily attributable to an increase in theatrical revenue in the year as a result of the increased number of high profile films with recognised star casts resulting in higher Indian and international revenue.

"The higher revenue in India was a result of wider screen releases, higher than average ticket prices resulting from the continued increase in multiplex and digital screens in India and premiums charged for tickets for one 3D film release, and the timing of theatrical releases.

"Music and mobile monetisation from the music tracks of the high profile continued to be strong. Television and music pre-sales formed an important part of the company's monetization strategy and contributed towards de-risking content investment."

The share price fell 9.77% to 175.50p by 09:13.