Weak occupancy hurts operating performance of PVR-INOX

PVR-Inox reported a subdued quarter, with 20% occupancy and -3.2% EBITDA margin. Revenue declined 9% YoY due to a 13% drop in movie releases. Weak ticketing and F&B revenue, coupled with operating deleverage, led to a net loss of Rs 1.4 billion.

Consolidated 1QFY25 revenue declined 9% YoY (-5% QoQ) to Rs 11.9 billion due to a 13% YoY drop in the number of movie releases. Occupancy was weak at 20.3% (vs. 22.6%/22.4% in 4QFY24/1QFY24) and ATP declined 4% YoY to INR235. Hence, ticketing revenues declined 14.5% YoY (-6.6% QoQ) to Rs 5.9 billion.

F&B revenues also declined 6.1% YoY (-2.8% QoQ) to Rs 4 billion due to a 10% fall in admissions, offset by a 3% increase in SPH to Rs 134.

Ad revenue grew 4.6% YoY (-10.6% QoQ) to Rs 934 milion. Advertisement revenue increased 5% YoY in 1Q, led by Kalki’s standout performance and off-screen sponsorship deals. PVR-Inox expects healthy growth in ad revenue, supported by big releases in 2Q/3Q.

EBITDA loss (pre Ind-AS 116) stood at Rs 378 million due to operating deleverage and higher rentals. Reported margin stood at -3.2% (vs. 6.2%/0.1% in 1QFY24/4QFY24).

Movie distribution expenses declined 18% YoY due to fewer movie releases. Depreciation increased by 5% YoY and interest costs declined by 3% YoY. As a result, the reported loss after tax stood at Rs 1.4 billion.

Gross debt declined by Rs 231 million to Rs 16.9 billion. However, due to EBITDA loss, net debt increased by Rs 255 million to Rs 13.2 billion.

The prolonged general elections spanning 44 days, along with the Cricket World Cup, affected the release calendar for many producers, who postponed their film releases. This resulted in a 13% drop in the number of releases YoY.

Blockbuster miss: Compared to last year, there were fewer blockbuster films (ticket sales of Rs 1 billion), only three in 1QFY25 vis-a-vis seven in 1QFY24. ‘Kalki’, one of the biggest blockbusters, was released at June-end 2024, which will see spillover effects in 2Q.

Release outlook: 2Q started on a positive note, with the ‘Kalki’ spillover and the upcoming movie pipeline across languages. In terms of releases, 3Q will see big titles, including ‘Sitare Zameen Par’ and ‘Pushpa 2’. The management expects 3Q to be the biggest quarter of FY25. Hollywood is also rebounding as the writers’ strike is now over. The management expects the content pipeline to return to the pre-Covid level in the next 6-12 months.