Q1-2015: Loss due to commissioning delay, own project delivery recognition for DQ Entertainment

BENGALURU: The Tapas Chakravarti led DQ Entertainment (International) Limited (DQEIL) reported consolidated loss of Rs 12.06 crore in the quarter ended 30 June, 2014 (Q1-2015, current quarter) as compared to a profit of Rs 6.63 crore (21.8 per cent of consolidated net income from operations or Total Income from Operations) in the corresponding quarter of last year (Q1-2014) and against a profit of Rs 14.66 crore (14.4 per cent of TIO) in the immediate trailing quarter Q4-2014). The company says that it is facing a financial strain on account of high receivables, but at the operational level it is cash positive. DQEIL claims that the current total contract value for the service/co-production projects signed and in discussions is about USD 63 million to be executed over the next 18 months. Also, the total contract value for the licensing and distribution deals signed is USD 10 million for FY-2015. Note: 100,00,000 = 100 Lakhs = 10 million = 1 crore The company explains that due to seasonality of its business, the first and third quarter results are generally lower than the results of the second and fourth quarters.  It attributes the decline in production revenues to two reasons – (1) DQEIL had completed and delivered a number of projects by March 2014, and final deliveries were done in April 2014. Commissioning of new projects did not get completed by April 2014, as has been the global trend. However, DQEIL assures that the commissioning of new projects has commenced and invoicing of the same will be done only on completion of milestones. (2) Out of DQEIL’s current on-going projects, four are in-house IP, for which distribution revenue would be recognised on milestone delivery basis. Let us look at the other numbers reported by DQEIL for Q1-2015 DQEIL’s Q1-2015 TIO was 32.2 per cent lower y-o-y at Rs 20.64 crore versus Rs 30.43 crore and less than a fifth q-o-q versus Rs 101.83 crore. Two segments contribute to the company’s revenue – Animation and Distribution. Animation reported revenue of Rs 9.93 crore in Q1-2015, and segment result loss of Rs 1.07 crore; in Q1-2014, the corresponding figures were Rs 27.57 crore, and profit of Rs 11.46 crore; Rs 80.32 crore revenue and segment result of Rs 51.77 crore in Q4-2014. Distribution segment reported revenue of Rs 10.71 crore and a loss of Rs 1.19 crore in Q1-2015; revenue of Rs 2.85 crore and a loss of Rs 1.86 crore in Q1-2014 and Rs 21.51 crore and an operating profit of Rs 1.25 crore in Q4-2014. Expenditure in Q1-2015 at Rs 27.72 crore (134.3 per cent of TIO) was 46.6 per cent more y-o-y versus Rs 18.90 crore (62.1 per cent of TIO) and 67.9 per cent lower than the Rs 86.27 crore (84.7 per cent of TIO) in Q4-2014. Production expenses in the current quarter at Rs 2.15 crore (10.4 per cent of TIO) was 30.4 per cent more than the Rs 1.65 crore (5.4 per cent of TIO) in Q1-2014 and was 86.3 per cent lower than the Rs 15.69 crore (15.4 per cent of TIO) in Q4-2014. DQEIL’s employee expense in Q1-2015 at Rs 16.64 crore (80.6 per cent of TIO) was 17.7 per cent lower than the Rs 20.22 crore (66.5 per cent of TIO) in Q1-2014 and 24.6 per cent more than the Rs 13.35 crore (13.1 per cent of TIO) in Q4-2014. Depreciation, amortisation and impairment (Depreciation) expense in Q1-2015 at Rs 7.63 crore (36.9 per cent of TIO) was 16.1 per cent lower than the Rs 9.09 crore (29.9 per cent of TIO) in Q1-2014 and was 71 per cent lower than the Rs 26.33 crore (25.9 per cent of TIO) in Q4-2014. The company reported a forex loss of Rs 0.39 crore in Q1-2015; forex gain of Rs 18.4 crore in Q1-2014 and forex loss of Rs 9.21 crore in Q4-2014. Says chairman and CEO Chakravarti: “Drawing our plans for the year and the current trends in the global animation industry, the company is moving ahead in new areas of business as well as seeing growth in our current business divisions. Our VFX teams have forayed into providing services for locally produced live action feature films and are now gearing up to take on VFX works at an international level. The industry is witnessing an increase in demand for VFX content for animated feature films, live action thrillers & action films and sci-fi films from Hollywood, Europe and Japan. This will enable DQE to take advantage of its core strengths and capatalise on the demand for CGI/VFX production in USA and Europe. Our licensing and distribution teams have been successful in closing deals for our IPs in various territories such as Latin America, south east Asia, USA and parts of Europe. Also our team is successfully working on the exploitation of our properties on digital media such as VOD and SVOD. New associations with leading networks and licensees globally are paving the way to monetize our IPs and co-produce content. New deals across our portfolio of properties in recent months are the best in-class partners such as France Television, Nickelodeon, Disney Channel, De Agostini, Sky Italia, 22D Music, Discovery Kids, Rai TV, Italy, etc. The promotional deal for The Jungle Book with Burger King Worldwide has been immensely successful and is being extended for another season to many other territories worldwide. In Europe, The Jungle Book has been licensed by Buffalo Grill a chain of steakhouses based in France, with over 328 outlets in Europe.” Click here for the financial release