Q2 results no blockbuster for Inox Leisure as margins disappoint

Inox Leisure Ltd’s September quarter (Q2) results did not impress. The stock closed 6% lower on Monday, as the multiplex’s Ebitda margin fell short of expectations. Ebitda margin fell by 200 basis points compared to the same period last year to 12.3%. Film exhibition costs, cost of food and beverage (F&B) consumed and other expenses increased at a faster pace, weighing on its operating performance.

Ebitda is earnings before interest, tax, depreciation and amortization. One hundred basis points equal one percentage point.

Revenue performance was just about satisfactory. Sure, F&B revenue increased 41% year-on-year, but that was owing to a lower rate of goods and services tax (GST), almost 14% increase in spend per head and 7% increase in footfalls.

For many, Inox Leisure’s Q2 footfall growth could have been better. Discontinuance of sale of its tickets from online platform BookMyShow for a few days during Q2 had an adverse impact on footfalls, said an analyst.

However, the exact impact due to the BookMyShow tie-up disagreement is difficult to gauge. BookMyShow used to account for a quarter of the tickets sold by Inox Leisure, analysts from Nirmal Bang Institutional Equities had said in a report on 11 October. Besides, content performance wasn’t exceptional. Accordingly, Inox Leisure’s net box office revenues for Q2 increased 11% year-on-year, which isn’t encouraging.

Overall, net profit came in at ₹12 crore in the September quarter, only marginally higher than the corresponding quarter of last year.

However, addition of screens in this fiscal have been faster. The company has added 47 screens so far, compared to just 25 in 2017-18. According to the Q2 results presentation, Inox Leisure intends to add 77 to end FY19 with 569. Its June quarter presentation had said it will add 59 screens for FY19. Of course, it will help if content performance is better at a time when the company is expanding.

Content performance remains a key measure to track multiplex companies, and Inox Leisure is no exception. Investors will also have to keep an eye on adverse developments on the F&B stream of revenues.

Including the decline in the share price on Monday, the Inox stock has declined 18% this fiscal. Content pipeline for this quarter appears promising with releases such as ZeroThugs of Hindostan and Fantastic Beasts: The Crimes of Grindelwald.

Investors will likely take cues from how these films deliver at the box office.

source: livemint


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