Ad revenues to be stronger in Q4 than Q3: UFO Moviez

Kapil Agarwal, Joint Managing Director of UFO Moviez in an interview to CNBC-TV18 spoke in detail about their third quarter performance and outlook going forward.UFO Moviez India has reported a standalone total income from operations of Rs 89.42 crore and a net profit of Rs 10.55 crore for the quarter ended Dec '15. For the quarter ended Sep 2015 the standalone total income from operations was Rs 82.73 crore and net profit was Rs 20.71 crore.Agarwal is confident that the ad revenues in fourth quarter will be better than third quarter because usually in Q3, government ad revenues are lesser than that of corporates but both will be stronger in Q4. The ad revenue growth in FY16 is likely to be 35%, he added.Talking about the new Caravan Van business he said it is likely to breakeven by H2FY17. The revenue potential of each Caravan Van is around Rs 30-40 lakh. The cost of each van is around Rs 15 lakh. The company has been adding new vans every month, said Agarwal.Below is the verbatim transcript of Kapil Agarwal’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18. Latha: Let me start with the margins itself, one has seen a dip of about 5 percentage points, what happened? A: The core business margins are faring well. This is the new businesses which are in the process of stabilisation and last time also we spoke about it in the Caravan Cinema, that is in the infancy stage and it is in the process of stabilisation. So, that is what is pulling the margin down at the moment while the core business margins are intact. Latha: What is the core business margin? A: The core business, the EBITDA margin is 8.7 percent growth at the moment and it is operating at almost 33 percent EBITDA margin. Sonia: Your ad revenues have been quite strong, up almost 15 percent and your ad minutes per screen has come in at about 4.36 minutes. Can you give us a target for FY17? What would the run rate be? A: I can’t say what will be the run rate for FY17 but all I can say is that while you see that 15 percent growth has been a strong growth, year to date (YTD) we have delivered a 28.5 percent growth in terms of ad revenue and overall generally our Q3 is always weak for the government revenue and strong for the corporate revenue. In fact corporate revenue, ad revenue has seen a 33 percent growth in this quarter while the government ad revenue has been flat and Q4 typically does well for both. So, I think overall we should be able to deliver between 35 percent and 40 percent growth in the ad revenue as against 15 percent in this current quarter and 28.5 percent YTD. Latha: You have this interesting experiment, Caravan Talkies. Is it getting you good revenues, what are the prospects in terms of Q4 revenues or next year revenues? Is the idea catching on?A: The idea is catching on. Top 20 advertisers of this country experimenting with this medium because this is a medium which is giving them the rural reach which elsewhere, it is very difficult to reach those audiences.We have grown, now in the current year we have added a lot of vans, so, we are now already at 114 vans actually operational currently. We are operating in six states so each region you go to it takes some process, some time in stabilising the local conditions, publicising it to the local villagers.Latha: What is the cost of a van and by when does that breakeven?A: Cost of a van is just around Rs 15 lakh and the revenue potential of each van eventually when the business stabilises between Rs 35-40 lakh per year. So, this is a very high margin business.Sonia: When will Caravan Talkies breakeven?A: I think the second half of FY17 is when we are expecting the breakeven.Latha: What is the amount of revenues you made from Caravan Talkies in the quarter gone by?A: The quarter gone by, the revenue was in the range of approximately Rs 3 crore.Latha: That is from the 91 vans that you have?A: Yes. They have been growing, every month we have been adding the vans.Latha: You have some idea of the ad revenue for the Q4, will it be as good as the Q3?A: As I mentioned that Q4 we are expecting to be stronger than the Q3 in terms of the ad revenue because typically the government ad revenue in Q4 does well. So, we are expecting a better growth, both in corporate and the government revenue in the Q4.Overall as I said, we are expecting to close the year with a 35 percent plus growth overall year-on-year (YoY) in the ad revenue.(Copy edited by Vaishali Karulkar, interview transcribed by Priyanka Deshpande)