Expect to sustain 20-22% EBITDA margins: Prime Focus

Vikas Rathee, Group C-O-O of Prime Focus in an interview to CNBC-TV18 spoke about the fourth quarter earnings and the outlook going forward.He is confident of sustaining 20-22 percent EBITDA margins as the company undergoes integrations of strategic transactions and on back of strong growth going forward, and CAGR in the range of 10-20 percent for next 3-4 years, The company reported net profit at Rs. 20.29 crore in the quarter ended March 2015 as against net loss of Rs. 7.16 crore during the previous quarter ended March 2014. Sales rose 72.38% to Rs. 405.98 crore in the quarter ended March 2015 as against Rs. 235.51 crore during the previous quarter ended March 2014.

Below is the transcript of Vikas Rathee’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: If you could tell us in terms of your numbers the sales and EBITDA have gone up quite a bit but there is a net loss still, is that entirely due to exceptional and adjusted for that what kind of profit would you have per state?A: The revenues as well as the EBITDA, the operating performance of the core business continues to be robust and this quarter we delivered pretty strong growth both on the revenue side as well as on the operating margin perspective. Almost all, if not all of the losses is on the back of exceptional items we had announced previously the sale of our non-core post production business in the UK, that is actually contributing close to Rs 40 crore of loss. So, without that you would have looked at a profit after tax (PAT) of about Rs 18 crore positive and profit before tax (PBT) of about Rs 50 crore which is about north of 12 percent margins.Ekta: Do you think that these margins at 25 percent will be sustainable in the coming quarters? A: What I mentioned about a quarter or so back, as we go through the integration of the different strategic transactions we have done in the past 12 months, we expect to be in north of 20-22 percent of EBITDA margin on a sustained perspective. This was a good quarter; we hit on all the cylinders across accretive businesses, bunch of high quality movies coming out, winning an Oscar for the Interstellar as well as the technology business kind of coming in and so kicking through on all cylinders. I am not going to guide to 25 percent margins for next quarter; I hope to deliver that but at the end of the day we are definitely in the realm where we are delivering 20 plus percent EBITDA margins going forward.

Anuj: In terms of your outlook going forward, what kind of compounded annual growth rate (CAGR) do you think investors can expect in revenues maybe over the next three or four years, that is on top of mind for a lot of people?A: The market is evolving and I think in the media space especially things are moving away from just linear television or theatrical perspective. There is a massive amount of growth on the online as well as the mobile video channels. So, all our customers are today grappling with the challenge and the opportunity of getting more and more eyeballs online and how to basically capture that. We definitely play a big part in that both in creative service where we provide visual effects as well as 3D conversion services as well as on the technology platform which allows providers such Star TV, Warner Brothers and others to deliver high quality content over the web to younger generation which fundamentally doesn’t want to be tied down to television sets anymore. So, we expect to see pretty strong growth going forward. CAGR and stuff like that, we are definitely expecting something in the north of 10 percent into the 20 percent range is what we expect to deliver over the next three to four years. Hopefully it is higher, the whole landscape is changing fairly dramatically, you are seeing the growth that the dotcom (.com) and the ecommerce is kind of seeing on the B2C side. We obviously are B2B2C player, not really a B2C. Our aim is to help galvanise our customers to be able to offer robust and high quality entertainment services over the web, I think that is what is going to drive a lot of growth going forward.

Ekta: Which are the marquee projects that you have worked on recently and what might the pipeline look like maybe in the first half of FY16 or maybe in the entire FY16 that we can see?