With virtually no sales in the first quarter, lower costs did not save PVR significantly


With the closure of cinemas due to the covid-19 health crisis, multiplex revenues have dried up. PVR Ltd’s June quarter results show consolidated revenue fell 98.6% year-on-year for 12.7 crore. The sale of packaged popcorn and the distribution of digital film rights contributed to the revenues.

In this situation, PVR had no choice but to focus on cost reduction. He said his monthly operating expenses in the June quarter were around 32 crore per month. Note that this behaved better than 40-45 crore per month guidance provided at start of lockdown. Overall, PVR’s fixed operating expenses fell 78%, which was obviously much slower than the rate of revenue decline.

Much like Inox Leisure Ltd, PVR also did not make cash payments on rentals and CAM fees to mall developers during the lockdown. CAM is the abbreviation for maintenance of common areas. Although PVR has fully provisioned CAM in its income statement and adopted a prudent accounting practice.

According to an analyst requesting anonymity, “The difference in accounting method for recognizing rental and CAM expenses resulted in a loss of EBITDA of Rs 116 crore for PVR in 1T compared to a positive result. 34 crore Ebitda for Inox. “EBITDA is earnings before interest, taxes, depreciation, and amortization; a key measure of profitability for companies. Of course, Inox would have reported a loss of EBITDA as well if it had followed a similar accounting policy,” he added. analyst.

In addition, PVR has also obtained a rental concession worth 29.8 crore during the quarter. According to another analyst, “Adjusted for the benefit of 29.8 crore regarding waiver of rental charges, PVR’s pre-tax loss was 381.6 crore. “

PVR shares were trading flat early in Tuesday. In general, the lack of revenue visibility has kept feelings dull for multiplex stocks, including PVR. No wonder, stocks are still up to 38% away from their pre-covid highs seen in February. With no sign of multiplexes reopening yet, the current quarter is also a washout. Also, it is uncertain how the footsteps would play out after the multiplexes restart, as movie watchers may refrain from visiting theaters to avoid catching the virus.

In the meantime, PVR is doing its best to keep costs down. He said the fixed cost execution rate for the current quarter was between 22 and 25 crore per month, well below the average of 32 crore seen in the June quarter. Sure, this helps, but unless the revenue starts pouring in, just cutting costs won’t reduce investor ice.



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