Pyramid Saimira Theatres Ltd: Some thoughts:
I was going through the Q4FY09 result sheet of Pyramid Saimira Theatres Ltd when I discovered that they look quite good if we remove the loss due to extraordinary items, which is massive around Rs.99.45 Cr. This loss affected the net profit margin though the operating profit margin actually increased in Q4FY09, from 12.61% to 15.01%, considering Y-o-Y figures. Hence though net sales decreased but at the end of the day, the bottomline is more or less intact, except that extrordinary item.
Let me highlight some of the points in this connection:
(a) The results of the 4th quarter, FY09, was hit by certain major extraneous events which includes Income Tax: an attachment of all its receivables, bank accounts, investments, box office etc. This has resulted in the Company’s loosening of system controls, increase in the leakage rate of the Company in the box office and insufficient internal control of all its screens as it was forced to operate little outside its otherwise strict operational controls. Further the global meltdown, national slowdown, and failure of the film industry has put enormous strain on the company's revenues/profitability and to the film industry in general.
There was an attachment order from the IT department during the end of the 3rd quarter of FY09. The Company appealed against the order of the IT department and the Honourable Madras High Court vide its order dated March 23, 2009 restricted the attachments. Further the IT department has also lifted all the attachments on overdraft / advances bank accounts on June 05, 2009.
THIS IS A GREAT NEWS AFTER A SERIES OF BAD NEWS ROCKED THE SHARE PRICE OF THE COMPANY.
(b) An unfortunte event also happened in the company in June, 2009 when it's MD, Mr. P.S.Swaminathan had to face the bullets of a Delhi based Financier, in relation to Rs.25 Cr loan given to the company--this further dented the image of the company and the stock tanked.
However, most of it happened due to the continuing recession and also due to strained working capital finances and IT attachments. The Company faced severe liquidity crises during Q4FY09. Due to bank account attachments the Company could not honour its commitments in proper time and in proper fashion and hence that ugly and unfortunate incident took place. Only now after the lifting of bank account attachments, the Company is limping back to normalcy.
It is to be noted that Pyramid Saimira Theatres Ltd is one of the top corporate companies involved in film business for the last 4 to 5 years and Mr. Mr. P.S.Swaminathan, who became the Chairman and Managing director of the company last year is known for his aggressive and dynamic leadership, both in silver screen & small screen. Hence, now it seems all those past series of negative events which rattled the shareholders, are all history.
However, let me highlight some more events which lead to poor Net Profit of the company in Q4FY09:
(i) The company's DTH business (JV) which operated in Europe could not sustain its business operations due to worsening of Europe consumer spending power and sustained serious losses. It is in JV with that company, hence on a consolidated basis (conservatively) it has decided to write off its investments from its books during the Q4FY09 quarter.
(ii) Its gaming subsidiary Aurona Technologies, also underwent serious liquidity crises and loss partially due to depression of pounds as compared to other currency making operations losses in its back office including wiping out its margins. Aurora is a gaming company involved in outsourced production of gaiming software and therefore could not sustain operations due to the same. The Board has also decided to write off the investment exposure in Aurona during the current quarter.
But in spite of all those negative there are positives also and let highlight them now:
(i) Its US subsidiary Pyramid Saimira Entertainment America, is making little/marginal losses while it Malaysian subsidiary, Pyramid Saimira Theatre Chain (Malaysia) Sdn Bhd is making cash profits. Please visit this link: http://pstlmy.blogspot.com/. (ii) The Company’s distribution subsidiary which has not distributed any films during the Q4FY09, quarter will start reviving its activities shortly. THIS IS A GREAT NEWS FOR THE SHAREHOLDERS OF THE COMPANY.
(iii) Its marketing subsidiary is marginally profitable even when there is tight advertisement and marketing spent in India and much tighter collection delays due to bad credit environment.
(iv) Its production subsidiary is continuing its activities of production and is slated to increase its top line and bottom line in the coming quarters.
(v) The Company had undertaken a massive restructuring exercise which involved converting fixed lease theatres into profit share, revenue share and content provisioning theatres / screens. Only screens under profit share / revenue share is being considered. Content provisioning screens are not considered in these results as they form part of 100% subsidiary.
During the Q4FY09, quarter the Company had 248 screens and through which 168.58 lakhs tickets were sold, with an average revenue per user (ARPU) of Rs.47.86 at an occupancy rate of 32.35%. THIS IS NO MEAN ACHIEVEMENT WHEN THE COMPANY IS FACING SUCH ASSAULTS FROM ALL CORNERS.
(vi) The Board in its recent meeting approved the issue of securities to Qualified Institutional Buyers subject to a maximum of One Crore in one or more tranches. The Board has also approved the issue of convertible Warrants to the promoters subject to a maximum of One Crore Warrants.
(vii) Consequent upon the order of Hon'ble High Court, the attachment made on the bank accounts were lifted by the Income Tax Department, in respect of the overdraft facilities granted to M/s. Pyramid Saimira Theatre Ltd.
(viii) Due to positive developments in Malaysia, the company is thinking of expanding its network there. Moreover, the Board of Directors (BOD) in a meetting held in May, 2009, has approved the proposed merger of its subsidiary M/S Fun Asia, US with another company in similar business, appreciating the fact that this merger will strenthen the market position of the group in USA and will create a strong foundation for expansion of its business there. Please visit this link: http://pstlus.blogspot.com/. (ix) The BOD also consented to the expansion plans of Pyramid Saimira Production International Ltd (PSPIL) a sister company and also approved the efforts to bring in fresh equity and debt for the production company.
(x) The Company had allotted on October 22, 2007, 3640000 warrants, convertible into equal number of equity shares at a later date, to the promoter of the Company, pursuant to a special resolution passed by the shareholders on September 29, 2007. The Company also received upfront amount equal to 10% of the total amount payable from the promoter. During the quarter the Company received an application for conversion of 1485000 warrants into equal number of equity shares after bringing the balance consideration. The allotment was made subsequently on April 11, 2009. The aforesaid has been considered in computing the diluted EPS.
Due to Income Tax attachments and consequent realignment of business model to a lesser control business model, the Company has decided to extend the financial year 2008-09 to 15 months to enable more proper reconciliation, control and accounting. Therefore the current financial year will encompass a period of 15 months starting from April 01, 2008 to June 30, 2009. The results of Q4 will be followed by results of Q5 for the purpose of annual results. Hence till now FY09 results are not out, we have one more quarter to follow....
The Company has incurred marked to market losses due to the management’s view of the capitalized content’ cost and therefore there was a resulting write-off of Rs. 76.94 crores pertaining to the financial year 2007-2008 which is currently written off as prior period expenses in the current quarter.
Further the Company also decided to make all assets mark to market and write off the foreign exchange currency loss as and, when it occurs instead of availing deferred benefit under AS11 which amounts to Rs. 22.5 crores for the quarter and Rs. 98.82 crores for 12 months period. This has been shown under extraordinary items. This is a good accounting policy.
Now to sum up, in the last one year Pyramid Saimira Theatres Ltd suffered a business loss of about Rs.100 Cr and unfortunately at the same time, issues like IT attachment, etc. happened which brought the company into serious financial strain. Besides this, a large number of investors also exited from the company in questionable circumstances, which also reduced the company's ability to handle the situation.
NOW THE GROUP HAS DECIDED TO FOCUS ON ITS BASICS WHICH ENABLED THE COMPANY TO TAKE A VERTICAL UPMOVE EARLIER.
The efforts put in by the management as mentioned earlier has started to bear fruits. The company's refocus on its core business is expected to bring it back to profitability in the next few quarters. It is also heartening to note that Mr.Swaminathan in order to focus more on operational management, with a view to strenthening the core exhibition business, reduce risk and to bring back growth/profitability to Pyramid Saimira Theatres Ltd, handed over the Chairmanship to Mr.N Narayanan.
THEREFORE IN THE DAYS TO COME PYRAMID SAIMIRA THEATRES LTD COULD BECOME A DARK HORSE AND GIVE MASSIVE RETURNS TO THE SHAREHOLDERS.
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