TVB has recorded a loss of up to about HK$660 million in the 2021 financial year due to the acquisition of eCommerce operator Ztore, and the absence of government subsidy, according to its latest profit warning announcement.
Prior to announcing its annual results in late March, TVB issued a profit warning, saying that it had expected to record a loss for the FY2021 in the range of approximately HK$640 million (US$81.76 million) to HK$660 million (US$84.31 million), compared to a loss of HK$281 million (US$35.89 million) for FY2020.
In a statement, TVB said it was due to the acquisition of eCommerce operator Ztore in August 2021. The company, in collaboration with Shaw Brothers, said it would invest HK$200 million to acquire approximately 75% of the issued share capital of Ztore, which owns and operates two eCommerce platforms in Hong Kong, namely ztore.com and neigbuy.com. TVB owns a majority of shares and voting rights in this investment. The total consideration for the acquisition is HK$200,000,000 (US$25.55 million) to be satisfied by HK$70,000,000 (US$9.45 million) in cash and a sum of HK$130,000,000 (US$16.61 million) represented by resources in relation to artistes, television commercial spots and other advertising products on TVB’s free to air and digital platforms.
TVB said, "By substantially scaling up our eCommerce presence in Hong Kong, the Ztore acquisition brings tremendous synergies and cross-selling opportunities with our large local TV viewership. Post-acquisition, our average monthly eCommerce revenue has indeed grown several-fold. However, as the Ztore Group was still in the investment phase and hence was loss-making in FY2021, our consolidation of its results meant that our eCommerce business recorded a net loss for the year."
In addition to the acquisition, TVB said in FY2021, it continued to invest in its content and production talents to strengthen its core creative capacity.
"We believe this will fuel future growth across our businesses. Hence, such investment and Ztore acquisition also led to an expected 14% increase in total operating costs for the Year from HK$32.53 billion (US$415.5 million) incurred in FY2020.
Moreover, TVB received a one-off wage subsidy of HK$202 million (US$25.8 million) under the Hong Kong government’s Employment Support Scheme. It recorded the subsidy as other revenue last year. However, the company did not receive the subsidy again in 2021.
In August 2021, TVB announced its interim results for FY2021. TVB's advertising income in the first half of 2021 improved but the company lost HK$284 (US$36.28 million) in total, according to its announcement of 2021 interim results.
In a statement, TVB said its advertising income from Hong Kong TV broadcasting reported a 31% increase from HK$351 million (US$44.84 million) to HK$460 million (US$58.76 million). myTV SUPER registered users further increased from 8.6 million to 9.5 million as of 30 June 2021, equivalent to a growth of 11%. Subscription revenue increased by 8% from HK$146 million (US$18.65 million) to HK$157 million (US$20.05 million), driven by average revenue per user (ARPU) growth from an expanding pool of subscribers. TVB added that myTV SUPER would continue to invest in original and first-window content for its premium service myTV Gold.
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