Nine posts $234m profit in first results since Fairfax merger completion

In its first financial year results since the completion of the Fairfax merger, Nine has posted a net profit after tax of $234m, a 12% rise from the previous year. Group earnings before interest, tax, depreciation and amortisation (EBITDA) grew 10% to $424m on an overall revenue of $2.3bn, down 1% from 2018’s results.

The 2019 financial year also saw the business sell ACM, completed 30 June 2019, and its events arm, completed 30 May 2019. Stuff NZ remains for sale, after dropping 10% in revenue and 24% in EBITDA to $28m for the year. The main costs across the business were related to restructuring ($36.6m), including cost-cutting across digital and publishing, and the Fairfax merger. Acquisition-related costs were $22.2m, and the net impairment on the merger of Car Advice and Drive was $17.7m.

Nine’s broadcast division, which includes Nine Network and Macquarie Media, which Nine owns a 54.5% stake in, reported an overall EBITDA of $241m on revenues of $1.222bn. Nine Network reported an overall revenue decline from $1.154bn to $1.090bn, although the business reports this decline was in the first half of the fiscal year only, and that revenues grew by 2% in the latter half.

Nine reported a final free-to-air (FTA) revenue share of 39.6%.

Nine Network also reported a strong year in ratings, with 38.3% of the 25-54 key advertising demographic and 39.3% as a channel. FTA costs improved by 4% as a result of the move from cricket to tennis and bigger expenses in calendar year 2019. That move did however result in a drop in premium advertising across sport, although this sector did rise across non-sport programming.

In a call with investors, Nine CEO Hugh Marks spoke about the move away from advertising for the business, with a focus on subscription models and diversification of revenue streams, and spoke about the ‘disappointing’ performance by Macquarie Media in the latter half of the financial year. The radio business posted revenues of $313.8m, down 3.3% on the year prior, and EBITDA of $27.1m, down 16.4%. 


Nine’s reported results for the 2019 financial year (Click to enlarge)

Marks said the business was happy with the results, considering the tough conditions they were achieved in.

“To achieve 10% EBITDA growth in this cyclically challenging FTA and housing market was a very strong result. It’s a validation of our strategy, the success of the investments we have made, and the efforts of our people,” said Marks.

“Nine has real operating momentum in each of our divisions, with an earnings composition increasingly weighted to high growth businesses. In particular, we are well placed to further expand our share of the rapidly growing digital video market. Not only through 9Now and Stan but also more broadly across our digital assets. We will continue to draw on the strength of our traditional media assets to help us successfully build complementary, high growth, digital media businesses of the future. A strategy that has, of course, been greatly enhanced by the merger with Fairfax.”

In the digital and publishing division, including Metro Media, which covers the acquired Fairfax titles, and 9Now, as well as Pedestrian, Car Advice and, revenue was up 3% to $637m with print now contributing approximately 20% of revenues. There was a rise in digital subscribers of 2% across The Age, Sydney Morning Herald and the Australian Financial Review. 9Now grew its revenue by 51% to $61.7m and is reported as holding a market share of 49%.

Nine’s changing revenue streams (click to enlarge)

Nine’s results also include Domain, which reported its separate figures earlier this month, dropping revenues by 6% as a result of a tight housing market and posting a $137m loss.

Streaming service Stan, which is now wholly owned by Nine, reported more than 1.7m active subscribers, after hitting 1m in June 2018, and grew its revenue by 62%.

Nine said Stan moved into profitability in the second half of the 2019 financial year, despite a final EBITDA loss of $21.3m for the full 12 months to 30 June, 2019. Nine reports it expects a stronger move into profit for Stan in 2020, partially thanks to a $2 price increase from March 2019.

Recently, Disney announced its streaming platform Disney+ would launch in Australia in November, leaving many to wonder where Stan would be left if the company pulled its content from the platform. Marks addressed this in the investor call, citing Stan’s relationship with Showtime and Paramount as other strong content providers, both of which have several years left in their agreements. He also said Stan remains hopeful that the Disney+ launch won’t result in the loss of its content from the platform, and cited growth in subscribers for the platform prior to the Disney agreement as proof the business can survive even if it does lose the streaming rights. Regarding the Paramount agreement, Marks wouldn’t comment on the cost or the length of the deal, but said it was a medium-term agreement and the volume wouldn’t be as significant as that of the Disney deal.

“Growth in digital and publishing and the move to profitability through the second half at Stan enabled us to grow Nine’s EBITDA year on year, giving us further confidence that we are investing in the right content and technology for the future of our business,” said Marks.

“We are excited about the future, and the potential we see in the further execution of our strategy. Having all of our businesses working together will maximise the benefits for each of them as well as the collective benefit for Nine as a group.”

Shareholders in Nine ended the year with a 10c per share dividend, in line with the prior year and consistent with the predicted performance of the business. The result was a rise from 9c last year.

Nine’s pro-forma results (Click to enlarge)

Nine also took the reporting as a chance to announce its new chief financial officer, following the announcement of Greg Barnes’ departure. Paul Koppelman will take the role in September, reporting in to Marks. He comes from a non-media background, holding CFO roles as Aconex, Medibank Private Limited and BHP. He’s guided businesses through both acquisitions and IPOs.

“I am delighted to appoint Paul to the role of CFO. Nine has undergone an enormous transformation over the past 12 months and the focus now will be on further strengthening our relative position within the media sector, and continuing to grow the operating performance of our business. Paul’s diverse experience across different industries and operating environments will prove a valuable addition to the senior leadership team,” said Marks.

Heading into the 2020 financial year, Marks flagged in the investor call that should the Macquarie Media bid be successful, Nine sees large growth opportunity there, especially in the consolidation of some points of the business, including the wider group’s news coverage. 9Now and Stan are expected to continue their growth, and Stan is predicted to move into stronger profit returns. Marks predicted FTA would decline single digits and costs to increase, largely related to future sports rights charges around existing deals.

Overall, Nine is expecting EBITDA growth of 10%.


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