Nine reports a 9% drop in profits, points to growth in digital and $100m of cost removal
Media giant Nine has reported a 9% drop in profits for the first half of the 2020 financial year and an 8% drop in earnings before interest, tax, depreciation, and amortisation (EBITDA) as it faces “cyclical headwinds” across its traditional media assets.
Revenue across the business was $1.182bn, down 2% from the same half in 2019, and group EBITDA dropped to $250.8m. Net profit after tax was $105.1m.
Nine’s direct figures comparing H1 2020 to H1 2019 were non-comparable, given the acquisition of the Fairfax assets which only occurred in late 2018. Nine issued adjusted figures to amend this.
Nine CEO Hugh Marks drew attention to the work the business has put in over the past four years to transform into a ‘digital business’, including streaming platform Stan and broadcast video on demand (BVOD) platform 9Now.
“This result is a testament to the work we have done over the last four years to reposition Nine for a digital future. With strong growth in our digital businesses helping to offset some of the cyclical headwinds faced by our traditional media assets,” said Marks.
“We have now clearly established Nine as the leading domestic player in the digital video market with both 9Now and Stan recording very strong growth in the period. Growth that we expect to continue into H2. We have successfully unified our first-party database across all of our owned and controlled businesses, meaning we are in a position to offer our partners the benefits of more targeted advertising across the Nine suite of assets.”
Marks drew attention to 9Galaxy which allows brands to secure inventory across both linear and on-demand television.
In his presentation to investors, Marks said the revenue share demonstrated by Nine’s broadcast assets was “disappointing” and showed the business had not capitalised on its ratings success. Nine’s 2019 ratings were the best, in terms of share, since measurement platform OzTAM was launched 18 years ago.
Broadcast revenue across free-to-air (FTA) dropped 6% for the first half of the financial year, falling to $531m, however revenue for BVOD platform 9Now jumped 44% to $42m. Nine Radio, formerly Macquarie Media, saw its revenue drop 16% to $57.6m. Marks said the poor result was a reflection of some “Macquarie Media specific issues” and was not particularly surprising. Marks has confirmed before now that the controversy surrounding 2GB breakfast host Alan Jones impacted revenues at the radio business.
Overall, EBITDA across all broadcast fell 29% to $145.5m. Nine held a 38.7% revenue share in broadcast. Nine Radio share fell 16%, costs improved by 2% and Marks flagged more expected savings in the coming months.
In publishing, Nine’s Metro Media assets, including The Sydney Morning Herald and The Australian Financial Review, grew EBITDA by 16% to $49.8m. Comparatively, Nine’s digital publishing saw EBITDA fall 43%.
Stan reported its active subscribers now sits at 1.8m with revenue costs growing 79% to $116.6m as costs dropped 18%.
Stan reached 1m active subscribers in June 2018, with CEO Mike Sneesby then setting his sights on the 2m mark.
Marks spent time championing the launch of VOZ, the new measurement system which was planned to launch early 2020 and will now arrive in April. The VOZ system will consider both linear broadcast views but also BVOD, which Marks claims will return viewer figures to the TV audience figures of 10 years ago.
He also flagged cost cutting in the TV business.
“Recognising the company-wide evolution, we believe there is significant potential to refocus the cost structure of our FTA business, targeting the removal of up to $100m in annualised costs over the next three years – costs that will not inhibit our ability to continue to invest in the growth opportunities around premium revenue and digital video, as we have done successfully over the last three years,” said Marks.
Marks said the Nine business is planning $100m in savings across its business over the next three years, primarily from its FTA business. On the chopping block is international content and one-off sporting events, something Seven also flagged in its results as an unnecessary cost that the business won’t support in the future. As Nine completes its move to North Sydney this year there will also be opportunities for cost savings, said Marks.
International content especially is starting to suffer in the current environment, said Marks, and while The Ashes and other one-off sports events gave great ratings, the revenue doesn’t support the outgoing expenses. The business remains focused on content that drives revenue outcomes, said Marks, including news and regular sport.
In the six months to 31 December, 2019, Nine spent $9.4m on restructure and termination-related costs.
Nine expects similar results over the next six months, with continued growth at Stan and a consistently subdued ad market. the media company advised dividends per share of 5.0c.
“the business had not capitalised on its ratings success” – are there even sponsors for MAFS? Hilarious if not.
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How are Car Advice and Pedestrian going? Didn’t see any mention
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Nine is and has been bloated for ages. Costs vs Revenue is still way out of control. Too many department heads. Environment becoming too cluttered…
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The poor results stemming from the “Macquarie Media specific issues” were not only “not particularly surprising”, they were entirely predictable, and indeed were predicted. The Nine takeover first put a question mark over the whole Macquarie network. Instead of reassuring listeners, the new owners tinkered with the schedule, dropped Chris Smith in favour of the light and fluffy Deborah Knight, and even let it be known that Alan Jones was under threat. Dearie me, it could have been handled worse, but not by much.
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They would be in 9 Digital Publishing – which was down 10%.
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