Nine shares plunge 20% as broadcaster admits TV ad spend down 11% for first quarter

nine entertainment coNine Entertainment Co, has warned its TV ad revenues have declined 11% in the first three months of 2016 compared with last year, saying it expects the free-to-air TV market to drop this year.

In an update to the Australian Securities exchange (ASX:NEC) the company said a poor summer of international cricket, the absence of the Cricket World Cup and the earlier Easter have all affected its bottom line.

Shares in Nine were trading 20% down on the closing price of $1.52 at $1.21 as of 11:00am. The company said it expects to finish with around 37% of the free-TV ad spend for the year – 1.2% lower than last year.

Source: Google Finance

Source: Google Finance

“Nine’s Summer of Cricket was adversely impacted both by the weather and the standard of the competition,” the broadcaster said pointedly as a weak West Indies side failed to put up a strong fight against the Aussies and saw around 30% of the scheduled summer cricket lost, hitting the company in both make-goods and loss of viewers for the early part of the year.

In the update, the company warned: “The Free-To-Air advertising market is now expected to record a low single-digit decline for FY16, versus our previous guidance of `flat to down marginally’. Reflecting the disappointing ratings start to 2016, Nine’s share is now expected to be c37% for the year.”

It also warned its digital revenues were also down saying: “The trends experienced in Digital in the first half, have continued in the second half.”

Those trends saw its digital assets controlled by the Mi9 section of the business, fall by $1.5m on the same period the previous year to $79.604m. The company has also parted ways with the Daily Mail Australia since those results, although that was not thought to be a profit centre for the business which acted as an ad sales house for it.

It also signalled it would slash more costs from the bottom line, adding: “Given the revenue environment, the Company continues to focus on all cost lines, with reported TV costs expected to be at least 4% lower across the year, notwithstanding higher-than-expected legal expenses incurred during H2.”

The legal expenses line refers to the ongoing court battle with WIN over Nine’s right to stream its content into its affiliate’s broadcast area.

Last year the company issued another revenues warning which saw its shares fall 20% in a day.

Nine has struggled in the ratings at the start of the year with rivals Seven dominating thanks to its My Kitchen Rules franchise. A move to put Married at First Sight in the prime 7.30pm slot last night saw only marginal gains for the broadcaster.

Alex Hayes

Update 5pm: Nine shares closed the day at $1.16 down some 23.68%.


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