Nine’s net profit soars 79%, promises to return $2m of JobKeeper
Nine Entertainment Co has committed to repaying the $2 million it received in JobKeeper to the Federal Government after posting a $182 million net profit, a 79% leap, and $1.2 billion of revenue, a 2% slide, for the half year ending in December.
Nine’s core business did not receive the government subsidy, with the $2 million boost awarded to the likes of Pedestrian and Nine Events, including Night Noodle Markets, Good Food events, and Australian Financial Review events. Last week, rival Seven West Media recorded a $116.4 million net profit, but decided against returning its $33 million in JobKeeper, with CEO James Warburton telling Mumbrella: “We would have had to have retrenched between 120 and 150 employees if we hadn’t secured those funds.”
But, in his last results presentation as chief executive officer, Nine’s Hugh Marks confirmed the business has “performed incredibly well”, with group earnings before interest, tax, depreciation and amortisation (EBITDA) of $355 million. He told investors JobKeeper provided “comfort and confidence” but that the balance sheet was strong enough to return the funds.
The company’s costs were down 13%, or $124 million. Marks revealed that 41% of EBITDA came from digital – 9Now, Stan, and the digital output of its mastheads and Domain – and the business will pay out a dividend of $0.05 per share.
“Our business has performed incredibly well through this period of heightened volatility, and has come out the other side in a very strong operating position,” Marks said.
“We acted swiftly when circumstances changed, whilst continuing to embrace opportunity and remain true to our vision – of building Australia’s leading cross-platform media business. In these latest six months, the combined contribution from Stan and 9Now, and the digital components of Domain and publishing grew by 53% to more than $140 million, and, notwithstanding the strong recovery in earnings from our traditional markets, equated to 41% of our total EBITDA.”
Source: Nine. Click to enlarge
As the search for Marks’ successor as CEO nears its end, the outgoing boss said he is “handing over the reins at the perfect time” since Nine is “clearly firing on all cylinders, but … has plenty of scope to accelerate its profitability in the coming few years”.
Broadcast
Nine’s broadcasting unit, housing TV, 9Now, and Nine Radio, recorded an EBITDA of $207 million on $622 million of revenue.
Source: Nine. Click to enlarge
Free to air
The company’s free to air unit secured revenue of $522.8 million for the half, back by 2%, while free to air costs dropped by around $70 million, or 16%, to $352.5 million.
The media business’ free to air ad revenue climbed 4% to $87.9 million for H121, and free to air EBITDA jumped 55% to $171 million; the 33% resulting margin of 33% is the highest since Nine listed on the stock exchange in 2013.
Chief financial officer Maria Phillips noted that temporary costs, such as the lack of Love Island last year due to COVID-19, account for around a quarter of the cost savings. The remaining three quarters are sustainable cost measures, Phillips said, such as Nine’s reduced NRL contract.
In the September quarter, the metro free to air market dropped 14.3%, but climbed its way out of that hole in the December quarter, growing by 16.6%. Accordingly, the market was up 0.6% for the half, and Nine had a metro free to air revenue share of 38.6%.
Source: Nine. Click to enlarge
“From an advertising perspective, this latest half year was a tale of two quarters,” Marks said. “The advertising market clearly turned in late September, earlier and more sharply than we had anticipated, and this was led by television, both free to air and BVOD.
“The brand-building strength of these segments underpinned clear growth in market share overall for the television industry, that has continued into the first quarter of 2021. Nine’s consistently strong audience performance, across all of our platforms, means we are well positioned to benefit from this improvement in the ad cycle.”
Nine noted that the March quarter’s metro free to air revenue is expected to be in the “low-to-mid single digits, notwithstanding the timing of Easter”, and said “FTA costs are expected to decrease by around 3% over the year, or approximately 5% excluding this impact”.
Stan
Stan’s EBITDA rose by $23 million, a 161% year-on-year jump to $36.5 million. Revenue was up 28% to $149.1 million thanks to 2.3 million active subscribers, and a price jump for premium subscribers, from $17 to $19. Costs, meanwhile, rose by 10%, split across content and marketing.
“Recent subscriber momentum is expected to continue at Stan, driven by the launch of Stan Sports as well as the investment in incremental entertainment content,” the business said.
“This further investment is expected to expedite subscriber build, underpinning Stan’s longer term potential.”
Bump, an original show released on New Year’s Day, has become Stan’s most successful show yet. The streaming service also signed a significant deal with NBCU in the half, and total streams were up almost 20%.
Stan Sport launched last Friday, timed with the beginning of the rugby season, while Marks addressed the netball rights shifting to Foxtel as the sports rights battle has ramped up.
“Netball of course went back to Foxtel and Kayo. Again, it was a decision on our part,” Marks told investors.
“That was something that we wanted to be part of, it had been a great part of our business, but at the price that was being touted … when we like to have all rights and play a role with a sport rather than just be a broadcaster, that wasn’t where that sport wanted to go. We were outbid by another party. Again, that will happen. We will be rational about the decisions that we make.”
9Now
Nine’s broadcast video on demand platform recorded revenues of $54.6 million, up 30%. Costs also climbed, up 46% to $21.4 million, while EBITDA was up 22% to $33.2 million.
Nine said it had increased daily active users by 8%, but noted that Love Island’s absence had an impact, given it accounted for 30% of BVOD audience the year before last.
“Seven has really significantly increased its investment into the category, and what you saw was probably stronger market growth than we anticipated and we maybe had a little less share than we anticipated,” Marks acknowledged to investors.
“Frankly, I’d be happy with a stronger market and a lower share than a higher share of a market that’s maybe not growing as strongly as we’d like.”
Nine Radio
Nine’s Radio’s result for the half was “disappointing”, according to CFO Phillips. Revenue was down 24% to $44 million, and EBITDA fell 62%, from $7.6 million to $2.9 million.
Nine said the unit’s performance “is expected to improve into FY22, as the radio market begins to recover” from the pandemic’s effects (the market was back 19% in the half), and Phillips added that Nine Radio has “refocused” its sales team without driving up costs.
Across the six month period, the metro radio ad market dropped 19%, in line with the the fall of Nine’s gross ad revenue.
Publishing
Nine’s publishing arm – including The Sydney Morning Herald, The Age, The Australian Financial Review, nine.com.au, Pedestrian Group, and Drive – experienced a 9% decline in revenue to $263.4 million, while EBITDA was up 27% to $68.1 million.
Digital subscriptions and licensing revenue climbed 26% to $51.9 million, while print subscriptions performed less strongly, with revenue at $28.3 million, an increase of 2%.
Print advertising was down 25% to $48.1 million due to travel and luxury advertisers reducing spend, and retail sales fell by 18% given the pandemic’s impact on the hotel, airport and CBD sectors.
Source: Nine. Click to enlarge
“Audiences across our mastheads strongly increased over the half, with readership across The Sydney Morning Herald, The Age and the Financial Review up 22%, 24% and 25% respectively,” Nine told the ASX.
“This strong growth in digital subscriptions reflects the structural trend of audiences paying for quality journalism, and an accelerating transition towards a business model focussed on recurring, digital reader revenue.”
The business noted that the News Media Bargaining Code would boost licensing revenue, and “underpin Nine’s ability to continue to invest in news journalism into the future”.
Nine’s publishing costs fell by 17%, an almost $40 million reduction. Around half of these cuts were attributed to reduced printing volumes and other production and distribution matters.
Nine’s Domain also reported its results last week, with total revenue down 4% to $137 million, and print back 65%.
In an email to staff, Marks “thank[ed] each and every one of you for your contribution”.
“This success has been underpinned by the focus we’ve kept on our core strategy through
“Through the most difficult period, we did not take the course chosen by others of business-wide pay cuts. Instead, we trusted the strength of our unique position in the market and adapted to the significant changes to ensure we were strategically positioned when the confidence in the wider market returned. This, as you will have now seen, is in full swing across most sectors.
“I’ve had a great five years at Nine and I will be around for a while yet as the process continues for the new CEO, and to ensure a smooth hand-over.”
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Brittney Rigby was Mumbrella's deputy managing editor - news and analysis. She left Mumbrella in April 2021.
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