Nine Entertainment reports profit following merger

Positive results mainly due to growth in both Metro Media and 9Now, plus reductions in costs

Nine Entertainment Co. (ASX: NEC) has chalked up a net profit after tax of $234 million for the 12 months to June 2019, up 12 per cent on the previous corresponding period.

The media giant today reported pro-forma group EBITDA growth of 10 per cent to $424m, on revenue of $2.3bn, down 1 per cent year-on-year. Net profit after tax and minority interests tapped in at $198 million, up 16 per cent.

The results are mainly due to a 56 per cent growth in digital and publishing EBITDA, underpinned by growth in both Metro Media and 9Now, plus reductions in costs across various areas.

Nine Network reported a revenue decline from $1.15bn to $1.1bn for the year, confined to the first half. Across the divisions, television revenue was down 6 per cent, with free-to-air (FTA) EBITDA dropping 10 per cent or $25 million for the year, to $213 million. Stan also lost $21.3 million, despite achieving higher revenue and subscribers, due to consolidation costs. Radio was also down 3 per cent.

The results come following the historic $4.3 billion merger of Nine and Fairfax, which was announced in July last year and finalised in December

Since then, Nine has completed a review of the combined group and sold off Australian Community Media and Printing (ACM) in June, along with its Events business, which completed on 30 May 2019.

On 12 August, Nine announced an all cash, off-market takeover offer for all of the outstanding shares in Macquarie Media (ASX:MRN) of $275 million, inclusive of MRN’s 30 June net debt of $22 million and the payment of its August 2019 dividend. The acquisition will be 100 per cent funded from cash reserves and existing debt facilities.

Nine Entertainment CEO, Hugh Marks, said to achieve 10 per cent EBITDA growth in a challenging FTA and housing market is 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," he said. “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." 

Marks said the growth in digital and publishing and move to profitability through the second half at Stan were key to the strong EBITDA performance.

"This gives us further confidence that we are investing in the right content and technology for the future of our business," he continued. “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.”

The Nine results were released just days after rival, Seven West Media, announced a $444.4 million net loss for the full-year, a figure prompted by a hefty write-down of goodwill off the back of significantly softer advertising market conditions.

Across the business, Nine’s Broadcasting division, which comprises Nine Network as well as the consolidated results of Macquarie Media (MRN), of which Nine currently owns a 54.4 per cent stake, reported EBITDA of $241 million on revenues of $1.2bn for the year.

However, MRN reported revenue was down by 3 per cent, to $132 million, reflecting the slower radio advertising market in the second half. Coupled with a cost increase, Macquarie Media reported EBITDA before specific items of $27 million, down 17 per cent on previous corresponding period.

Together, digital and publishing reported revenue of $637 million, up 3 per cent and reported a combined EBITDA of $130 million, up 56 per cent for the year, and growth of more than 60 per cent in the second half. Within digital and publishing, total print revenues were still broadly flat year-on-year.

Metro Media reported overall revenue growth of 3 per cent after three years of single digit declines. This is largely due to a reduction in costs of $21 million, meaning EBITDA increased by 65 per cent to $83 million.  Overall, circulation/subscription revenues grew by 2 per cent, with double-digit growth in digital subscribers across each of The Age, SMH and the AFR.

On the on-demand side, 9Now reported revenue growth of 51 per cent and increased its EBITDA contribution from $19 million to $36 million, up 87 per cent.

Stan grew its active subscriber numbers to 1.7m. Usage per subscriber continues to increase, with daily total hours streamed now reaching 1.5m. The combination of the subscriber build, and the $2 price rise from March increased Stan’s revenue by 62 per cent across the year and resulted in the Group’s first EBITDA positive result in the second half.

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