The Nine Entertainment Co Holdings Ltd (ASX: NEC) share price popped 9% this morning after the company released their results this morning for the half year ended 31st December 2018.
Nine is one of Australia’s most well-known media companies, and with their merger with Fairfax Media in December 2018 they also became Australia’s largest locally owned media company. Some of their assets include the Nine Network, The Sydney Morning Herald, The Age, Australian Financial Review, CarAdvice and Stan.
Here Are The 5 Key Points
- Revenue decreased 1% to $709.8 million
- Group EBITDA was down 2% to $177.8 million
- Group NPAT dropped 7% to $108.5 million
- Statutory net profit from continuing operations was down 2% to $171.3 million
- Basic earnings per share took the biggest hit, down 17% to 11.1 cents per share
Analyst Targets
Bell Potter analyst estimates for NPAT were $117 million, so it seems Nine missed the targets this time, but they are hopeful that the recent merger with Fairfax will bring improved results in for the full financial year.
Management Commentary
On the merger with Fairfax, Nine Chief Executive Officer Hugh Marks said, “The merger with Fairfax has created Australia’s pre-eminent media company, with a diverse suite of assets that now reach more Australians each week than those of any other local media company.”
Mr Marks was also pleased with the half-year results, stating, “This half year result is a testimony to the new Nine. With around 55% of our revenue coming from a stable base of broadcasting and 45% coming from businesses that are in strong long term growth markets.”
“Nine is now uniquely positioned through the combination of the operating strength of our traditional media assets as well as an increasing exposure to the continued transition of the market towards digital media assets.”
Is Broadcasting Dead?
The results show a clear trend away from broadcasting into digital media. Total revenue from broadcasting was down 10% for the half year, but up 4% for digital and publishing. Nine now owns or has stakes in several online platforms, including Domain Holdings Australia Ltd (ASX: DHG) and Pedestrian.TV. Click here for Rask Media’s article covering Domain’s HY report.
Outlook
Peering into the second half of the financial year, one of the most positive segments for Nine is Stan. Stan saw revenue growth of 50% during FY18 and a reduction in costs of 19%. Although Stan is still making a loss, EBITDA has increased 27% and Nine now expects a net positive EBITDA contribution in FY20.
Investors are also yet to see the full effect of the merger with Fairfax, which only occurred at the end of the period. Nine originally estimated cost synergies of $50 million but has updated that estimate to $65 million, representing a significant saving.
Guidance for FY19 includes Pro Forma Group EBITDA of at least $420 million, which would represent a growth of at least 10% over FY18 results.
Although Nine did not produce a positive report today, it will be one to watch over the next six months to see the full impact of the merger with Fairfax.
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Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.
