Nine FY20 Results: Revenue of $2.2bn, loss of $575m + big year for Stan

• update on: Broadcast Divison, Digital & Publishing, Domain, and Stan

Nine has released its FY20 results for the 12 months to June 2020. On a Statutory basis, Nine reported revenue of $2.2bn and a net loss of $575m, which included a post-tax specific Item cost of $665m.

On a pre AASB16 and specific Item basis, Nine reported Group EBITDA of $355m, down 16% on the pro forma results in FY19 for its continuing businesses. On the same basis, net profit after tax and minority interests was $160m, down 19%.

Key takeaways include:

• Audience growth across all key platforms – Metro Publishing, Stan, 9Now, Radio and FTA
• Strong growth from digital video businesses
a. $51m EBITDA improvement at Stan, with current active subscribers of 2.2m
b.  36% growth in EBITDA at 9Now to $49m, with market leading BVOD share of 50%
• Ad markets heavily impacted by COVID-19 from March 2020
• $225m cost-out program – cash basis, CY20 Including increasing and expediting previous cost initiatives 
• 40% growth in digital EBITDA to $166m ($178m post AASB16)
• Evolution of Metro Media business to consumer focus, with reader revenue now accounting for 59% of total revenue

Operating Cash before Specific Items, Interest and Tax for the 12 months was $373m, calculated on a wholly-owned basis, from continuing operations and excluding the impact of AASB16. On this basis, this equated to cash conversion of 137%.

As at 30 June 2020, Net Debt was $291m, on a wholly-owned basis, which equated to Net Leverage of 0.9X. 

The Company intends to pay a dividend of 2.0 cents per share, fully franked (payable 20 October 2020), taking the total dividend for the year to 7.0 cents per share. 

Broadcast Divison

Nine’s Broadcast division comprises Nine Network, 9Now as well as Nine Radio (previously Macquarie Radio). Together, Broadcast reported EBITDA of $197m on revenues of $1.1b for the year.

Nine Network reported a revenue decline of 13%, or $138m for the year, to $952m. The disruption caused by COVID-19 had a significant impact on advertising revenues broadly, with the Metro Free To Air ad market down 14% across the year, and 22% in the second half. Nine’s Metro FTA revenue share of 39.8% was 0.2 pts above FY19, and included a second half share of 41.4%, the highest recorded by any network for more than 10 years.

Across the year to June, Nine was the #1 Network and Primary Channel in all key demographics, attracting a commercial network share of 37.9% of the 25-54 demographic. On a primary channel basis, Nine’s share of the 25-54s was 38.5%, more than seven share points ahead of its nearest competitor. In both the December and June halves, Nine won all of the key demographics.

Excluding the impact of AASB16, FTA costs declined by 6%, or $49m. Second half costs declined by 16% or $75m, as the onset of COVID-19 resulted in a major review of Nine’s cost base early in calendar 2020. Of this $75m, around $40m related to the interrupted NRL season. It also includes the expedition of Nine’s previous commitment to reduce FTA costs by around $100m, and an increase in the 3-year target to $160m.

For the year, FTA EBITDA fell by 42% to $124m, pre AASB16, or $138m inclusive of the accounting change.

In a BVOD market which grew by 31% for the year to $162m, 9Now held its share 50%, for revenue growth of 32%. Growth in the underlying market slowed in the fourth quarter to 15%, reflecting the broader advertising market momentum. Nine’s investment in incremental content has had a positive impact particularly on users and engagement, with corresponding revenue expected to follow when the ad market generally improves. Live and VOD minutes increased by 49% across the year on pcp, with total streams up by 44%. Overall, 9Now increased its EBITDA contribution by 36% or $13m to $49m, pre AASB-16, or $50m post.

The acquisition of the minorities in Nine Radio (previously Macquarie Radio) was completed in November. The radio market generally had a difficult 12 months – the Metro radio ad market declined 20% across the year and 30%4 in the second half. Across the two halves, Nine’s revenues declined by 16% and 29% respectively, given specific operational issues during the year. Full-year costs declined by 8% or $8m, reflecting one-half of merger synergies, supplemented by broader cost out initiatives. Nine Radio reported EBITDA of $10m, or $6m pre AASB16.

Since taking full ownership, Nine has made significant changes to its Radio business – both in terms of personnel, as well as the consolidation of back-office functions, sales and news into Nine and the reformat of the loss-making Sports Network to easy-listening. 

Digital & Publishing

Nine’s Digital & Publishing division includes Metro Media and Nine’s other Digital Publishing titles including Pedestrian Group, CarAdvice and nine.com.au. Digital & Publishing reported revenue of $525m, down 9% on pcp. A combined EBITDA of $92m was reported, or $76m ex AASB16.

Metro Media reported a 4% decline in revenue (ex Weatherzone) as the disruptions relating to COVID-19 impacted, with H2 revenue down 9%. Revenue generated directly from its audiences accounts for around 59% of total revenues, exceeding the contribution from advertising.

Audiences across all mastheads increased over the year, with total readership across The Sydney Morning Herald, The Age and the Financial Review up 38%, 20% and 43% respectively. The removal of the paywall for some critical content relating to the bushfires and COVID-19, Nine reported more than 20% growth in digital subscriptions across The Age, The Sydney Morning Herald and the Financial Review (June 2020 vs June 2019). The pandemic, and subsequent lockdown, however, resulted in declines in print retail sales.

Digital advertising revenue growth of 4% was weighted to the first half, with the second half impacted by the overall ad market. Print advertising was particularly soft, with two of print‘s leading categories, travel and luxury goods, being hard hit by the lockdown. Adjusting for the impacts of the Weatherzone sale and the re-inclusion of some mast-head related events, Metro Media costs were down by 8%, or $28m. Cost reductions were focussed outside of the core editorial content where investment increased across the year. EBITDA declined by 10% to $75m, pre AASB16, or a reported $88m.

Other key components of Digital & Publishing together contributed revenue of $99m, and EBITDA of $4m ($2m pre AASB16) impacted by soft conditions in the broader advertising market.

Domain

After a stronger start to calendar 2020, the challenges relating to COVID-19 heavily impacted on the property market and Domain through the fourth quarter. New listing volumes across the year were down 11% nationally. Domain increased yield by 6% through the launch of its new pricing model and higher depth penetration. Together with favourable geographic mix, like-for-like residential depth revenues declined by 1%. The market weakness also impacted on Domain’s Media & Developer and Print operations, with Printing paused during the height of the COVID impact. On a like-for-like basis, total costs declined by 5%.

EBITDA (pre AASB16) was down by 17% to $78m. This included a $5m benefit relating to JobKeeper and an offsetting $5m support package provided to agent customers. During the year, Domain continued to grow its audiences, and focus on providing innovative solutions for both agents and consumers. Notwithstanding the difficult operating environment, depth and yield improvements have continued, which will result in strong leverage when the cycle returns to normal.

Stan

Stan experienced an acceleration of subscriber growth through the June half, to around 2.2m currently. The combination of this ongoing subscriber build and the $2 price rise implemented in March 2019 underpinned the 54% increase in Stan’s revenue across the year. Further investment in content and marketing contributed to the 19% increase in costs. On a like-basis, EBITDA improved by more than $50m, to a full year total of $31m.

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