Nine posts $575m loss but weathering COVID storm

Nine Entertainment has posted a net loss of $575m in its 2020 financial year results, but revenue lifted 17% to $2.17 billion.

The loss was largely due to write-down of goodwill on assets, mainly television and Domain. Excluding the write down, profit was $155.9 million. Underlying earnings before EBITDA fell 6% to $396.7m.  Revenue was down 7% and earnings 16%.

Nine Network reported a revenue decline of 13%, or $138m for the year, to $952m.

CEO Hugh Marks said the business was successfully weathering the storms of the Australian economy.

“2020 was no doubt a challenging year. The results of the strategic growth decisions we have made over the past 5 years, have played out at scale across the year and, as a result, sheltered us from the worst of the market impact of COVID-19,” he said.

“Our focus on the growth platforms in the market – primarily digitally based, and video-centric – has paid off. In the year to June 2020, the combined contribution from Stan and 9Now, the digital components of Domain and Publishing grew by 40%, to around 48% of our total EBITDA. Digital video consumption and subscriber revenue in particular, have grown significantly across the period, while digital advertising markets have improved more quickly as we trade through the worst of the COVID crisis.”

Overall Nine’s broadcast businesses (TV and radio) were among the most impacted by COVID and delivered earnings of $197.3m (down 35% on a like for like basis). But there were positive signs of recovery in key markets as they come out of lockdown. 9Now saw 32% revenue growth, had a 50% share of revenue in the BVOD market and grew earnings to $49m.

Stan has more than 2.2m active subscribers, with revenues up 54% year-on-year and the business delivered earnings of some $31m this year.

“On COVID more broadly, we were quick to respond when the markets turned, transitioning the majority of our work-force to `work at home’ with minimal interruption. As advertising markets across all sectors came under pressure, we focused on significant short and long term cost initiatives across all of our businesses, successfully removing around $225m of cash costs in CY20, and setting in place the reduction of approximately $230m of long-term P & L cost from our business,” Marks continued.

“As a result, the current market conditions have only given greater cause to continue to evolve the positioning of our business. Particularly the migration to digital – clearly evident across both our publishing and video assets. We will continue to drive growth in our increasingly prominent digital businesses while, at the same time, maximizing the performance of our traditional media assets.

“We are confident that this current period of adversity will only make us stronger. We believe we have the right strategy, the right assets and the right people, as well as a strong balance sheet, to ensure Nine’s position at the forefront of the media sector for many years to come.”

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%1 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%2 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 that 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.