Coronavirus: Nine dumps profit guidance

Nine Entertainment has scrapped its annual guidance, blaming poor future advertising visibility in the wake of the coronavirus pandemic.

Nine chairman Peter Costello (left) and CEO Hugh Marks. Picture: John Feder.

Investors dumped Nine Entertainment shares after the media company abandoned its annual guidance because of poor future advertising visibility in the wake of the coronavirus pandemic.

The company, born from Nine’s $4bn merger with Fairfax Media in December 2018, said the "rapid progression of COVID-19 is beginning to have an impact on Nine’s markets" since it issued its guidance for the financial year to June on February 26, alongside with its interim results.

Nine, which is the free-to-air television broadcaster of the embattled National Rugby League, said the short term impact remains limited to date, with its fiscal third-quarter free-to-air ad revenues "continuing to track close to flat", with overall results for the quarter broadly in line with its expectations.

"However, the forward ad market is becoming increasingly difficult to reliably predict," Nine said in a statement to the ASX on Thursday.

As a result of the uncertainty in the fourth-quarter to the end of June, Nine said it "considers it prudent to withdraw" its 2020 financial year guidance.

The warning spooked investors, who pushed the stock to a record low of 85c in late trading on the ASX on Thursday. Nine shares closed down more than 15 per cent to 87c, with the benchmark ASX 200 finishing 3.4 per cent lower after the Reserve Bank of Australia’s emergency rate cut.

Nine had forecast full-year underlying earnings to come in at a “similar level” to last year’s $423.8m. The group also said it would cut costs by $100m cost cutting program from its free-to-air broadcast business over the next three years, as its Channel 9 broadcasting business faced weak ad revenue.

Nine's announcement comes a day after New Zealand pay-TV and streaming company Sky Network Television abandoned its annual revenue and earnings guidance because of the increasing uncertainty over the coronavirus outbreak, which has already hurt sporting events for which it holds broadcast rights.

Outdoor advertising firm oOh!media on Monday abandoned its full-year guidance because of the coronavirus.

Amid the ad market uncertainty, Nine said its audiences across “all key businesses continued to perform well”, and it remains “very focused on bringing forward cost efficiencies where possible”.

Nine didn’t provide any specific information on the performance of its radio business, home of popular AM stations 2GB and 4BC, or its publishing operations such as The Australian Financial Review, Sydney Morning Herald and The Age.

The group also didn’t make any reference to its streaming service Stan, which has a big pipeline of original drama shows scheduled to be filmed. However, that could prove tricky given the federal government’s limits on non-essential gatherings in a bid to curtain the spread of the coronavirus.

In the unscheduled trading update, Nine also noted that it had recently completed the refinancing of its corporate debt facilities as announced on January 31. It comprises equally of three and four year revolving cash advance facilities of $545m, plus a one-year $80m working capital facility.

Nine will pay a 5c fully franked interim dividend on April 20, in line with last month’s financial results announcement.

Nine’s major rival, Seven West Media, was also sold off over market fears about its outlook.

Seven, which was already struggling before the coronavirus pandemic hit ad markets, dropped to a record low of 6.8c just before the end of trading session, It closed down more than 29 per cent to 7.8c.