Nine Entertainment’s earnings up, but tougher times ahead

Nine Entertainment will buy back up to 10 per cent of its shares on issue, following a better-than-expected annual earnings result.

Nine Entertainment chairman Chairman Peter Costello and CEO Mike Sneesby. Picture: James Brickwood

Nine Entertainment will buy back up to 10 per cent of its shares on issue, following a better-than-expected annual earnings result which saw the media company book a net profit of $315m.

The group’s earnings before interest, tax, depreciation and amortisation for the 2022 financial year rose 24 per cent to $700.7m, helped by the post-Covid buoyancy of the advertising market across television, radio, print and digital.

Revenue grew 5 per cent to $2.7bn.

The rate of growth of Nine’s streaming service Stan, however, appears to have slowed.

The platform now has more than 2.5 million active subscribers — a year-on-year increase of just 6 per cent.

But the figure of 2.5 million subscribers had previously been announced at Nine’s half-year results in February, suggesting the platform’s growth plateaued in the second half of the financial year.

Asked if Stan’s growth had flattened in the six months to June 30, Nine chief executive officer Mike Sneesby said the streaming platform was meeting expectations.

“We said at the half-year result that what we’d see in the SVOD (subscription video on demand) category is a level of consolidation or normalisation post-Covid,” he said.

“We’ve seen that in the (streaming) category in general (across the industry).

“But it (Stan) has got great growth opportunity ahead of it.”

Mr Sneesby also warned that the volatile economic conditions made it difficult to predict whether the advertising market would remain strong into the second half of this financial year.

“It’s the second half of FY23 where I think there’s greater uncertainty,” he told The Australian.

“That’s not because we’ve seen any hard measures, or any indication from our advertisers, that their sentiment is turning. We’re simply looking at the second half through the lens of economic indicators.

“Generally speaking in a high inflation environment, you would expect that to flow through into the advertising market.”

The release of Nine’s full-year results came as the company’s publishing division continues to threaten industrial action over unmet pay demands.

It’s understood more than 80 per cent of staff in the publishing division has voted in favour of striking — should the company fail, in coming weeks, to meet annual pay rises of between 4.5-5.5 per cent.

On Wednesday afternoon, Nine’s publishing boss James Chessell wrote to staff to congratulate them on the company’s full-year results, but also warned that the current financial year may not be as profitable. “As I’ve said previously the next 12 months will undoubtedly be tougher, given the cost headwinds facing Publishing and the apparent end of a once-in-a-lifetime news event.”

Mr Chessell also told staff that he met with the media union and staff delegates last week, and admitted: “It is technically correct to say there was ‘no movement’ on pay increases.”

There is genuine concern within Nine’s management ranks that any pay bumps offered to staff in the publishing division would also need to be passed on to its TV division, which is not covered by an enterprise bargaining agreement.

Such a scenario could add tens of millions of dollars to the company’s wage costs.

Nine Entertainment shares closed at 2.18 on Wednesday, up 9 per cent.