Nine forecasts first-half earnings fall of 10pc

Nine warns its first-half earnings will be measurably down on last year, made worse by the boycott of Alan Jones.

Nine says broad weakness in advertising markets will hurt its half-year profit. Picture: Stuart McEvoy.

Nine Entertainment has warned that its first half earnings will be hit as television network and publisher battles a a tough advertising market while its radio network feels the pinch of an advertiser boycott of Alan Jones' radio program.

The warning came as Nine chairman Peter Costello – the former Howard government Treasurer – took aim at tech majors Google and Facebook for undercutting the nation’s advertising business and not investing in local media content “the same way we do”.

“We are highly regulated through content and viewing hours, Australian content requirements, advertising standards, defamation and public-decency requirements. They are not. These competitors sell their services to advertisers as publishers and broadcasters but they do not accept, nor do they follow, the standards that apply to the traditional publishers and broadcasters in this country,” Mr Costello told investors at the media companies annual meeting.

His comments follow a probe into the digital platforms by Australia’s competition regulator which recently handed its probe into the sector to the Federal Government.

Meanwhile, Nine chief executive Hugh Marks, who is leading the integration of last year’s merger $4 billion merger of the Nine television empire with Fairfax Media, said the weak ad market is being “driven by poor consumer sentiment”, adding a credit squeeze was hurting spending.

While investors anticipated a tough market in the first three months of the financial year, particularly as the economy was slowing, the extent of the warning by the company that now owns The Sydney Morning Herald, the Financial Review as well as the Nine television network took many offguard.

Nine shares fell nearly 6 per cent, hitting a six-month low of $1.70 during the trading session, and closed down 5.7 per cent to $1.74.

“People’s access to credit has been terribly constrained in this post Hayne Commission environment, and that weakness of credit has led to obviously other impacts throughout the economy, which has contributed to low consumer sentiment,” Mr Marks said.

Record low interest rates and tax cuts have failed to stimulate consumer spending, which has hit ad spending, he added.

READ MORE: Nine CEO Hugh Marks flags more changes at Macquarie Media | Nine ups ante on ad charges

Mr Marks earlier told shareholders that metropolitan free-to-air television market was down 6.4 per cent in the first quarter from a year earlier, "pretty much in line with the overall ad market". Early signs of an improvement in the second quarter of the 2020 financial year have "dissipated in recent weeks", after a broadly flat September, he said.

"Advertising from pretty much every major advertising category was weak in the September quarter particularly from auto, government, domestic banks and gambling," Mr Marks said.

"And whilst our business has become much less subject to the vagaries of the ad market, this weakness has of course impacted."

Just days after completing its acquisition of Macquarie Media, Mr Marks said radio had “experienced similarly soft market conditions in the current half exacerbated for Macquarie by the advertiser boycott around the Alan Jones’ program" on 2GB in Sydney and 4BC in Brisbane.

Meanwhile, Mr Marks defended the return of Karl Stefanovic to its television network’s ailing breakfast show Today next year, saying he is refreshed and “fired up”.

Nine is hoping to offset the earnings fall in the second half of the financial year, citing expectations of free-to-air market share growth, growth online and at its streaming service Stan, as well as a pick-up in activity at online property listing group Domain and "early synergies” from its Macquarie Radio business.

For the full year, based on the metro free-to-air TV market being down in "mid-single digits", Nine expects to report "low single digit growth" in underlying earnings, before the impact of accounting rule changes. That's below its forecast in August for underlying earnings growth of 10 per cent for the 2020 financial year.

Nine expects its television costs to be up 2.5 per cent, compared to its previous guidance of 4 per cent.

Mr Marks was coy on future Stan content deals with US entertainment giant Disney, which is launching its own streaming service Disney+ early next week, and other players.

“We’ll continue to talk to a whole bunch of people that might be future suppliers for Stan. At the moment a lot of the content that goes onto Hulu, we’re acquiring through Paramount, or MGM or other studios, so there’s no reason that’s necessarily going to change but we’ll continue to talk to all parties in the market.”