Nine shares rise on buyback as David Gyngell eases investor concern

NINE boss David Gyngell has mounted a defence of the free-to-air television industry, as the company’s shares rose after a robust result.

Nine share chart.

THE chief executive of Nine Entertainment has mounted a staunch defence of the free-to-air television industry following investor concerns about the threat posed by the internet, as the company’s shares bounced on the back of a robust half-year result.

Amid a rough start to the year for Nine’s ratings and several expensive program flops, David Gyngell urged investors to stop panicking about the impact of structural challenges.

“I think the market needs to settle down,” Mr Gyngell told The Australian. “History will always show free-to-air television never settles down until Easter, whether it was Kerry Packer talking to you or David Leckie telling me, just wait until after Easter before you get too radical on change.”

The plea for calm comes as the networks face a growing danger from the rise of streaming services such as Netflix, which has 44 million subscribers around the world, enabling users to watch original productions, such as House of Cards, when they want.

Asked if investors and advertisers were overstating the disruptive influence of the internet, Mr Gyngell said: “I believe a media buyer’s job is to look for opportunities, but these opportunities do not always mean outcomes and results for advertisers.

“Their job is to have choices to beat us with a stick. That’s all well and good, but at the same time we have big shows and big ideas.”

The explosion of streaming services is one of the factors behind a recent rerating of the main commercial networks — Seven, Nine and Ten. A persistently weak advertising market has also depressed investor confidence in the stocks.

Despite the hype, free-to-air television remained an “effective way for advertisers to reach consumers at scale”, Mr Gyngell said.

While new entrants like Netflix are providing competition for eyeballs, the networks are countering the move with their own streaming services, for which they have secured exclusive content.

Mr Gyngell said he was surprised by the number of subscribers Nine’s streaming service Stan had attracted in just four weeks since its launch on January 26. He said Stan was on track for more than 100,000 sign-ups at $10 per month by mid-March.

“It hasn’t been an exciting start to the year,” he admitted. “We’ve had House of Hancock which has been great, and Gallipoli which hasn’t been great for us but great for Stan.”

Nine’s shares hit a three-month high after the media group announced a $150 million share buyback. Underlying net profit fell 6.4 per cent to $88.8m, in line with guidance, while revenue dipped 1.9 per cent to $829m, missing market expectations.

The shares rallied as much as 15 per cent — the biggest intraday surge on record for the stock. But they fell back, finishing 9.43 per cent higher, up 17c, at $2.03, adding more than $200m to the company’s stockmarket value.

Mr Gyngell said he was “no longer interested” in buying an outdoor advertising company because of high valuation multiples, but did not rule out radio assets.

The TV, events and digital media company said it expected to lift full-year profit by 10 per cent, adding that the advertising market had been improving, with expectations of a boost in government expenditure.