Nine swings to profit but ad slowdown crimps revenues

Nine has swung back to profit but a subdued ad market hit revenues, as it admitted to poor programming outcomes.

“Poor programming outcomes” was one of Nine’s problems this year.

Nine Entertainment has swung to a full year profit, but recorded a 7 per cent drop in adjusted earnings as a subdued advertising market crimped revenues at its core broadcasting unit.

The result coincided with news it had extricated itself from a costly content arrangement with US-based Warner Bros.

For the 12 months to June 30, Nine (NEC) reported a profit of $33.2 million, up from a writedown-affected loss of $597.6m last year.

The group’s more closely watched adjusted net income lifted 7.1 per cent lift to $120.3m, ahead of analyst forecasts for a reading of $112.3m.

On a pro forma basis the group declared a 6.5 per cent decline in sales to $1.28 billion as revenue at its core Nine Network operation dipped 7 per cent.

The group admitted to some ill-advised programming decisions.

“The ratings and revenue performance of our core free-to-air business was disappointing in the first six months of calendar 2016, due to a combination of the challenging ad market and poor programming outcomes,” Nine chief executive Hugh Marks said.

“However, we are taking positive steps to regain momentum in our ratings and revenue, with a well-advanced content plan for 2017 incorporating 50 per cent more premium local television content.”

Mr Marks added he was happy with progress made to reposition the group in an ever-changing media landscape, with the development of its own streaming platform 9Now and streaming video on demand joint venture Stan seen as positives.

Stan has over 500,000 active subscribers after less than 18 months, Nine said, while 9Now has more than 1.6 million registered users.

Nine also said its cost-cutting program had produced results ahead of expectations.

The company was cautious in its guidance, saying the TV advertising market would be “flat-to-down” in fiscal 2017, with its results to be impacted by a likely post-Olympics boost for rival Seven Network.

“Historically, the broadcasting of the 16 days of an Olympics adds approximately 1.5 points of ratings share across the year for the host network, which is expected to impact Nine’s share for FY17,” the ASX-listed group said.

“Looking beyond the short term impact of the Olympics, the significant increase in local, premium content will greatly enhance Nine’s competitiveness in calendar year 2017, and is expected to provide momentum into FY18.”

Nine also took the opportunity to inform investors of a deal struck yesterday with Warner Bros to abandon its life of series obligations.

The current arrangement sees Nine required to purchase a number of US drama and comedies as they are made available regardless of performance in the local market, with lossmaking content from this agreement leading to a $46m impairment in its most recent results.

The new deal will rid it of this obligation for a fee, with contracts tipped to be formally signed next month.

“This agreement will require a further provision of $86m to be booked in the first half of FY17, the majority of which will be payable over FY18 and FY19,” Nine said.

“The agreement crystallises what would otherwise be a recurring liability, giving Nine certainty in relation to the obligation and increased flexibility in relation to future content spend.”

Nine declared a final dividend of 4c a share, bringing total dividends up to 12c for the year. The payout is a 2.8c improvement on the prior year.