Nine targets $266m in cost cuts

Nine is fast-tracking cost cuts across its business, as the coronavirus crisis hits advertising revenue.

Nine Entertainment CEO Hugh Marks. AAP.

Nine Entertainment is targeting cost savings of $266m this year and fast-tracking $100m in cost cuts from its free-to-air broadcast business, as the coronavirus crisis hits the economy and advertising revenue.

Just 11 days after dumping its annual earnings guidance, Nine said it is “focused on major short and long-term cost initiatives across all of its businesses”, including big savings from its marquee sporting event, the National Rugby League.

Nine also said its third-quarter revenue was in line with its previous guidance. However, the advertising market is “increasingly uncertain with likely material negative impact from April”. No specific details about the ad downturn were released.

Of the $266m in cost savings identified, Nine expects $102m to be delivered in the six months to June 30 and the remainder in the second-half of 2020.

Nine has identified $130m in broadcast savings if the NRL 2020 season is cancelled, of which will be equally booked in the 2020 and 2021 financial year.

In a statement to the ASX on Monday, Nine outlined a further $68m in operational savings in 2020, including sales and product costs, operational changes, travel and the axing of bonuses and commissions.

Plus, savings of $30m in capital expenditure by deferring projects into next year and $28m in the production of local kids and drama programs. It is also looking to save $10m by deferring its spectrum payment to next year.

Nine chief executive Hugh Marks said it is a “very difficult time for all Australians, on many levels”.

“Notwithstanding an expected significant impact on our business as conditions continue to evolve, we are confident that with our enhanced audience position, our mix of assets and the commitment of the Nine team, we will emerge from this period a stronger and more competitive company,” Mr Marks.

Nine also said its streaming services, Stan and 9Now, are reporting “accelerating growth in active subscribers/users and usage” as people stay home, in a bid to avoid the coronavirus spreading.

Nine’s update on its operational plans was issued on the same day that Mr Marks presented at the JPMorgan virtual conference.

Nine, born from Nine’s $4bn merger with Fairfax Media in December 2018, blamed poor future advertising visibility for axing its annual earnings guidance on March 19, joining a growing list of Australian media companies to do the same.

The group last month forecast full-year underlying earnings around a “similar level” to last year’s $423.8m and a $100m cost cutting plan from its broadcast business over the next three years, as its Channel 9 business faced weak ad revenue.

For the second time in less than a fortnight, Nine noted it had completed the refinancing of its corporate debt facilities on January 31, amid investor concerns about funding across the sector. It comprises equally of three and four year revolving cash advance facilities of $545m, plus a one-year $80m working capital facility.

Nine said it has undrawn debt and cash of around $300m as of Monday.