Nine Entertainment’s profits slide as costs rise in ‘tough’ market

Nine Entertainment’s balance sheet has been hit by a slump in its real estate division, coupled with a sharp rise in costs across its broadcast and streaming arms.

Nine Entertainment’s earnings slid by nine per cent in the first half of this financial year, with the media giant’s balance sheet beset by a slump in its real estate division coupled with a sharp rise in costs across its broadcast and streaming arms.

In announcing the company’s half yearly results on Thursday, Nine chief executive officer Mike Sneesby said a “tougher economic backdrop” in the six months to December had contributed to softer-than-expected profits.

Nine’s earnings before interest, tax, depreciation and amortisation were $370.5m in the six months to December, down from $406.3m a year prior; net profit slipped by 14 per cent to $183m.

Group revenue rose 5 per cent to $1.405bn, up from $1.333bn for the first half of FY2022.

As reported last week, the challenges of the Australian property market saw Nine’s real estate portal Domain post EBITDA of $49.3m, a year-on-year fall of 19.2 per cent.

Mr Sneesby told The Australian he remained bullish about the capacity of the media group’s content to deliver strong revenue streams later this year and beyond, although he said advertising conditions were unlikely to improve until the next fiscal year.

“We’re not expecting the market to turn around quickly in Q4 — we think there’s a fair bit of uncertainty there,” he said.

“But the great positive for Nine is the diversity of revenue streams that our business generates.”

Nine’s streaming platform Stan recorded revenue growth of 12 per cent year-on-year, with its numbers of active subscribers “approaching 2.6 million, a slight rise from the reported 2.5 million users in August last year. The platform’s costs, however, rose by 17 per cent.

“We continue to see long-term opportunity for Stan subscriber growth,” Mr Sneesby said.

The company’s publishing division, which includes The Age, The Sydney Morning Herald and The Australian Financial Review, saw subscription print revenues dip by 7 per cent, offset by a 9 per cent rise in advertising revenue and a 4 per cent jump in digital subscription revenue.

Total revenue for publishing was $299m — unchanged from this time last year.

Total costs exceeded revenue in all of Nine’s divisions, with the exception of publishing.

Mr Sneesby highlighted the strong growth of its broadcast video on demand (BVOD) platform 9Now, which saw its revenue climb by 19 per cent amid forecasts of further growth in Q3, despite a negative outlook for the free-to-air advertising market over the same period.

“At some stage in the future all television will be consumed through the internet. The question is just how far into the future that will be,” Mr Sneesby said.

“It’s a superior means of distribution … and therefore it’s critical we prioritise that.”

The Nine boss continued to defend the company’s recent $315m, 10-year outlay on securing the rights to the Summer and Winter Olympic Games through to and including Brisbane 2032, despite the global event almost always leaving host broadcasters out of pocket due to the exorbitant production and hospitality costs.

Industry estimates suggest that Australia’s long-time Olympics host broadcaster Seven lost $120m across the 2016 and 2020 Summer Games in Rio de Janeiro and Tokyo.

Mr Sneesby said Nine’s diversity of platforms gave the broadcaster a clear advantage over its commercial rivals.

“We have more forms of distribution, more opportunities to reach (a greater number of) eyeballs, and a greater opportunity to commercialise than any other media company has ever had for an Olympics broadcast in Australia,” he said.

Nine will pay a fully franked dividend of six cents per share.

Nine’s shares closed at $2.00 on Thursday, down 2.9 per cent.

Originally published as Nine Entertainment’s profits slide as costs rise in ‘tough’ market