A weak interim result and a surprise new chairman stood out in yesterday’s interim report from Nine Entertainment Co (NEC). Investors liked the news and marked the shares up 5.1% to $1.525 as they preferred to focus on the positives of the move to promote former Federal treasurer, Peter Costello, to the chairmanship of the company.
Despite the optimism, which is also linked to investor belief that Nine will be a target in any takeover activity in the wake of proposed changes to the media ownership laws, the bottom line from Nine’s figures was weak.
Nine, like Ten, Southern Cross, and its main rival, Seven West Media, have been hit hard by the slowdown in ad revenue and the desertion of advertisers to social media and all things digital.
And that is not going to change and will be a big test for the new chairman, the newish CEO, Hugh Marks (like Mr Costello, a former director) and just who replaces the company’s departing chief operating officer, Simon Kelly.
Mr Costello replaces David Haslingden immediately – as of next Tuesday, March 1 which was a surprise. There was no explanation as to why the change in the chairmanship was needed, and so quickly.
But there had been media reports and whispers of board and managerial disruption in recent months, especially between former CEO, David Gyngell and Mr Haslingden.
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Nine reported yesterday that interim profit from ordinary continuing activities after tax fell 63% to just $28.1 million as revenue fell 5% to $692.2 million.
Excluding one off items net profit fell 10% to $80 million from $88.8 million.
Nine blamed the poor result on a softer advertising market and a decline in Nine’s share of market revenue.
But earlier this year, Nine had trumpeted how it had won the TV ratings last year in the major demographics that advertisers love, such as 18 to 49s and 24 to 54s, and yet from this Seven did much better and had a much stronger result (Seven won Total People).
That weak interim result was really the final effort from former CEO, David Gyngell, who retired late last year and Mr Kelly, plus the departing chair, his replacement and Hugh Marks – they were all in management and/or on the board and oversaw what turned out to be a bad half year for the network.
But shareholders are not being penalised by the weak result – earnings might have dipped 10% excluding one off items, but interim payout was lifted from 4.2 cents a share to 8 cents a share.
And the company is conducting a second $150 million share buyback (its following the lead of Kerry Stokes at Seven West Media, and now Seven Group Holdings where the collection buyout figure is a gross $150 million).
That will also keep the share price fairly steady and ready for talks with perhaps Fairfax Media and/or Win (its regional TV affiliate) on a merger, if the media law changes go through parliament in Canberra and are approved.
And a merger with Fairfax Media?
