Nine Entertainment shares were sold off after the company revealed a sharpish downgrade in first-half earnings because of the slump in TV and radio broadcasting.
Nine shares fell 5.7% to $1.74, Seven West Media shares lost 8.3% to 44 cents, after it reached a five-month high of 47.8 cents on Monday and shares in Southern Cross Media (which warned of an 8.5% slide in first-quarter revenue in both TV and radio) lost 3.2% to 90.5 cents.
Nine CEO Hugh Marks told the company’s AGM in Sydney yesterday that signs of improvement in the advertising market had dried up in the last few weeks and admitted the brand boycott against 2GB presenter Alan Jones had cut earnings at its most recent acquisition, Macquarie Media.
The big problems are at the Nine Network and Macquarie Media, the recent acquisition.
“Specifically – for the first quarter, while Nine’s Metro Free To Air business achieved a leading revenue share of 39.8%, the market was down by 6.4% on last year…pretty much in line with the overall ad market. Early signs of improvement in Q2, given a broadly flat September, have unfortunately dissipated in recent weeks,” he said.
“The FTA market in the second quarter looks like being down by at least as much as Q1 – we now expect the market to decline by mid-single digits across the full financial year.
“We remain confident about share gain through the second half on the back of our audience performance earlier this calendar year, and will be working hard to soften the impact of the weak start to the year. FTA costs are now expected to be 2.5% higher as opposed to the 4% we guided to earlier in the year.
There was always going to be a shift in earnings contribution in this financial year due to timing issues, particularly the one-off costs in the TV business – however, the current advertising market conditions will mean that our first half result is now expected to be approx. 10% down on the first half of 2018-19.
Nine said that it expects to make up the shortfall in the second half from better performances from non-broadcast businesses, such as the 59% Domain, streaming video, print, and websites.
As a result of Nine now expects to report “low single-digit growth” in group earnings before, interest, tax, depreciation and amortisation (EBITDA) this financial year. Previously in August at its full-year results, Nine said it expected to report EBITDA growth of around 10%.
Mr. Marks blamed (as did News Corp CEO, Robert Thomson last Friday in a first-quarter results briefing) that the prevailing weakness in consumer sentiment in Australia has manifested itself in weak trading conditions for many consumer-facing businesses, and general softness in the overall advertising market.
“Advertising from pretty much every major advertising category was weak in the September quarter particularly from auto, Government, domestic banks and gambling,” Mr. Marks said.
