The annual meetings of Nine Entertainment and Seven West Media gave us very different pictures of current trading conditions at the start of the 2020-21 financial year – on the one hand Nine has found more revenue, cut costs and is now looking at a much better result for the six months to the end of December, forecasting profit rise of “around 30%, according to CEO Hugh Marks in an update.
Over at Seven, the company and CEO, James Warburton was far more circumspect – there was no guidance given for the half or full year. None at all.
“SWM is not in a position to guide on FY21 earnings due to market uncertainty,” CEO James Warburton told the meeting and the market in an update.
And yet the share prices of both headed in similar directions – Nine’s jumped more than 8% to 2.56, the highest since late 2018 (in the wake of the Fairfax takeover) while Seven West’s shares were up more than 7% to …22.5 cents.
Nine shares eased over the rest of the session to still end higher at $2.48, up 5%. Seven shares also lost their early oomph to end the day steady on 21 cents.
Seven’s update is easiest to deal with first – CEO James Warburton told the meeting “The market has improved since the August results but remains short and volatile. The Metro FTA market was down 5% YoY for the period from July to October. Over the same period, the BVOD market continues to grow strongly, up 37%, with 7plus capturing share and growing 62% in that period.
Forward bookings suggest Seven’s advertising revenue for the first half could be down by approximately 5%. Pleasingly, cost savings YTD, ex JobKeeper, have more than offset this revenue decline.
WAN (West Australian Newspapers) has also had a positive start to FY21. Ex JobKeeper benefits, YTD cost savings have offset most of the revenue decline, which has been driven by continued weakness in travel against a stronger retail backdrop.
“Relentless focus on cash flow has reduced net debt to approximately $425m at the end of October with $750 (million, sic) in drawn facilities and $325m cash.”
At the end of the 2019-20 financial year the company had net debt of $398 million (so it has risen $27 million in four months as the cash pile at the end of June has shrunk from $352 million.
At Nine, shareholders and investors learned of far better times – the best for a couple of years – in the midst of the backwash from the pandemic.
Nine Entertainment Co said it expects a 30% boost in earnings for the first half of the financial year thanks to better revenue and more cost-cutting.
“As a result, at this stage, Nine’s first-half EBITDA (earnings before interest, tax depreciation and amortisation), before Specific Items, is currently expected to be up by around 30%, compared to $251m on a post AASB 16, basis for continuing businesses, in the previous corresponding period,” the meeting was told.
Nine warned that it would cut more costs (including jobs) across its television, radio and newspapers.
Nine said the late timing (because of COVID and earlier lockdowns) of the NRL finals and the three State of origin games would help increase advertising revenue for the first quarter.
(Despite the late timing of the AFL finals, Seven said its revenues could be down 5%).
“We are certainly trading more positively than we would have anticipated just three months ago and are very pleased with the operating performance and trends in each of our business units,” Mr. Marks said.
“Despite this, given our limited visibility on the second half advertising market, we do not believe we are in a position to provide guidance on earnings for the full year. We expect to be in a better position to address this at our half-year results in February.”
Mr. Marks said television division costs are expected to be down double digits in the first half of the new financial year but will spike due to the return of the NRL. Mr. Marks said the television costs would be down 4% over the year to June, 2021.
He said the company will aim to reduce costs by $230 million from now until 2024. Mr. Marks flagged $100 million in cost cuts to the television division in February but was forced to target $266 million in cost savings in the calendar year after the coronavirus caused large falls in revenue.
