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Nine Entertainment Releases a Gloomy Third Quarter Update

Nine Entertainment Releases a Gloomy Third Quarter Update
The company announced that the advertising market during the quarter remained passive and Nine’s ratings dropped more than anticipated, resulting in a lower FTA (Free-to-Air) revenue share.
Apr 05, 2016 By Kaivalya Kandarpa Tags: NEC

Nine Entertainment Co. (ASX:NEC) released a trading update for the third quarter, stating that the revenue declined 11% against the previous comparable period.

The company announced that the advertising market during the quarter remained passive and Nine’s ratings dropped more than anticipated, resulting in a lower FTA (Free-to-Air) revenue share. The company also states that Nine’s Summer of Cricket was adversely impacted by the weather and the standard of competition, and subsequently 30% of the scheduled play days were lost.

The company also blames lower revenues on the timing of Easter holidays this year and on the absence of the Cricket World Cup event. Nine Entertainment anticipates to record a low single digit decline in the FTA advertising market during FY16, lower than the previous guidance of ‘flat to down marginally’.

The company also states that it will continue to focus on reducing costs across all business segments. It anticipates to have 4% lower TV costs this year, notwithstanding higher than expected legal expenses incurred during the second half.

1H16 Results

The company released financial results for the first half of FY16 in February. It reported a 5% decline in revenue to $690 million while the overall net profit after tax contracted 6.1% to $78.4 million, compared to the pcp. Net cash as at 31 December 2015 was $52 million, compared with net debt of $524 million at 30 June 2015. The company’s cash balance was boosted by the sale of the Nine Live business, completed during the period.

Nine Entertainment’s CEO, Mr. Hugh Marks commented on the results: “I am pleased to report a solid result in what has been a challenging advertising market. Competition from both within and outside the sector kept pressure on our revenues. However, our stringent cost focus has resulted in a group-wide cost decline of 5% for the period, mitigating much of the revenue impact.”

NEC has declined more than 23% at $1.18 as at 10:30 AM (AEDT), as investors sold off more than $1.5 million worth shares in the company.

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Kaivalya Kandarpa Author: Kaivalya Kandarpa Apr 05, 2016

Kaivalya is an equity analyst and a client advisor at Wise-owl. She specialises in fundamental and technical analysis for large and mid-cap companies. Having completed her bachelor's degree in Business Administration majoring in Finance, Kaivalya has a comprehensive understanding of international stock market movements. She tracks local and overseas markets and compiles analytical reports for various industries.

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