Nine flags ‘disappointment’ as radio revenue falls 24%

Nine has announced its financial results for the six months to December 31, 2020, with the entire media conglomerate posting profits of $182 million, up 79% from the prior corresponding period, on revenue of $1.2 billion (down 2%). The group EBITDA (earnings before interest, tax, depreciation and amortisation was $355 million, up 42%.

Its radio operation stood out from its other broadcast and digital operations, however, with revenue for the six-month period down 24% to $44.0 million from $57.6 million for the same period in 2019. EBITDA was down 62% from $7.6 million to $2.9 million.

Nine’s chief financial officer, Maria Phillips, said the results for its radio division were disappointing.

“The results from Nine Radio were disappointing, however they disguise some promising trends,” she told investors in a presentation this morning. “Nine has done a great job of refreshing talent with our core talk network growing cumulative audience in thousands in every market, and by a total of 15%.

“As a result, Nine has refocused its radio sales team without adverse effects on the cost base. And we remain confident that our radio results will improve as the ad market continues to recover.”

The group said it anticipates Nine Radio’s performance to improve into the 2022 financial year (kicking off on July 1, 2021), as the radio market recovers. It said radio’s recovery has lagged compared to that of television.

“The radio market generally has a difficult six months, with the advertising recovery lagging that of television,” Nine said in a release to the ASX. “The metro radio ad market declined by 19% across the six months – Nine’s gross ad revenues declining by a similar quantum, with growth in agency share being offset by a softer performance in direct. First-half costs declined by 18% or $9 million, reflecting ongoing cost out and restructuring initiatives.”

The company echoed CFO Phillips’ statement too, noting: “Since Nine’s major format changes through the first half of calendar 2020, audiences have grown across all talk stations. Recent changes in sales structure, coupled with this audience growth, are expected to underpin leverage as the ad market improves.”

Radio forms part of Nine’s Broadcast decision, which also includes free-to-air television and broadcast video on demand (BVOD) service 9Now. The wider segment’s revenue was $621.5 million, down 1% from $630.8 million for the corresponding period in 2019. EBITDA for the division was up 42% to $207.4 million, and costs were down 15% from $485.3 million to $414.1 million.

The company confirmed it has received $8.4 million from the Federal Government from the JobKeeper wage subsidy between July and December, $6.5 million of which went to real estate listings and content portal, Domain. It will repay $2.0 million of JobKeeper payments which it used for Nine Events and its youth publishing outfit Pedestrian.

In the earlier stages of JobKeeper, in the 2020 financial year (between March and June), Nine received $6.6 million in payments.

The company also benefited from government grants of $13.68 million in the six months to December 31, 2020, compared to netting nothing in the six months to December 31, 2019.

Nine’s overall expenses for the business were $893.968 million for the half, down from over $1 billion for the prior corresponding period. Payments to suppliers and employees for the half-year were $943.567 million, down from $1.306 billion, while salary and employee benefit expenses were $341.754 million, down slightly from $343.347 million.

Wholly-owned net debt was down from $278.2 million at the end of 2019 to $149.5 million, while consolidated net debt was $261.0 million, a significant drop from 2019’s $426.1 million.

Outgoing CEO Hugh Marks said the company has performed incredibly well throughout a period of heightened volatility, and had emerged in a very strong position.

“We acted swiftly when circumstances changed, whilst continuing to embrace opportunity and remain true to our vision of building Australia’s leading cross-platform media business,” he said.

He added: “From an advertising perspective, this latest half was a tale of two quarters. The advertising market clearly returned in late September, early and more sharply than we anticipated. And this was led by television, both free-to-air and BVOD… Nine’s consistently strong audience performance, across all our platforms, means we are well positioned to benefit from this improvement in the ad cycle.”

He said the company had learned clear lessons throughout COVID-19, and its focus on strict cost efficiency at its traditional media assets had delivered the profitability it was targeting.

News has not yet emerged of Marks’ replacement, however he used the opportunity to thank staff and farewell investors.

“I’ve had a great five years at Nine, and am confident that I am handing over the reins at the perfect time – of a business which is clearly firing on all cylinders, but that has plenty of scope to accelerate its profitability in the coming few years.”