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Why Nine Entertainment shares are soaring 8% today

Share price soaring higher

The Nine Entertainment Co Holdings Ltd (ASX: NEC) share price is soaring higher this morning after the market reacted favourably to the ASX media company’s 1H20 results.

At the time of writing, Nine Entertainment shares are trading 8.36% higher at $1.75 per share. This is particularly impressive given that the S&P/ASX 200 Index (INDEXASX: XJO) is currently down by 1.80%.

What did Nine Entertainment report?

For the 6 months to 31 December 2019, Nine Entertainment reported revenue of $1.18 billion for the first half of FY20. This represented a 2% decline on the prior corresponding period (pcp) of 1H19 on a pro forma basis.

On a pre AASB16 and Specific Item basis, group earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $230.5 million. This was down 8% from the pro forma result of $251.6 million achieved in the pcp.

Nine Entertainment’s Broadcast division, comprising Nine Network, 9Now as well as Nine Radio (previously Macquarie Radio), reported EBITDA of $146 million and total revenues of $631 million for the half.

The group commented that its results were heavily impacted by challenging market cycles. Wide industry-based advertising market weakness was observed as the Metro FTA ad market declined by 7%.

The group reported that earnings per share from continuing business was 6.2 cents, while a fully franked dividend of 5.0 cents was declared, payable on 20 April 2020.

Digital video divisions driving growth for Nine

The group reported strong growth from its digital video business. This saw a $35 million EBITDA improvement from its online video streaming division, Stan. Stan has seen rapid growth over the past six months and now is a major engine of growth for Nine Entertainment. With this, Stan subscriber numbers now exceed 1.8 million.

Nine Entertainment’s 9Now division saw impressive EBITDA growth of 65% during the period. It now has a market-leading share of around 50% in the Broadcast Video On Demand (BVOD) Australian market.

Nine commented that further investment in 9Now is set to accelerate growth into the broader digital video market.

Performance of other divisions

With regards to its online real estate venture Domain Holdings Australia Ltd (ASX: DHG), Nine commented that housing market softness had significantly impacted Domain’s residential property listing volumes. This comes after Domain released first-half results of its own last week.

Pleasingly for shareholders, there was reported to be stability in earnings from its Metro Media division and synergies of around $9 million were identified following completion of the group’s acquisition of Macquarie Media.

Commenting on the results, Hugh Marks, chief executive officer of Nine Entertainment, said:

“This result is a testament to the work we have done over the last four years to reposition Nine for a digital future. With strong growth in our digital businesses helping to offset some of the cyclical headwinds faced by our traditional media assets.”

Market outlook

Nine Entertainment noted that overall advertising market conditions across most categories had remained softer-than-anticipated so far in 2020.

Meanwhile, the group expects continued strong growth in 9Now, with EBITDA growth moderated by increased investment in content as the business expands into the broader digital video market.

With regards to its financial results for the full-year FY20, Nine Entertainment expects to report group EBITDA at a similar level to its FY19 Pro Forma result of $423.8 million. 

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nine Entertainment Co. Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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