This afternoon, Nine reported that its overall group revenues for Q3 in 2020 are in line with previous market guidance.
On 26 February 2020, Nine Entertainment reported its first-half FY 2020 results. In the release, Nine expected FY20 group earnings before interest, tax, depreciation and amortisation (EBITDA) to be at a similar level to its FY19 pro forma result of $423.8 million. However, on 19 March, Nine Entertainment withdrew its FY 2020 earnings guidance.
The company further commented today that the advertising market is now becoming increasingly challenging as the coronavirus crisis further unfolds. Therefore, there is likely to be a negative impact on revenues in the fourth quarter starting in April.
Nine’s strategy to get through the coronavirus crisis
Nine Entertainment noted that it has already transitioned the majority of its workforce to a work at home environment. So far, this has resulted in minimal disruption to overall operations.
All the group’s newsrooms across Australia, however, remain open for news coverage.
Cost reduction strategy
Nine Entertainment will now focus on a range of group-wide short and long-term cost initiatives. In addition, it will expedite its $100 million three-year cost reduction program that it had previously announced in February. Due to the pandemic, these initiatives now include a $130 million cost impact for the NRL broadcast in calendar year 2020, assuming the 2020 season is cancelled.
Nine Entertainment also pointed to the recent completion of refinancing its corporate debt facilities. The new facilities include revolving cash advance facilities totalling $545 million and an $80 million working capital facility.
Strong growth in audiences across news and online platforms
Nine Entertainment reported today that it was seeing strong quarterly audience growth for its core News and Current Affairs content. Nine News has shown strong 30% growth, while A Current Affair saw 13% growth and Today Show saw growth of 26% compared to audience levels in late February to early March. Strong growth has also been seen across Nine’s digital offerings.
I am fairly certain that this growth is largely due to the increased media interest surrounding the coronavirus developments. It is likely that other networks such as Seven West Media Ltd (ASX: SWM) are also seeing strong growth. Increased revenues from news and current affairs are vital for our major media companies in the months ahead as they try to recoup some of the loss in revenues from cancelled sporting events.
Nine Entertainment also reported that its online offerings, Stan and 9Now, are reporting rising growth in subscribers and users as more people stay at home due to the growing self-isolation restrictions.
Commenting on today’s trading update, Nine’s CEO Hugh Marks said: “Notwithstanding an expected significant impact on our business as conditions continue to evolve, we are confident that with our enhanced audience position, our mix of assets and the commitment of the Nine team, we will emerge from this period a stronger and more competitive Company’.
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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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