Nine's Sneesby gets better at navigating the awkward questions
Welcome to a Friday update from Unmade. Today: digging into Nine’s half year results, and a poor day on The Unmade Index.
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Sneesby hits his stride with investors
Earnings season is winding down. Yesterday Nine was the last of the big media companies to update the market. Nine follows the traditional financial year, so this was just half a year of data, covering July to December of last year.
First to the superficial. CEO Mike Sneesby, who took charge in 2021, has hit his stride in the nuts and bolts of presenting updates to the market.
Almost all ASX updates follow a similar pattern. The financial data is released onto the ASX just after breakfast time, before the markets open. The financial community then has an hour or two to digest the data, before the CEO and chief financial officer run through a Powerpoint presentation of the highlights, which anyone who wishes to, can watch online. They then take questions from financial analysts who have dialled in.
Incidentally, this year, the star across earnings season was Fraser McLeish who covers media and telcos for equity research house MST Marquee. He seemed to get in the first question at every company’s update.
For presentations after the market has opened, it’s fun watching the share price blip upwards and downwards as the CEO tackles the questions, like the worm the TV networks used to put on screen during election debates.
Nine’s update was the slickest of the season. Sneesby and chief financial officer Maria Phillips presented the first part to camera from a newsdesk. For the second, live, section featuring the analysts’ questions, Sneesby and Phillips were joined on the studio couch by chief sales officer Michael Stephenson and chief strategy officer Matt Stanton.
This was the first update where Sneesby has looked comfortable. His first few were bumpier, even with chairman Peter Costello at his side. In August 2021, for Sneesby’s first update, the share price fell 10% after he failed to reassure the analysts about cost control at subscription streaming platform Stan.
Yesterday the Nine share price still fell a little, by 2.91%, but that was more because of the information the update contained on the wider outlook, rather than how it was delivered.
For the half, the company did revenues of $1.4bn, which was up by 5% on the same period a year ago. However EBITDA (earnings before interest, taxation, depreciation and amortisation) profit was down by 9%, to $370.5m, because of growing costs.
In television (including both Nine and ad-supported video service 9Now, the company’s revenue was up by 5% to $661m. However, its costs grew by 12%. That meant that TV’s contribution to the profits fell back by 8% to $217m.
Radio (including 3AW and 2GB) continued its recovery with revenues rising by 11%. However, radio costs rose by 12%. Profit for the radio segment stood still at $6.4m.
During the analysts’ call, it became clear that the squeeze on Paramount’s Ten has worsened. Nine took a metro revenue share of 39.6% for the half, Seven got almost as much (although, unusually, it did not disclose the number this year).
That left Ten with just over 20%, which is a tough place to be. The company announced a sales restructure this week, including the departure of national sales director Lisa Squillace, in what looked like a cost cutting exercise.
Stephenson revealed during the call that in January, thanks to The Australian Open, Nine’s revenue share rose above 50%. Good for Nine, bad for Ten.
Alongside Sneesby’s increasing assurance in presenting the updates is more slipperiness around the most sensitive numbers.
The company gives less data than its rival Foxtel Group when it comes to Stan subscribers. The previous two updates merely said that the service had “more than” 2.5m active subscribers. This time round the phrase was “active subscribers approaching 2.6m”. Technically that could be a standstill, or slight growth, we don’t know. The word “approaching” may be doing some heavy lifting.
Stanton was on the couch to take questions about The Olympics, which Nine will pay $315m for over the next nine years. It still isn’t saying whether it expects to make a profit, or use the Games as a loss leader. Sneesby and Stanton dodged that one again yesterday, and also avoided a question of how much Nine is budgeting for production costs. The number of $110m for production costs and another $30m for client hospitality has been bandied around in the market.
Something else that came through more clearly, but not for the first time, yesterday is that Sneesby sees investing in original content for Stan, under the Stan Originals banner, as a better use of money than simply buying in overseas content. I took that as a signal that Stan Originals will grow as a production arm.
Like the broadcast segment, revenue for Stan grew, by 12% to $206.4m for the half. But costs went up by 14%, so profits fell by 18% to $17.9m for the half.
That raises an interesting question. At one stage back when the company was worth $5bn, Nine insiders were arguing that Stan was worth $1bn of the company’s share price. With Nine worth $3.5bn these days, I wonder how much of that can reasonably be attributed to Stan. It’s hard to argue that a platform which appears to have peaked in subscriber numbers and is doing $200m in revenue and less than $20m in profits per half deserves to be valued at $1bn.
Perhaps the biggest timebomb awaiting Nine sits in the publishing segment. As the analysts on the call pointed out, it’s hard to unpick the true state of the segment without the boost of the money extorted from Facebook and Google via the News Media Bargaining Code threats back in 2021. The company lists “subscription and licencing” revenue of $89m for the half, which represents growth of 5%.
We’ll probably have to wait another year, until those Google and Facebook deals begin to expire, to get a truer picture. It’s likely the $96.1m profit for the half from the news mastheads would look a lot worse without them.
Counterintuitively, advertising revenue for the company’s printed news titles grew by 9% in the half, while digital advertising shrank by 8%. Usually it’s the other way round. Stephenson said this was because of changes in the programmatic environment (think: falling CPMs.)
Like its competitors, Nine avoided giving profit guidance for the full year. Nobody really knows what’s aboutn to happen with the economy. Nine’s strategy is to maintain or even grow its revenue share in what is likely to be a declining advertising market. Its programming is still strong. Nine is better placed than most of its competitors to achieve that.
Down day on the Unmade Index
Nine’s results led The Unmade Index of ASX listed media and marketing companies down by 1.52% yesterday.
The index closed at 664 points.
Broadcasters Seven West Media and HT&E were also down yesterday, by 1.23% and 0.83% respectively.
Time to leave you to your end-of-week revelries.
I’ll be back tomorrow with Best of the Week.
If you haven’t done so yet, remember to check out the program for next Thursday’s RE:Made. For anyone working in media or marketing, retail media is the next sector you need to educate yourself on. For a half day of education, the ticket price of $295 is an absolute steal.
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