Nine Entertainment chairman Peter Costello has hailed a rebound in the advertising market and defended investments into streaming service Stan as shares in the television, publishing and digital climbed following a buoyant trading update.
Shares in Nine, which owns The Sydney Morning Herald and The Age, rose by more than 4 per cent to as high as $3.13 after the company upgraded its forecasts for its publishing division and reported strong gains in television advertising at its annual general meeting.
Nine chairman Peter Costello said increased costs in streaming service Stan will deliver long-term benefits.Credit:James Brickwood
Nine shares took a hit in August when the company said total costs for its recently launched Stan Sport division, which it launched in February, would be at the lower end of the $70 million to $90 million range in the next financial year. This would reduce Stan’s overall earnings [before interest, tax, depreciation and amortisation] to the low double-digit millions.
But Mr Costello said the increased costs would be beneficial over the long term to the company. “You shouldn’t be surprised that you keep reinvesting and reinvesting and reinvesting with a growth business – you’re trying to build share, you’re not trying to take short-term profit,” he said.
“It was little misunderstood. That was a deliberate decision to build share in a growth business. Pure tech companies, go for years and years without ever making a profit.”
Martin Currie portfolio manager Patrick Potts said at the time of the announcement that Nine had not explained the revenue opportunity from Stan Sport to the market.
“Your profit will fall in the short term, but your revenues will build in the longer term,” Mr Costello said. “You can say we were misunderstood, or we didn’t explain it properly. But I think the markets understands where we were going.”
Mr Sneesby, the former CEO of Stan who was elevated to his new role in April, said he had not found a permanent chief executive to lead the streaming service through its next stage of growth. Stan currently has 2.4 million subscribers and is currently being led by Stan’s chief financial officer Martin Kugeler.
“I said in my transition to this role that we wouldn’t rush to look at who would be appointed as the permanent CEO, but we’re certainly very comfortable and the business is in fantastic hands,” he said.
Nine chief executive Mike Sneesby presenting at the company’s annual general meeting.Credit:James Brickwood
Nine’s publishing division, which is made up of the Herald and The Age, is now expecting FY22 earnings (before interest, tax, depreciation and amortisation) revenue of between $40-$45 million, up from previous guidance of $30-$40 million.
Mr Costello assured the company would not take anti-vaccination ads after concerns were raised about Clive Palmer, a major print advertiser, and his stance on the matter. “We don’t take ads that say ‘don’t get vaccinated’,” Mr Costello said. “Just because somebody has got one view that we don’t agree with, we don’t say can advertise on any other issue.
“That’s where we draw the line. We don’t judge an advertiser so much as we judge the ad.”
Nine said its free-to-air television advertising revenue will increase in the first half of this fiscal year by up 6 per cent. Revenue from Nine’s online video service 9Now is expected to be up more than 45 per cent in the first half.
Nine’s first half EBITDA, before specific items, is expected to be up by about 10 per cent, but the company did not provide full-year guidance.
It said that its cost growth in FY22 would be slightly less than it previously flagged. Mr Sneesby said Nine did not provide full-year guidance as the company is waiting to see the benefit of the easing of lockdown restrictions on the advertising market.
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