Nine Entertainment Co. Holdings Limited · ASX:NEC
Nine Entertainment — FY2016 Earnings Presentation
24 slides from Nine Entertainment's earnings presentation, Aug 25, 2016
Slide 1: FY16 Results Briefing
FY16 RESULTS BRIEFING HUGH MARKS CHIEF EXECUTIVE OFFICER GREG BARNES CHIEF FINANCIAL OFFICER MICHAEL STEPHENSON CHIEF SALES OFFICER ALEX PARSONS CHIEF DIGITAL & MARKETING OFFICER AUGUST 25, 2016
Slide 2: Disclaimer
DISCLAIMER Important Notice and Disclaimer This document is a presentation of general background information about the to differ materially from the plans, objectives, expectations, estimates and intentions activities of Nine Entertainment Co. Holdings Limited (“NEC”) current at the date of expresse
Slide 3: Key Financials
KEY FINANCIALS DIGITAL PROFIT PROFIT AFTER TAX1 TV EARNINGS UP 19% $120M DOWN 11% TO 13% OF GROUP EBITDA1 REPORTED GROUP COSTS 0.9X FULL YEAR DIVIDEND OF DOWN 6.5% NET DEBT – TO – EBITDA1 12 CPS OR -2% INCL. ALL WARNER COSTS INCL SXL INVESTMENT UP 30% 1 Before Specific Items, Pro Forma, excluding Ni
Slide 4: Operational Highlights
OPERATIONAL HIGHLIGHTS Launch of 9HD, 9Life and Established nine.com.au Finalised NRL rights Secured new affiliate deal on 9Now creating world class proprietary data proposition agreement through 2022 improved terms with Southern consumer options Cross Austereo Industry-wide licence fee Well advance
Slide 5: Solid Result in a Transitional Year
SOLID RESULT IN A TRANSITIONAL YEAR • Revenue down 6.5% − Challenging market conditions in FTA − Refocussed digital business $m FY16 FY15 Variance • Costs down 2% adjusted for Warner Revenue1 1,282.4 1,371.4 -6.5% ‒ Includes $11m licence fee reduction Group EBITDA1 201.7 217.2 -7.1% • NPAT, continui
Slide 6: Divisionally - Strong Cost Performance
DIVISIONALLY - STRONG COST PERFORMANCE NETWORK Continuing businesses, $m FY16 FY15 Variance • Revenue down 7% Revenue Network 1,130.0 1,215.0 -7.0% − 37% share of metro FTA market Digital 149.9 156.4 -4.2% − Metro FTA market down 2%, Regional down 6.2% SXL 2.5 - - dividend • Costs down 2%, inc. Warn
Slide 7: Investing in the Business Continues
INVESTING IN THE BUSINESS CONTINUES • Operating cash conversion of 78% − Rebuild of local content and timing led to increase in working capital (inc. $18m in licence fees) • Excludes payments for Warners and other Specific Items (~$55m) • Significant return of capital to shareholders − Buy-back of $
Slide 8: Settlement of Warner Bros. Life of Series
SETTLEMENT OF WARNER BROS. LIFE OF SERIES FY16 • Impairment recorded for loss-making content as it becomes available − $45.7m recorded as a specific item in FY16 FY17 – Heads of Agreement (HOA) FY16 Movement • In-principle agreement to exit the life of series arrangements H1 FY16 FY16 • Removes vari
Slide 9: Balance Sheet Momentum into FY18
BALANCE SHEET MOMENTUM INTO FY18 Jul 2016 NRL prepayment • Net effect of several inflows/outflows will preserve -$50m Adelaide site sale balance sheet strength +$10m • Further improvement expected as working capital Nine Live tax -$28m begins to unwind in FY18 • Dividend policy remains to pay 80-100
Slide 10: Michael Stephenson, Chief Sales Officer
MICHAEL STEPHENSON CHIEF SALES OFFICER
Slide 11: Free to Air – Embracing & Adapting to Change
FREE TO AIR – EMBRACING & ADAPTING TO CHANGE • Market leadership in key advertising demographics1 Nine's Metro Ratings2 and Revenue1 share - No.1 25-54 | No.1 16-39 | No.1 18-49 | No. 2 All People 40% • FTA Metro ad market decline of 2%2 across the year 35% • FTA Regional ad market down 6.2%2 • FTA
Slide 12: 12
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Slide 13: Alex Parsons, Chief Digital & Marketing Officer
ALEX PARSONS CHIEF DIGITAL & MARKETING OFFICER
Slide 14: Strong Operational Performance from Digital
STRONG OPERATIONAL PERFORMANCE FROM DIGITAL • Double digit earnings growth with strong margin improvement • Launched 9Now, a world class streaming and AVOD product • Launch of nine.com.au data proposition supported by 9Now – c1.6m users since January launch • Australia’s leading multi-medium news br
Slide 15: Stan – Leading Local Player in Growing SVOD Market
STAN – LEADING LOCAL PLAYER IN GROWING SVOD MARKET • Key milestones/achievements: – Signed up more than 1.1m subscribers, with more than 500,000 active subs as at end of June ‒ Available on all major devices ‒ Showtime deal locks in long term premium content supply ‒ First international sale of orig
Slide 16: Current Trading & Outlook
CURRENT TRADING & OUTLOOK • Metro FTA market to be flat-down marginally for FY17 • Regional markets expected to continue to under-perform, offset by enhanced affiliate agreement • FY17 share to be impacted by the Olympics • Momentum expected to return into FY18, given increased local programming foc
Slide 17: Five Key Points of Focus
FIVE KEY POINTS OF FOCUS 1. Ratings momentum • Rebuild 9’s FTA ratings share • 50% increase in premium local content hours in CY17 2. Firm cost discipline • Tightly managed cost regime • More premium content for same effective cost • Focussing on increasing the flexibility of the cost base 3. Innova
Slide 18: Appendices
APPENDICES • APPENDIX 1: ADJUSTMENT FOR DISCONTINUED BUSINESSES • APPENDIX 2: SPECIFIC ITEMS • APPENDIX 3: CASH FLOW RECONCILIATION • APPENDIX 4: DEBT AND LEVERAGE CALCULATIONS • APPENDIX 5: GLOSSARY
Slide 19: Appendix 1: Adjustment for Discontinued Businesses
APPENDIX 1: ADJUSTMENT FOR DISCONTINUED BUSINESSES Less Continuing Less Continuing Continuing Reported discontinued business1 Reported discontinued business1 business1 $m FY16 businesses FY16 FY15 businesses FY15 Variance Revenue 1,339.5 57.1 1,282.4 1,610.1 238.7 1,371.4 -6.5% Group EBITDA 209.4 7.
Slide 20: Appendix 2: Specific Items
APPENDIX 2: SPECIFIC ITEMS H1 FY16 H2 FY16 Reported FY16 Net impairment charge non-current assets (33.3) (0.5) (33.8) Stock provisions - Warners (12.1) (33.6) (45.7) Restructuring costs (1.6) (7.1) (8.7) DMA write-down (5.9) - (5.9) Other (0.4) (11.1) (11.5) Total Specific Items before Tax, Continui
Slide 21: Appendix 3: Cash Flow Reconciliation
APPENDIX 3: CASH FLOW RECONCILIATION Adjust for Adjust for Reported Discontinued Pro Forma Reported Discontinued Pro Forma $m FY16 businesses FY16 FY15 businesses FY15 Statutory cash-flows from 50.3 (1.1) 49.2 246.2 (46.4) 199.8 operating activities Statutory interest received (1.8) 0.1 (1.6) (3.8)
Slide 22: Appendix 4: Debt & Leverage Calculations
APPENDIX 4: DEBT & LEVERAGE CALCULATIONS Actual Actual Actual Actual Jun- As at, $m 30 Jun 2016 31 Dec 2015 30 Jun 2015 Jun Variance Interest bearing loans and borrowings 220.5 0.1 575.7 -355.2 Less: Cash and cash equivalents 42.9 52.6 179.9 -137.0 Plus: Cash held on trust - - (111.4) -111.4 Plus: D
Slide 23: Appendix 5: Glossary
APPENDIX 5: GLOSSARY Continuing Businesses – Excludes the operations of Nine Live Pro Forma – Adjusted to reflect the impact of the sale of Nine Live, as if Contra – Advertising time offered in lieu of cash payment this had been effective for the whole reporting period and assuming the Discontinued
Slide 24: Nine Entertainment Co.
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Nine Entertainment Co. Holdings — FY2016 Earnings Presentation on 6ix