The Nine Entertainment Co. Holdings Ltd (ASX: NEC) share price has surged today after releasing its first-half FY21 results.
At current levels of around $2.90 per share, this represents a huge gain of over 200% since the onset of COVID-19. Here are the details.
NEC share price chart
Key takeaways
While group revenue for the half-year came in fairly flat at $1.2 billion, disciplined cost-cutting strategies combined with accelerated growth from many of its digital segments allowed the company to generate EBITDA of $355 million, up 42% on 1H20.
On a company-wide basis, net debt decreased to around $150 million, and Nine indicated it plans on returning its JobKeeper allowance back to the Federal Government.
A fully franked dividend of 5.0 cents per share will be paid on 20 April 2021, which equates to roughly 50% of net profit after tax (NPAT). Management plans to keep its dividend payout ratio at around 60-80% across the full year.
Growth drivers
Despite the volatility of the current trading environment, the digital advertising market has remained strong, with Nine’s broadcasting segment proving to be one of the key drivers behind these impressive results.
The broadcast segment, which is comprised of the group’s free-to-air (FTA) Nine Network, 9Now, and Nine Radio, reported EBITDA of $207.4 million, up 43% on the prior corresponding period (pcp). Cyclical and structural elements allowed costs to decline by 15%, significantly boosting its EBITDA margin up to 33.4%, up 10% over the pcp.
Broadcast video on demand (VOD) was another winner, with daily active users up 8% across the period, despite the absence of Love Island, which contributed as much as half the VOD minutes in the months it was played.
Video streaming service Stan also continued its upwards growth trajectory, with total streams up nearly 20% across the period.
Stan’s revenue was up 28%, partly as a result of a higher subscription fee (from $17 to $19 for the premium plan). Costs increased by only 10%, allowing EBITDA to more than double to $36.5 million for the period.
My take
Nine has delivered a pleasing result and the market has responded well to it.
Companies that operate by generating advertising revenue can often struggle in economic downturns, as advertising costs are usually some of the first to be cut from a business’s budget. This is likely why Nine shares got so heavily sold off last year.
Still, despite the challenges that Nine has faced, it’s good to see some positive results that will hopefully continue as the wider economy shows more signs of recovery.
For a more in-depth analysis of Nine shares, click here to read: Nine Entertainment (ASX:NEC) share price races higher – is it too late to buy?.
