The media group reported 1H numbers yesterday that were weaker than expected, dragging down the sector including Nine Entertainment (NEC) which we hold in the Emerging Companies Portfolio. The sector has been facing headwinds from a falling free-to-air (FTA) ad market, though SWM also saw a slight drop in market share in the period. Total revenue for the half was $775m, down 5%, but earnings (EBITDA) dropped 40% for the half and missed expectations by around 3%.
Despite the soft headline numbers, there were some positives scattered throughout the update. Streaming through the 7Plus platform continues to grow, and advertising grew 12.5% for the company’s Broadcast Video on Demand (BVOD). There are also some signs of the metro market headwinds abating for the industry with Q3 showing a moderating decline vs 1H.
Nine Entertainment (NEC) is set to report on Thursday 22nd Feb. We would expect a better result compared to SWM for a few reasons. We expect Nine to win market share helping to offset some of the shrinking market effect. Nine also has a great BVOD offering through 9Now, leveraged to the same trends that performed well for SWM. We also see upside in their stake in the streaming platform Stan.
- We are confident holders of NEC into the HY result next week despite SWM’s soft result.
MM is neutral SWM
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