NEC shares edged up +0.75% on Wednesday after they reported a ~20% decline in profits courtesy of weakness in advertising, however, there were some green shoots coming through this result as they progressively move towards a digital platform business relative to an older style media business;
- Revenue of $2.62bn, down 2% from FY2023 – met expectations.
- EBITDA of $517mn, down 12% year on year – was inline
- Net profit after tax (NPAT) of $216mn, down 22% from y/y but inline with expectations
- A final fully franked dividend of 4.5c per share, down 10% from the prior final dividend.
Free to air TV overall is in decline, and connected TV is on the rise, and we saw this in the result yesterday. We also see this through our position in The Trade Desk (TTD US) in the US which is involved in the distribution of advertising inventory, with the rates being achieved in connected well above traditional channels.
What was interesting yesterday, was that the traditional Channel 9’s audience has troughed, and is stable rather than declining, while other areas are growing, which should create an inflexion point from a revenue perspective. With costs coming out of the business, and an increasing proportion of revenue coming from digital, there is a lot more scope for advertisers across multiple NEC platforms, utilising their solid depth of brands.
- Overall, this was an okay result, in a tough environment, however we think the transformation is now showing tangible ‘green shoots’, while yielding over 6%, which allows us to be patient – MM owns NEC in our Emerging Companies Portfolio
MM is cautiously bullish NEC
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