FY17 RESULTS BRIEFING 24 AUGUST 2017
COMMERCIAL CONTENT STRATEGY
HUGH MARKS CHIEF EXECUTIVE OFFICER GREG BARNES CHIEF FINANCIAL OFFICER MICHAEL STEPHENSON CHIEF SALES OFFICER ALEX PARSONS CHIEF DIGITAL OFFICER 2
D ISCLAIMER expectations about the performance its theexpectationsofabout businesses. includingNEC’s futureevents, comments andabout forward certain lookingstatements This document contains this document reliance of onresulta loss sufferedas damageany for or ororganisationentity liabilityperson, anyany to accept not maximum the permitted byNECtheParties law, extentdo To this information byparty. of useany flowing from the disclaim andinformation, liability responsibilityandany warrantaccuracyParties”), reliability doornot the this of respectiveofficers, directors(“NEC employees and NEC, theirits relatedanyof corporatebodies and investment if anis appropriate.deciding considered,whenorwithwithout professionalbe advice, particularanyinvestor.Theseshould of or needs situation investment financial objectives, the account into take not investors doesadviceinvestorsor potentialand to as uponberelied to intended is complete. It not bepurport to doesnot backgroundand general is of this presentation in ( presentation, Holdings(“NEC”)Limited the of datethe current at Co.activities Nine of Entertainment the information about backgroundgeneral of This document is presentation a Important Forward Forward L Notice ooking ooking Statements . 24 August 2017). August 24
and Disclaimer
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Forma Forma Financial Information
- IFRS financial information information financial IFRS
- - IFRS financial financial IFRS compliant compliant
- ^
K E Y FINANCIALS
Results for FY17 Pre Specific Items, FY16 Pro Forma
^ ex licence fee benefit of $33m 3 4M+ REGISTERED USERS ON CONSISTENT GROWTH IN FTA RATINGS & REVENUE 9NOW, REPORTING 37% STAN, NOW APPROACHING OPERATIONAL SHARE MOMENTUM HIGHLIGHTS REVENUE GROWTH 800K ACTIVE SUBS
LAUNCH OF 9HONEY, ROLL-OUT OF TIGHT COST CONTROLS AUSTRALIA’S LEADING INNOVATIVE SALES AUGMENTED BY LICENCE FEE RELIEF 4 WOMEN’S NETWORK APPROACH
• FTA market soft across the year • NPAT (pre-Specific Items) of $124m • Olympics impacted ad market and share • EPS up 4% (pre-Specific Items) • Nine’s share momentum improving • DPS of 9.5 cents, fully franked
• FTA costs down 2%, ex licence fees • Reported FTA costs down 6%
$M FY17 FY16 VARIANCE
REVENUE 1,237.8 1,282.4 -3%
GROUP EBITDA 205.6 201.7 +2%
EBIT 170.3 169.5 -
NPAT (CONTINUING BUSINESSES)1,2 123.6 120.3 +3%
STATUTORY NET (LOSS)/PROFIT (203.4) 324.8 NM
BASIC EARNINGS PER SHARE, BEFORE 14.2 13.7 +4% SPECIFIC ITEMS – CENTS1,2
EARNINGS PER SHARE, STATUTORY - CENTS (23.4) 36.9 NM
DIVIDEND PER SHARE - CENTS 9.5 12.0 -21%
5 Refer to glossary in Appendix 5 for definitions. Totals may not add due to rounding. 1 Before Specific Items, 2 Pro Forma, excluding Nine Live
CONTINUING BUSINESSES, $M FY17 FY16 VARIANCE • Revenue down 4% REVENUE TELEVISION 1,080.4 1,130.0 -4% − Metro FTA market down 3.7%, Regional down 2.8% DIGITAL 154.7 149.9 +3% − 35.7% share of metro FTA market CORPORATE 2.7 2.5 - (35% H1 and 36.4% H2) • Costs down 2% TOTAL REV 1,237.8 1,282.4 -3%
− Licence fee relief $32.8m COSTS TELEVISION 892.1 946.5 -6% − Incl. licence fees, costs down 6% DIGITAL 125.8 123.9 +2%
CORPORATE 14.6 12.3 +19% • 7% H2 revenue growth driven primarily by video TOTAL COSTS 1,032.5 1,082.7 -5% • Further margin improvement with focus on more EBITDA TELEVISION 188.3 183.5 +3% profitable business DIGITAL 28.9 26.0 +11%
CORPORATE (11.9) (9.8) -21%
SHARE OF 0.2 2.1 -90% • Increased costs due to higher employee costs ASSOCIATES’
• Incl. SXL dividend of $2.7m GROUP EBITDA 205.6 201.7 +2%
6 Refer to glossary in Appendix 5 for definitions. Totals may not add due to rounding. CONTINUING BUSINESSES, $M H1 H2 FY17 FY16PROFORMA
EBITDA 119.5 85.9 205.4 199.6
WORKING CAPITAL (23.8) (30.2) (54.0) (44.7)
LICENCE FEE TIMING - (34.8) (34.8) -
ASSOCIATES 0.7 0.5 1.2 2.5
OPERATING CASH FLOW, PRE SPECIFIC ITEMS, TAX 96.4 21.4 117.8 157.4 AND INTEREST
CASH IMPACT OF WARNER ONEROUS PROVISION (28.8) (18.7) (47.5) (46.6)
OTHER SPECIFIC ITEMS (5.9) (1.2) (7.1) (9.7)
CASH PREPAYMENT TO NRL – NET IMPACT (50.0) 41.4 (8.6) -
INTEREST & TAX (44.5) (14.3) (58.8) (51.9)
DISCONTINUED BUSINESSES - - - 1.1
STATUTORY CASH FLOW FROM OPERATING (32.8) 28.6 (4.2) 50.3 ACTIVITIES
NET DEBT – FY2017 8.6 54.6 124.0 92.0 73.9 Incl Warners 224.5 177.6 151.8 58.8 $48m Incl Stan $33m 34.8
Net Debt at 1 Underlying Licence fee Tax and Interest Dividends Specific items Net prepayment Disposal of SXL Long term Net debt at 30 7 July 2016 Operating cash timing inc Warners of NRL and Sky News investment June 2017 CHIEF SALES OFFICER
8 • Number one in every key buying demographic (P25-54, P16-39, GB+CH)1 • Total television advertising market decline of 2.7%2 • FTA Metro advertising revenue share2 of 35.7%. Q4 share of >38% • AVOD market growing at 37% as content is distributed via multiple channels • Premium revenue up 16%, as local content creates unprecedented demand for integration opportunities • 9Galaxy has improved inventory utilisation delivering greater returns for advertisers
MONTHLY SHARE RATINGS PERFORMANCE METRO NETWORK COMMERCIAL SHARE 6AM-MIDNIGHT, P25-54 3 50% 45% 40% 35% 30% 25% 20%
1 OzTam Ratings, 1 July – 30 June, 06:00 – MN, ex Olympic weeks 2 KPMG data, 12 months to June 2017. 9 3 Network metro shares, Consolidated, 6am-midnight, people 25-54. 1 July 2016 – 19 August 2017 $ (M) 250
200 7% SPORT 150
100
50 4 5 % ENTERTAINMENT 0 2016 2017
10 Source: Calendar Year, Format Integration Revenue CHIEF DIGITAL OFFICER
11 • Gross revenue growth • Continued cost control • Consumer product development focussed on content genres of News, Sport, Entertainment and Lifestyle • Over 4m registered users for 9Now • Strong growth in video streams and revenue
Total Gross Revenue 3%
EBITDA 11%
Long Form Video Streams 114%
Nine Data 4M
12 Australian Ninja Warrior L O N G F O R M Married at S T R E A M S First Sight The Block
The Voice Doctor Doctor, + 1 1 4 % Y O Y Hyde & Seek 9Now Launch The Voice Chromecast Apple TV Sony TV Launch 9 N O W
REVENUE Sony PS4
+ 3 8 % Y O Y
Subscribers LF Streams
13 • Maintaining strong growth trajectory, approaching 800,000 active subscribers
• Introduction of tiers and price increase positive ARPU impact, with limited churn offset
• Positive net sub adds every week through price increase
• Strong content line-up for FY18 including Wolf Creek 2, Romper Stomper, Billions and Better Call Saul
ACTIVE SUBS SUBSCRIPTION OPERATING COSTS ~800K REVENUE +25% +50% +150%
FY16 > FY17 FY16 > FY17
14 • TV revenues are trending to +15% growth for the September quarter • Digital revenues are pacing around 8% ahead for the same period.
• Metro FTA market down 1-2% in FY18 TELEVISION • Nine’s share of at least 37.5% • Broadly flat costs, ex spectrum fees
• Growth in 9Now and Digital Publishing to offset lower DIGITAL contribution from Display and Search
• Upper end of analysts’ forecasts of $186m to $207m GROUP EBITDA (average $198m), inclusive of spectrum fees
DIVIDEND • Expected ~9.5c per share
15 Refer to glossary in Appendix 5 for definitions. (AUD) 2500000
2000000 2.0m
1.7m
1500000 1.4m 1.4m
1000000
500000
0 Married At First Sight The Voice Australian Ninja Warrior The Block (to date)
Overnight Time shift to 28 day Encore VPM
16 Refer to glossary in Appendix 5 for definitions. BROADCAST VIDEO ON DIGITAL CONTENT TELEVISION DEMAND PUBLISHING PRODUCTION Australia’s leading FTA Unique mix of leading Diverse portfolio of Television content network in the key local advertising and leading digital platforms production and advertiser subscription based on across News, Sport, distribution demographics demand television Entertainment and services Lifestyle
17 18 REPORTED REPORTED REPORTED $M H1 FY17 H2 FY17 FY17
NET IMPAIRMENT CHARGE NON-CURRENT ASSETS (260.0) - (260.0)
CLOSE OUT OF WARNERS CONTRACT (NPV) (84.9) (0.8) (85.7)
RESTRUCTURING COSTS (3.9) (3.3) (7.2)
WITHHOLDING TAX PROVISION RELEASE 10.7 - 10.7
DERIVATIVE REVALUATION - (9.5) (9.5)
OTHER (0.4) (3.5) (3.9)
TOTAL SPECIFIC ITEMS BEFORE TAX (338.5) (17.1) (355.6)
TOTAL TAX RELATING TO SPECIFIC ITEMS 26.6 (1.9) 28.5
NET SPECIFIC ITEMS AFTER TAX (311.9) (15.2) (327.1)
19 Refer to glossary in Appendix 5 for definitions. Totals may not add due to rounding. $M FY17 FY18 FY19 FY20 FY21 FY22 FY23
SEASONS 2013-2017
CASH COSTS (50.3) (6.0)
P & L COSTS (91.6) (47.3)
FOXTEL SIMULCAST REVENUE 20.0 9.0
SEASONS 2018-2022
CASH COSTS (50.0) (63.8) (96.3) (111.2) (107.5) (116.2) (30.0)
P & L COSTS (47.5) (102.5) (117.5) (120.0) (122.5) (65.0)
20 Refer to glossary in Appendix 5 for definitions. Totals may not add due to rounding. REPORTED REPORTED LESS DISCONTINUED CONTINUING BUSINESS1 CONTINUING BUSINESS1 $M FY17 FY16 BUSINESSES FY16 VARIANCE
REVENUE 1,237.8 1,339.5 57.1 1,282.4 -3%
GROUP EBITDA 205.6 209.4 7.7 201.7 +2%
NET INTEREST1 (5.6) (5.2) (2.2) (2.9) +93%
TAX (41.1) (47.3) (1.0) (46.3) +11%
NPAT, BEFORE SPECIFIC ITEMS 123.6 121.9 1.6 120.3 +3%
21 Refer to glossary in Appendix 5 for definitions. Totals may not add due to rounding. 1. FY16:Pro Forma assumes new capital structure in place for full period ACTUAL ACTUAL ACTUAL $M 30 JUN 2017 31 DEC 2016 30 JUN 2016
INTEREST BEARING LOANS AND BORROWINGS 291.2 300.8 220.5
LESS: CASH AND CASH EQUIVALENTS 66.7 123.3 42.9
NET DEBT/(CASH) 224.5 177.5 177.6
NET LEVERAGE 1.1X 0.9X 0.8X
22 Refer to glossary in Appendix 5 for definitions. Totals may not add due to rounding. 23
APPENDIX 5: GLOSSARY 9Life Network Specific NetProfit after(NPAT Tax NM months) 12 Net availablecash Net borrowings NetCash Metro LF H1 profit Group EBITDA FY FTA initial run Encore Items amortisation Businesses, from Continuing EBITDA Discontinued business Contra NineLive Continuing ARPU
– – – – Leverage Debt
–
Long form Long
6 months months to 6 Full year
Notmeaningful
– Free –
–
– Items Sydney, Melbourne, Brisbane, Adelaide and Perth andAdelaideMelbourne,Brisbane, Sydney, Average Revenue PerUser AverageRevenue –
–
Advertising time paymentAdvertising time cash lieuof in offered – Any broadcast on any Nine channel, post the post Nineanychannel, on Anybroadcast
–
Earnings before interest, anddepreciationinterest, tax, Earnings before
Combination of Channels 9, 9Go!, 9Gem and 9Go!, Combination 9, Channels of -
Gross debt per the balance sheet less less sheet balanceper Gross the debt to Cash less andCashless bearingloans interest Businesses
- – air
– Net Debt divided by Group EBITDA (last EBITDA GroupNetDebtdividedby
December EBITDA plus share of Associates’ EBITDA netshareAssociates’ plus of
– –
Nine LiveNine ) Excludesoperationsof the
–
Netprofit beforeaftertax,
before Specific Specific before
demand or live ordemand streamed on played TV content relatingonline to data minute VPM SVOD Accounts StatutoryReported othercomprehensive beforeperiod Statutory financial statements consolidated StatutoryAccounts 6(a)(and Items Specific SF elimination inter of theafter and income Specific interest excludingbusinesses, andItems, Revenue full periodtheforplace newstructure assuming capital in andthe reporting period wholethefor effective as been Nineif this hadLive, Pro franchises and talent IP, of usethe integration, brandandproduct content, Premium Revenue prepaymentNRLthe impact cash thestock Specific of Items and receivedfrom theAssociates. to cash Excludesrelating workingcapital Operating Cash
– Forma Forma
Short form Short – and social, social, primarily and linked key to
– Video Player Measurement. Captures minute Measurement. VideobyPlayer minute Captures
Subscription Video OnSubscription Video i
) of the )of – Net
– Operating revenue from from revenuecontinuingOperating
Adjusted to reflect the impact of sale thereflect impact theof to Adjusted (Loss)/Profit
sport
–
and other nonotherand
30 June 2017 Statutory 201730June Flow Flow Amounts as set out in Notes in 3(iv),set outAmounts 3(v) as –
– –
premium premium
Extracted from Statutory from Extractedthe – Audited or auditor reviewed,auditorAuditedor
EBITDA inforchanges adjusted –
- Net cash items items dividends plus cash revenue includes includes revenue - Demand segment segment
(Loss)/Profit (Loss)/Profit income/loss entertainment entertainment
Accounts revenue provisionsand for thefor
branded