Stock Scuttlebutt: NEC, SUL
The Macquarie conference this week has proved a bit of a confessional for the presenting companies, and Nine Entertainment and Super Retail were no different on Thursday.
Nine Entertainment (ASX: NEC) has joined its rival Seven West Media in forecasting a slide in ad revenues in the year to June because of a steepening slide in second half spending by advertisers large and small.
Nine CEO Mike Sneesby produced, as anticipated, a lowered forecast because of a slide in TV advertising volume and prices in a presentation to the Macquarieconference in Sydney on Thursday.
Seven CEO James Warburton had earlier this week revealed his company’s ad revenue downgrade and up to $20 million of additional (temporary) content cost cuts for the six months to June 30.
But in his address on Thursday, Nine’s CEO said that while "Nine continues to expect to grow its revenue share of all key advertising platforms in the current half...the advertising market is expected to remain challenging through Q4 of FY23."
"Based on our current view of market conditions, Nine is expecting FY23 EBITDA to be around $590-600m.”
That would be down nearly 15% from the 2021-22 EBITDA of $701 million and a much faster rate of fall than the 9% fall revealed in the December half year results released in February this year.
"Consistent with our commentary in February, the Metro FTA market declined by around 15% in Q3 (on Q3 FY22), with a similar decline expected in Q4 (on Q4 FY22), albeit the market remains short, with limited visibility,” Sneesby told the conference.
"The absence of key events, particularly the 2022 Federal Election, accounted for an estimated 6% points of this decline. Nine clearly outperformed the market, gaining more than 2.5 percentage points of share across the quarter, on previous corresponding quarter.”
"9Now continues its growth trajectory, with nearly 22% revenue growth in Q3, marginally ahead of February guidance. Whilst the structural growth in 9Now’s audiences and engagement continues, the digital video market is not completely immune to the current advertising cycle.
"Together, this equates to Total Television advertising revenue for Nine which is expected to be down in the very low single digits (%) in FY23 compared to FY22, a strong outcome against the backdrop of a weak economy, reflecting ongoing revenue share gains.
"Total Television costs are expected to increase in the low single digits in the second half, resulting in FY23 Total Television cost growth of slightly below 7%, as per the February guidance."
"Nine’s Publishing business continues to benefit from the growth of digital audiences, with digital subscription revenue growth expected to be around 8% in H2. Earlier this month, and reflecting Nine’s growing audience engagement, Nine communicated digital-only price increases across The Sydney Morning Herald, The Age, WA Today and The Brisbane Times that are due to commence during May. Initial reporting suggests that these price increases have not resulted in a significant increase in churn.
"Once implemented, this should lead to a meaningful increase in ARPU and digital subscription revenue from these titles. Notwithstanding, as commented with the interim result, a more challenging advertising and cost environment in H2 will result in greater-than-normal EBITDA phasing to the first half,” Sneesby told the meeting.
Nine shares dropped 1% to $2.01.
Meanwhile, shares in Super Retail Group (ASX: SUL) sank sharply after it, too, used the Macquarie colloquy to reveal problems - in this case a rise in second half costs from higher wages, rents, energy costs and building delays.
The shares ended down 7.1% at $12.49 after touching a low of $12.36.
“The way we think about it, underlying demand for retail will be flat to negative. We are planning for the worst and hoping for the best,” CEO Anthony Heraghty told the Macquarie Australia Conference.
The company said in a trading update based on the presentation that its second half group gross margin to date "is 10bps below gross margin (which was 46.2%) delivered in the first half.”
Mr Heraghty said “Following strong trading in the key Easter holiday period, the Group has continued to deliver positive like-for-like sales growth in FY23 YTD.”
"Supercheap Auto has seen an ongoing shift in consumer demand to less discretionary items with auto maintenance and lubricants the strongest performing categories.
“Rebel has achieved strong sales growth in football and basketball. The trading performance of new regional stores in Ballina, Nowra, Tamworth and Bunbury is highly encouraging.
"BCF sales reflect a growing contribution from strategic brands. The level of promotional intensity in the camping and outdoor category remains high, with aggressive mark down activity from competitors.
"Macpac delivered a record Easter trading result driven by higher sales in both Australia and New Zealand."
Mr Heraghty said offshore freight costs have returned to pre-pandemic levels "however inflationary pressures on wages, rent and energy expenses will impact Group CODB in the second half."
"The Group has opened 14 stores in FY23 year to date, with a further 13 stores scheduled to be opened by the end of FY23. Given delays in construction & development approvals, there is a risk that some store openings will slip into FY24.
"The macro environment remains challenging; however, the Group’s large active club member loyalty base and leading market positions in the resilient auto and sports categories mean it is well positioned to perform throughout the economic cycle,” he added.
All up that sounds like growing pressure on margins, hence the sharp fall in the share price.