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Stuff 1H earnings slide but Nine still optimistic of finding buyer

Thursday 21st February 2019

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Stuff's first-half earnings fell at a steeper pace than its shrinking revenue, but new owner Nine Entertainment Co is still optimistic it will find a buyer for New Zealand's biggest online news group this year. 

In its first reporting period as a subsidiary of Nine, the New Zealand business reported earnings before interest, tax, depreciation and amortisation of A$14.5 million in the six months ended Dec. 31, compared to A$18.9 million a year earlier.

The 23 percent decline compared to a 14 percent slide in revenue to A$126 million, where Stuff's print advertising slumped 21 percent to A$55.8 million, while its circulation revenue of A$43.1 million was down just 4 percent. Stuff's digital revenue - which has been a cornerstone strategy under local chief Sinead Boucher - reported flat revenue of A$22.1 million. 

Stuff was already a laggard among Fairfax Media Group's units before it merged with Nine late last year, and was never seen as a cosy fit in the enlarged Australian media group. 

The New Zealand arm runs the Stuff website and publishes a national network of newspapers including the Dominion Post, Press, and Sunday Star Times, and downsized last year, selling or closing a third of its mastheads - largely unprofitable community and regional publications.

It adopted a digital-first mentality as it grappled with the declining trajectory of print advertising and accelerated efforts to transfer more of that business online, despite about half its revenue coming from just five of its mastheads. 

Stuff still describes the core of what it does as producing quality journalism. However, it no longer views itself as a media company, having branched out into other products, including internet service provider Stuff Fibre, hyperlocal website Neighbourly, and electricity retailer energclubnz. 

Nine has carved out Stuff, its Australian community media unit, and Fairfax's former events business as being for sale, hiring Macquarie Capital to run the process, which it expects to complete by the end of the year. Those assets were valued on Nine's books at A$335.5 million, with liabilities of A$158.5 million. 

The Grant Samuel independent adviser's report on the Fairfax-Nine merger valued Stuff at A$115-135 million. The community media was valued at A$100-120 million, while the event business was included in Fairfax's metro division. 

Chief executive Hugh Marks said Nine has gone through a lot of work with Macquarie building sustainable ebitda and cashflow forecasts for the community and Stuff businesses, and he expects there will be "great interest" in both units. 

Marks noted that Stuff had a stronger digital component than the Australian community newspaper group. 

New Zealand media executives have already shown an interest in being involved in Nine's sale. Rival NZME, which unsuccessfully tried to merge with Stuff, this week said it will look to take advantage of any opportunities that crop up if they add value to shareholders. 

Television New Zealand chief executive Kevin Kenrick told politicians last week that he'll watch industry consolidation with a keen interest, and wouldn't rule in or out lobbing in a bid for Stuff. 

The state-owned broadcaster has been working more closely with Spark New Zealand as a free-to-air partner to the telecommunications firm's burgeoning online sports platform. Spark managing director Simon Moutter told BusinessDesk yesterday that he's firmly focused on the upcoming new premium sports media service and the existing streaming TV and film business, Lightbox. 

Nine was optimistic about its own outlook, reporting a largely flat first-half profit on a proforma basis of A$140.2 and projecting underlying annual earnings to rise at least 10 percent. The board declared an interim dividend of 5 Australian cents per share. 


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