Nine Entertainment Anticipates Cost Cutting Ahead Of Its Regional Newspaper Sale

Australian media and entertainment company, Nine Entertainment Co. Holdings Ltd (ASX:NEC) is anticipating cost-cutting in millions of dollars, from its community and regional Australian Community Media (ACM) and printing operations, ahead of the NEC’s plan to divest this business.

According to documents offered to the bidders, which forms a part of the sale procedure of the company’s ACM business, a planned $8 million in cost savings would be concluded in FY2019.

The ACM contains one-hundred and sixty regional publications and one-hundred thirty websites. At present, ACM is in the second phase of a 2-tier auction procedure as one of the numerous divestments by the NEC, as a result of the company’s merger with Fairfax Media in 2018.

Also, numerous sources (who have refused to be quoted because of discretion of terms in the sale procedure) have hinted towards the possible lay-off of the staffs, which is currently under the discussion phase with the prospective buyers.

One party involved with the preparation of the final bid which is due until 24 April 2019, mentioned that dialogue with NEC’s management team, in presentations arranged by Macquarie Capital, forming a part of the sale procedure, had directed it to anticipate around 200 staff members to be laid off, as a part of cost-cutting options.

However, sources close to NEC are of the view that a few of the savings on staff this year, has come up from not filling the unfilled positions in the business. Also, because of the burden on the business, the above mentioned cuts would have happened irrespective of whether the sale of the ACM was looming ahead or not.

According to the sources close to NEC, a huge part of $8 million amount in cost cuts for FY2019, has been concluded by now. The sources also rejected that there would be staff layoffs before the sale takes place. However, they mentioned that the prospective buyers have hinted that they might contemplate the staff lay-offs in future.

Besides, the documents have signalled that an additional seven million dollars of cost-cut would take place in the year 2021, without any cost savings done in the year 2020. This future prediction is a guidance for the buyers and would be determined by the resolutions taken by the forthcoming owner, as well as the NEC’s financial performance in the upcoming 2 years timeframe.

Recently, ACM together with Prime Media Group, Win, Southern Cross Austereo and such joined a million-dollar regional marketing initiative named Boomtown, to encourage the advertisers to spend money on regional platforms.

Mr Antony Catalano, Ex- Domain CEO and Anchorage Capital Partners and Allegro Funds (private equity firms) are few among those who made a suggestive bid for the regional newspaper (ACM).

During the first half of FY2019, the countrywide drought caused problems for ACM, resulting in the revenue plunging down by eight percent to $194.1 million from $212.1 million revenue results during the first half of last year. The recent outcomes demonstrated advertising revenue’s decline by 13% standing at $121.2 million. The circulation of the publication slipped down by 3%, standing at $35.9 million. The total EBITDA plunged by 42% standing at $21 million.

Also, as per the NEC’ spokesperson, the business would look at the eradication of cost via usual operation of the business, which has a past record of cost optimisation and other productivities. The spokesperson also mentioned that the reductions in the cost were not related to the sale procedure.

The stock of the company, by the closure of the trading session, was at a price of A$1.705 (as on 5 April 2019), down by 0.583% from its previous day’s closing price.

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