Jobs to go at Nine as Seven axes shows
Nine's chief executive, David Gyngell, announced to staff on Wednesday that "we have to toughen up and find ways to save costs and operate more efficiently".
No numbers were given on how many staff will be let go, but sources said it would be less than a hundred. Nine is expected to announce voluntary redundancies within weeks. It employs 2000 people across the Nine Network, Ticketek and Allphones Arena.
The Ten Network conducted a highly public round of job cuts last year, which it blamed on difficult trading conditions, the one-off impact of the Olympics and its weak ratings performance, which lead to a $13 million loss for the year.
About 100 employees were let go, including many prominent personalities from its news operations, which were cut extensively.
Due to the different operating environment's of Nine's various businesses, Mr Gyngell said he had asked Nine Network chief Jeffrey Browne and Nine Events chief Geoff Jones to communicate to their staff the "specifics of the cost-cutting plans for their respective businesses". He said the media sector continued to go through unprecedented change while facing financial challenges caused by the advertising downturn.
This came despite the Prime Minister, Julia Gillard, on Wednesday announcing a date for the federal election. The election was seen by some as a potential pickup for the advertising market.
Nine announced the cost-cutting ahead of the the company being handed over to its lenders next week in return for them cancelling $3.4 billion of debt. The scheme of arrangement governing the restructure was approved by the courts this week. A new board will be installed following the restructure, including the former treasurer Peter Costello.
Nine's financial accounts last year indicated just how badly the company has suffered under its immense debt load, as well as the media downturn. It made a $972 million loss for the financial year ending June 30, taking its total accumulated losses to more than $2.5 billion.
This included a $783 million write-down on the value of its media assets. Most of the write-down related to the falling value of the network's broadcast licence.
The company was not generating enough cash to pay its way, with operating cash flows negative to the tune of more than $17 million last year.
This is despite it paying only $267.7 million of an interest bill that totalled $372.7 million last year.
Debt was not the only issue. Nine Network was forced to record provisions of close to $60 million over the past two years, which relate to the difference between what it must pay for some of its programming and what it will receive in revenue against the programs.
Frequently Asked Questions about this Article…
Nine Entertainment said it will cut jobs as it looks to save costs amid an advertising downturn. The company didn’t give exact numbers but sources said the cuts would be fewer than 100. Nine employs about 2,000 people across the Nine Network, Ticketek and Allphones Arena and is expected to announce voluntary redundancies within weeks.
The article says the media sector is facing an advertising downturn and ‘unprecedented change,’ which is forcing companies to tighten costs and operate more efficiently. Seven has already cut shows such as The Price Is Right and may drop Today Tonight, while Nine is pursuing broader cost reductions.
According to the company’s latest accounts in the article, Nine made a $972 million loss for the year ended June 30, taking accumulated losses to more than $2.5 billion. The company recorded a $783 million write-down on media assets, had operating cash flows negative by more than $17 million, and recorded provisions close to $60 million.
The article reports Nine will be handed over to its lenders next week in return for them cancelling $3.4 billion of debt. The scheme of arrangement was approved by the courts and a new board will be installed following the restructure, including former treasurer Peter Costello. (The article does not provide further shareholder-specific details.)
Nine’s interest bill totalled $372.7 million last year, of which the company paid $267.7 million. The company was not generating enough cash to cover operations, with negative operating cash flows of more than $17 million, which contributed to its broader financial stress.
The Ten Network conducted a highly public round of job cuts last year, letting go about 100 employees. Ten blamed difficult trading conditions, a one-off Olympics impact and weak ratings, which contributed to a $13 million loss for the year. That example shows the sector-wide pressures the article highlights.
The article notes that Prime Minister Julia Gillard announced a date for the federal election and that some saw the election as a potential pickup for the advertising market. The piece does not confirm any concrete impact, only that the election was seen by some as a possible boost to advertising.
Based on the article, investors should monitor announcements about voluntary redundancies and the specifics of the cost-cutting plans from Nine Network chief Jeffrey Browne and Nine Events chief Geoff Jones, the formal handover to lenders under the restructure, the installation of the new board, and any signs of improvement in advertising revenue or operating cash flows.
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