Media Centre

Strong Operational Earnings Drives PBL To Record $161m Profit

Wednesday, 09 February, 2000

Financial Results
Dividends
Outlook
PBL Group Result Six Months ended December 31, 1999

Financial Results

Publishing and Broadcasting Limited (PBL) today announced an operating profit after tax of $162.8 million for the six months ended 31 December 1999 compared with $101.6 for the corresponding period last year. Operating profit after tax and abnormal items was $160.5 million for the six months ended 31 December 1999 compared with $137.0 million for the corresponding period last year.

A breakdown of the Group’s divisional performance is provided in Attachment B.

The major factors which have impacted the half year EBITDA compared with the previous corresponding period are:

  • Television:
    		•  continued ratings dominance and strong cost control
  • Magazines:
    		•  strong advertising revenue growth and attention to costs
  • Crown:
    		•  significant improvement in core domestic business offset by below theoretical win rate in international business
  • ecorp:
    		•  significant growth as Australia’s ecommerce leader with startup losses

    The Group’s after tax profit was also impacted by an equity accounted loss of $9.5 million which has been included in the six months result for the first time and by an increase in interest costs of $20.0 million incurred on higher debt levels following the acquisition of Crown and the completion of certain investments in the past six months.

    A proforma Group Profit & Loss statement is provided in Attachment A.



    Television

    The Nine Network delivered yet another strong ratings performance. Nine’s dominance in 1999 was clearly evident – Sydney station TCN-9 won each of the 40 official ratings weeks. Melbourne station GTV-9 won 39 of the 40 while Brisbane’s QTQ-9 won 29 weeks.

    In overall prime time results (6pm – midnight), Nine increased its overall share of audience to 33.5%, up 0.3% on 1998 and the Network’s best result since the introduction of people meters in 1991. Such was Nine’s dominance that the Network had 9 of the top 10, 17 of the top 20 and 36 of the top 50 programs for 1999, and was the clear winner in all key demographics in 1999.

    Gross advertising revenue for our major stations (TCN-9, GTV-9 and QTQ-9) increased by 4% compared with the previous year and represents an estimated market share of 41.7% compared to 41.3% for calendar 1998.

    Television EBITDA for the period was $154.4M, up $27.3M on the prior period, an increase of 21.5%. The result reflects both Nine’s rating dominance as well as the continued focus on cost control.



    Magazines

    Revenue for the Magazine division was up 5.9% on the corresponding period, reflecting strong growth in advertising revenue and the continuing impact of the number of magazine launches over the past few years.

    Costs increased by 4.6% over the corresponding period, reflecting the investment in new acquisitions and launches. A targeted cost program has reduced costs by 3% on a like for like basis.

    ACP continues to develop and expand its magazine portfolio into new markets, linking launches with successful television programs such as Money, Good Medicine, Our House and Burke’s Backyard.

    The division EBITDA increased by $6.1M to $63.0M; an improvement of 10.7% over the previous corresponding period.



    Crown

    Crown has recorded revenue of $468.5M reflecting an across the board improvement by all divisions with the exception of International program revenue which declined $17.6M to $73.7M. The decline in International program revenue reflects an increase in turnover of 9.1% which was more than offset by a low win percentage of 1.10% which is well below the theoretical win rate of 1.30%, and significantly below the corresponding prior period win rate of 1.49%.

    The improvement in gaming revenues reflects an increase in average win per machine per day to $283 for the six months compared with $252 for the previous corresponding period. The local table games business maintained its win per day around the $2,400 level.

    Costs, excluding gaming taxes and VIP Program Play expenses (commissions, rebates and complimentaries) which have increased in line with the movements noted above have been reduced by approximately 3.7%; the result of continued focus on the ‘building for growth’ programs established by Crown over the past twelve months.

    EBITDA for the six months improved slightly to $111.2M with an EBITDA margin of 23.7%, however the below theoretical win rate on international business had a $12M negative impact on Crown’s EBITDA for the period.

    Alternatively, excluding the international business the EBITDA of the underlying domestic operations improved by $18.2M, or 19%, over the previous corresponding period and generated an EBITDA margin of 28.2%, compared with 24.7% in the previous corresponding period.



    ecorp

    During the six months ecorp continued to grow its business and:
    		 maintained its leadership of consumer internet sites through the ninemsn (its joint venture with Microsoft) Internet Portal and ecommerce site
    		launched its eBay person-to-person internet trading site (its joint venture with eBay Inc) in October
    		announced an agreement with The Charles Schwab Corporation to form a 50/50 joint venture to provide financial services in Australia. Schwab will acquire a 50% stake in the ecorp subsidiary Online Broker Holdings (trading as “Share Trade Australian Stockbroking”).
    As anticipated in Ticketek, the effect of Olympic ticket sales and the corresponding decrease in the number of new shows led to softness in the overall ticketing market while increased costs in Share Trade had a negative impact.

    The equity accounted losses recorded by ninemsn and eBay were lower than expected.

    Enterprises

    • One.Tel

      The One.Tel business continued its strong growth with subscribers in Australia and overseas exceeding one million. One.Tel has completed an agreement with Lucent Corporation to roll out the Company’s 1800MHZ GSM network in the capital cities of Australia with work recently commenced in Sydney.

      During the six months News Corporation agreed to subscribe $200M of equity to One.Tel, thus reducing PBL’s stake to 18.3%, fully diluted.
    • Acxiom

      The Acxiom joint venture, established with Acxiom Corporation of the USA last June, commenced business in October. There is strong early marketplace interest in this customer relationship management services business.
    • Wizard

      Since the acquisition by PBL/ecorp of a 50% interest in August, this financial services business has experienced strong growth in its customer acquisition rate, and loan book size.

    Pay Television Investments

    • Foxtel

      Foxtel continues to grow both its cable and satellite businesses and now has in excess of 573,000 subscribers. PBL has included an after tax, equity accounted loss of $6.8 million for the six months.
    • Fox Sports

      In October PBL acquired a 50% interest in Fox Sports, a supplier of Sports channels to Australia’s leading pay television distributors; Foxtel and Austar, for $59 million plus $10.5 million to be paid on a deferred settlement basis. The business continues to grow strongly.
    • Sky News Australia

      This Australian pay-tv news channel, in which PBL has a one third interest supplies to Foxtel and Optus, and has recently begun to trade profitably.

    Net Debt / Cash Flow

    During the six months ended 31 December 1999 the PBL group generated $ 248.0 million of operating cash flow. Despite the strong cash generated by its core businesses net debt increased to $1,642 million at 31 December 1999, from $1,564 million at 30 June 1999, impacted by the following major activities during fiscal 1999:
    		 Acquisition of 50% of Fox Sports
    		Funding provided to growth oriented investments such as Foxtel, Ninemsn, ebay, Acxiom etc
    		Investments in Ticketek, 54-58 Park St, TMS, Wizard etc
    		Cash outflow associated with establishing new debt facilities, in completing the Crown acquisition and in rationalising the cost base of Crown.
    Whilst debt levels have increased the Group’s interest coverage and leverage ratios remain robust.

    As previously stated PBL has an objective to diversify its sources of funding and to lengthen the maturity of its debt. During the six months ended 31 December 1999 PBL issued $300 million of perpetual subordinated debt, $500 million of seven year debt into the Euromarket and has established a $500 million domestic MTN program.

    Issuance of debt into the capital markets will continue in calendar 2000, to further progress PBL’s stated objectives.

    Dividend

    The directors announced a dividend on ordinary shares of 10 cents per share payable 15 May 2000, to shareholders registered on the books close at 5.00pm on 28 April 2000.

    Outlook

    In commenting on the future, Mr Nick Falloon, PBL’s CEO said:

    “The second half of Fiscal 2000 should see a continuation of the strong operating performance delivered in the first half.

    The Television division has started calendar 2000 strongly with the advertising market remaining buoyant and a very successful conclusion to the year 2000 advertising rate negotiations. The Nine Network’s 2000 schedule is stronger than ever with the return of all our successful shows from 1999, strengthened by the addition of the new smash hit from the USA ‘Malcolm in the Middle’, ‘Third Watch’ from the producers of ‘ER’; and the new Don Burke production ‘Backyard Blitz’ among others. The Nine Network is actively preparing to bring High Definition Television to Australian audiences next year and is excited about this new era in Australian Television broadcasting.

    The Magazine division is well placed to continue to deliver improved results with signs that the advertising market will remain strong and the continued success of our new titles and the ongoing efforts to improve operating efficiencies.

    The domestic operations of Crown should continue to deliver improved results with new ‘product’ initiatives and enhanced operating efficiencies through the building for growth programs all contributing to an increase in EBITDA. An improvement in the win rate of the international VIP business to theoretical would also provide a boost to earnings.

    ecorp anticipates further initiatives in the second half to further consolidate its position as the leading ecommerce play in Australia.

    PBL’s investments in One.Tel, Foxtel, Fox Sports, Acxiom and Wizard are all growing strongly, toward building critical mass. While it is anticipated they will all require additional funding over the next six months the cash requirements of these investments is decreasing. We are pleased with the strategic positioning of these investments and remain confident they will continue to add significant value for our shareholders in the medium term.”

    For any further enquiries or comments please contact
    Nick Falloon on (02) 9282 8012 or Geoff Kleemann on (02) 9282 8822



    Attachment A - PBL Group Result Six Months ended December 31, 1999

    Six Months ended December 1999
    $M    		 Six Months ended December 1998
    $M    		 % Movement
    OPERATING REVENUE 1,175.6 642.6 82.9
    EARNINGS BEFORE INTEREST, TAX AND DEPRECIATION 323.5 184.3 75.5
    Depreciation & Amortisation 55.5 9.1 509.9
    EARNINGS BEFORE INTEREST AND TAX 268.0 175.2 53.0
    Net Interest 47.1 27.1 73.8
    PROFIT BEFORE TAX 220.9 148.1 49.2
    Taxation 58.1 46.5 25.0
    PROFIT AFTER TAX 162.8 101.6 60.2
    Equity Accounted Loss (1) (9.5) - -
    Minority Interests .4 1.3 -
    NET PROFIT AFTER TAX 153.7 100.3 53.2
    Abnormal Profits (after tax) 6.8 36.7 -
    NET PROFIT 160.5 137.0 17.2
    Earnings per share before abnormals 23.4¢ 19.6¢ 19.4¢
    (1) Includes:
         Foxtel : 25%
         FoxSports : 50%
         Ninemsn : 50%
         ebay : 50%
         Acxiom : 50%
         Wizard Financial Services : 50%

    Attachment B - Pro Forma PBL Divisional Results Six Months ended December 31, 1999

     
    Six Months ended December 1999
    $M    		 Proforma (1) Six Months ended December 1998
    $M    		 % Movement
    REVENUE
    Television 402.8 381.2 5.7
    Magazines 274.3 259.0 5.9
    Crown 468.5 467.5 .2
    Enterprises 3.8 2.4 -
    ecorp 26.2 - -
      1,175.6 1,110.1 5.9
    EXPENDITURE
    Television 248.4 254.1 (2.2)
    Magazines 211.3 202.1 4.6
    Crown 357.3 357.4 -
    Enterprises 2.6 2.1 -
    ecorp 32.5 - -
      852.1 815.7 4.5
    EBITDA
    Television 154.4 127.1 21.5
    Magazines 63.0 56.9 10.7
    Crown 111.2 110.1 1.0
    Enterprises 1.2 0.3 -
    ecorp (6.3) - -
      323.5 294.4 9.9
    EBITDA / REVENUE 27.5% 26.5%  
    (1) Although Crown was not consolidated into the PBL Group result for the six months
    ended December 31, 1998 a proforma comparative with the corresponding period
    is included above.
    PBL

    Media Centre

    Strong Operational Earnings Drives PBL To Record $161m Profit

    Wednesday, 09 February, 2000

    Financial Results
    Dividends
    Outlook
    PBL Group Result Six Months ended December 31, 1999

    Financial Results

    Publishing and Broadcasting Limited (PBL) today announced an operating profit after tax of $162.8 million for the six months ended 31 December 1999 compared with $101.6 for the corresponding period last year. Operating profit after tax and abnormal items was $160.5 million for the six months ended 31 December 1999 compared with $137.0 million for the corresponding period last year.

    A breakdown of the Group’s divisional performance is provided in Attachment B.

    The major factors which have impacted the half year EBITDA compared with the previous corresponding period are:

  • Television:
    		•  continued ratings dominance and strong cost control
  • Magazines:
    		•  strong advertising revenue growth and attention to costs
  • Crown:
    		•  significant improvement in core domestic business offset by below theoretical win rate in international business
  • ecorp:
    		•  significant growth as Australia’s ecommerce leader with startup losses

    The Group’s after tax profit was also impacted by an equity accounted loss of $9.5 million which has been included in the six months result for the first time and by an increase in interest costs of $20.0 million incurred on higher debt levels following the acquisition of Crown and the completion of certain investments in the past six months.

    A proforma Group Profit & Loss statement is provided in Attachment A.



    Television

    The Nine Network delivered yet another strong ratings performance. Nine’s dominance in 1999 was clearly evident – Sydney station TCN-9 won each of the 40 official ratings weeks. Melbourne station GTV-9 won 39 of the 40 while Brisbane’s QTQ-9 won 29 weeks.

    In overall prime time results (6pm – midnight), Nine increased its overall share of audience to 33.5%, up 0.3% on 1998 and the Network’s best result since the introduction of people meters in 1991. Such was Nine’s dominance that the Network had 9 of the top 10, 17 of the top 20 and 36 of the top 50 programs for 1999, and was the clear winner in all key demographics in 1999.

    Gross advertising revenue for our major stations (TCN-9, GTV-9 and QTQ-9) increased by 4% compared with the previous year and represents an estimated market share of 41.7% compared to 41.3% for calendar 1998.

    Television EBITDA for the period was $154.4M, up $27.3M on the prior period, an increase of 21.5%. The result reflects both Nine’s rating dominance as well as the continued focus on cost control.



    Magazines

    Revenue for the Magazine division was up 5.9% on the corresponding period, reflecting strong growth in advertising revenue and the continuing impact of the number of magazine launches over the past few years.

    Costs increased by 4.6% over the corresponding period, reflecting the investment in new acquisitions and launches. A targeted cost program has reduced costs by 3% on a like for like basis.

    ACP continues to develop and expand its magazine portfolio into new markets, linking launches with successful television programs such as Money, Good Medicine, Our House and Burke’s Backyard.

    The division EBITDA increased by $6.1M to $63.0M; an improvement of 10.7% over the previous corresponding period.



    Crown

    Crown has recorded revenue of $468.5M reflecting an across the board improvement by all divisions with the exception of International program revenue which declined $17.6M to $73.7M. The decline in International program revenue reflects an increase in turnover of 9.1% which was more than offset by a low win percentage of 1.10% which is well below the theoretical win rate of 1.30%, and significantly below the corresponding prior period win rate of 1.49%.

    The improvement in gaming revenues reflects an increase in average win per machine per day to $283 for the six months compared with $252 for the previous corresponding period. The local table games business maintained its win per day around the $2,400 level.

    Costs, excluding gaming taxes and VIP Program Play expenses (commissions, rebates and complimentaries) which have increased in line with the movements noted above have been reduced by approximately 3.7%; the result of continued focus on the ‘building for growth’ programs established by Crown over the past twelve months.

    EBITDA for the six months improved slightly to $111.2M with an EBITDA margin of 23.7%, however the below theoretical win rate on international business had a $12M negative impact on Crown’s EBITDA for the period.

    Alternatively, excluding the international business the EBITDA of the underlying domestic operations improved by $18.2M, or 19%, over the previous corresponding period and generated an EBITDA margin of 28.2%, compared with 24.7% in the previous corresponding period.



    ecorp

    During the six months ecorp continued to grow its business and:
    		 maintained its leadership of consumer internet sites through the ninemsn (its joint venture with Microsoft) Internet Portal and ecommerce site
    		launched its eBay person-to-person internet trading site (its joint venture with eBay Inc) in October
    		announced an agreement with The Charles Schwab Corporation to form a 50/50 joint venture to provide financial services in Australia. Schwab will acquire a 50% stake in the ecorp subsidiary Online Broker Holdings (trading as “Share Trade Australian Stockbroking”).
    As anticipated in Ticketek, the effect of Olympic ticket sales and the corresponding decrease in the number of new shows led to softness in the overall ticketing market while increased costs in Share Trade had a negative impact.

    The equity accounted losses recorded by ninemsn and eBay were lower than expected.

    Enterprises

    • One.Tel

      The One.Tel business continued its strong growth with subscribers in Australia and overseas exceeding one million. One.Tel has completed an agreement with Lucent Corporation to roll out the Company’s 1800MHZ GSM network in the capital cities of Australia with work recently commenced in Sydney.

      During the six months News Corporation agreed to subscribe $200M of equity to One.Tel, thus reducing PBL’s stake to 18.3%, fully diluted.
    • Acxiom

      The Acxiom joint venture, established with Acxiom Corporation of the USA last June, commenced business in October. There is strong early marketplace interest in this customer relationship management services business.
    • Wizard

      Since the acquisition by PBL/ecorp of a 50% interest in August, this financial services business has experienced strong growth in its customer acquisition rate, and loan book size.

    Pay Television Investments

    • Foxtel

      Foxtel continues to grow both its cable and satellite businesses and now has in excess of 573,000 subscribers. PBL has included an after tax, equity accounted loss of $6.8 million for the six months.
    • Fox Sports

      In October PBL acquired a 50% interest in Fox Sports, a supplier of Sports channels to Australia’s leading pay television distributors; Foxtel and Austar, for $59 million plus $10.5 million to be paid on a deferred settlement basis. The business continues to grow strongly.
    • Sky News Australia

      This Australian pay-tv news channel, in which PBL has a one third interest supplies to Foxtel and Optus, and has recently begun to trade profitably.

    Net Debt / Cash Flow

    During the six months ended 31 December 1999 the PBL group generated $ 248.0 million of operating cash flow. Despite the strong cash generated by its core businesses net debt increased to $1,642 million at 31 December 1999, from $1,564 million at 30 June 1999, impacted by the following major activities during fiscal 1999:
    		 Acquisition of 50% of Fox Sports
    		Funding provided to growth oriented investments such as Foxtel, Ninemsn, ebay, Acxiom etc
    		Investments in Ticketek, 54-58 Park St, TMS, Wizard etc
    		Cash outflow associated with establishing new debt facilities, in completing the Crown acquisition and in rationalising the cost base of Crown.
    Whilst debt levels have increased the Group’s interest coverage and leverage ratios remain robust.

    As previously stated PBL has an objective to diversify its sourc