Ann thoughts, page-7

The favorable ratings momentum and Stan subscriber growth are obviously major positives from the results announcement, almost certainly driving the share price this morning, oh, and a few panicky shorts realizing they’d better cover. You among them @TJ1988?

I think most would recognize that the key for NEC going forward is to manage the decline of FTA TV while building out content and expanding digital as rapidly as possible. Management seem to be acutely aware of this reality – per their commentary on the call and slide 20 of the results presentation – and their success or lack thereof on this front will obviously have a major bearing on the speed at which the share price advances to higher levels.

Management were sounded out by a questioner on the call about their interest in purchasing the various Fairfax mastheads (AFR, Age etc.). The response was fairly noncommittal, and one would hope they don’t go down this road unless the terms of any deal are super-attractive.

Once point of concern for me is cash flow. Yes, I’m in agreement with @TJ1988 on something.
In particular, the $50mn cash prepayment to NRL billed as a “one off” – for me, it’s an uncomfortably big item. Then there is the Warner contract exit, flagged already, but still, associated cash payments (totaling $86mn) are to continue “over FY18 and Fy19”. Cash flow management might be one thing to keep an even closer eye on.

In the interests of full disclosure, I should confess to selling down about 40% of my holding. I’ve felt for some time that my exposure to NEC was a little too great relative to my level of conviction –mid-strength as opposed to full-strength. This morning’s robust share price afforded a good opportunity to offload a bit. Nevertheless, the stock remains a material constituent of my portfolio, and I remain believer mid/long term.