As Nine Entertainment prepares to sell its 33% stake in Australian News Channel, which operates Sky News on Foxtel, it has taken the opportunity to make another impairment of its book value. Nine owns a third of Australian News Channel (the other two-thirds are owned by Seven West Media and British Sky) and is about to sell that to News Corp (which will buy the stake held by Sky News of the UK). Seven Network will buy 17% of Australian News Channel to take its stake to 50%, equal to News Corp’s stake.
But buried in the Nine annual accounts, filed with the ASX late last month, was news of the further impairment of more than half a million dollars.
“Management has determined the accounting fair value less costs to disposal for Australian News Channel Pty Limited to be the likely net proceeds which it is estimated would be received on a disposal of the Group’s shares in this entity. This has resulted in an impairment of $512,000 being recognised on the investment in Australian News Channel Pty Limited during the current financial year.”
That was the second impairment in a row. In 2014-15, Nine cut the value of its one-third stake in Australian News Channel by $25 million. And the 2015-16 annual report reveals that the dividend paid to Nine by Australian News Channel fell sharply, from $2.333 million in 2014-15 to $1.3 million in the June, 2015 year. That’s a 42% cut in dividend payments. What will that mean for Nine and Sky News now?
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