Accounting Financial Analysis Report for NEC Limited

This report provides a detail information about the whole analysis of Nine Entertainment Co. Holdings Limited. NEC is an Australia based media company involved in television broadcasting, internet, program production, subscription television and many other media sectors. The report contains a company’s overview in summarised form along with the details of its board of directors. It also provides information about the financing and investing decisions taken by the enterprise during the year 2016-2017 along with the details of its external auditors. In the later part of the report, ASX CGC recommendations, key investors of the firm and the measures taken by NEC to maintain its ethical standards are discussed. In the last, financial analysis of the company is done using the technique named as ratio analysis followed by the conclusion.

RUNNING HEAD: ACCOUNTING FINANCIAL ANALYSIS REPORT
Financial analysis

Accounting financial analysis report 1
Contents
Introduction................................................................................................................................2
Brief Summary – NEC Limited.................................................................................................2
Board of directors.......................................................................................................................3
Characteristics of Board.............................................................................................................6
Investment and financing decisions...........................................................................................8
Recommendations of ASX CGC...............................................................................................8
NEC’s audit function..................................................................................................................9
Ethical judgements and Ethics.................................................................................................10
Key Shareholders and Investors...............................................................................................10
Ratio analysis...........................................................................................................................11
Liquidity ratios.....................................................................................................................11
Asset Management ratios.....................................................................................................12
Capital structure ratios..........................................................................................................13
Profitability ratios.................................................................................................................14
Market value ratios...............................................................................................................14
Cash flow management ratios..............................................................................................15
Conclusion................................................................................................................................15
References................................................................................................................................17
Appendix 1...............................................................................................................................19

Accounting financial analysis report 2
Introduction
This report provides a detail information about the whole analysis of Nine Entertainment Co.
Holdings Limited. NEC is an Australia based media company involved in television
broadcasting, internet, program production, subscription television and many other media
sectors. The report contains a company’s overview in summarised form along with the details
of its board of directors. It also provides information about the financing and investing
decisions taken by the enterprise during the year 2016-2017 along with the details of its
external auditors. In the later part of the report, ASX CGC recommendations, key investors of
the firm and the measures taken by NEC to maintain its ethical standards are discussed. In the
last, financial analysis of the company is done using the technique named as ratio analysis
followed by the conclusion.
Brief Summary – NEC Limited
Nine Entertainment Co. Holdings Limited. Is publically listed company operating its business
is Australia. It was the successor of an Australia based media group named as Publishing and
Broadcasting Ltd. PBL was created by Sir Frank Packer, who had developed the first TV
network of Australia known as Channel 9. PBL was established in 2006 after the transfer of
media interest to a new joint venture between CVC Asia Pacific and PBL. NEC is engaged in
providing media services like broadcasting through television, internet and digital services
and many other media sectors. There are basically two segments in which company operates
named as Television and Digital (Reuters.com. 2018). NEC is also engaged in selling
advertising suite of Microsoft across the country and New Zealand. It has a good and a long
lasting connection or strategic relationship with Microsoft. The brand of the company
includes Nine Digital, Nine Network Television and other business which includes

Accounting financial analysis report 3
CarAdvice, Pdestrain.tv, RateCity and Literacy Planet. It is listed on Australian Securities
Exchange and is traded with a ticker NEC.AX.
NEC operates in entertainment and media industry in Australia. As per the statistics, the
media market of Australia has always shown a growth in past years. In the time frame of 10
years, the market value of the sector has continuously increased and the industry has
performed well. As far as the financial performance of NEC is concerned, the company has
made a revenue worth $1237.8 million which was slightly lower than the revenue earned in
2016 that is $1282.4 million. NEC made a net loss of $203,438 million in 2017 whereas the
same was reported as a profit at $324,755 million in 2016. Along with this, the earnings per
share of Nine Entertainment has also became negative due to the loss made. In 2016, the EPS
was $0.04 cents which turns out to be -$0.23in 2017 (Nineentertainmentco.com.au. 2017).
Board of directors
Name Gender Age Education Career History Post
Remuner
ation ($)
Peter
Costello Male 60
BA,
Bachelor of
Laws LLB
(Hons) and
Doctorate
of laws.
From 1990-2009, he was
been a member of the House
of Representatives and was
the treasurer of
Commonwealth from 1996 to
2007.
Independent
Non-
Executive
Chairman. 390,068
Hugh
Marks
Male N/A B.com and
a degree of
law
In past, Hugh had worked as
a senior executive for 20
years in broadcasting in
CEO and
Director
2,774,695

Accounting financial analysis report 4
Australia and in content
production. Before becoming
the chief executive director
he also owned a company
named as RGM artists. Also,
he was been a CEO of
Southern Star Group and the
director of Nine Films &
Television for seven years.
In addition to that, he was
also the member of
Australian Communications.
David
Gyngell Male 52 N/A
He served the company as a
chief executive officer from
2010 to 2015. He also had a
20 years’ experience in Nine
and over 25 years’ experience
in media industry. In past, he
was the CEO of Granada
Television, worked as an
executive director for
Publishing & Broadcasting
Limited.
Non-
executive
director 163,908

Accounting financial analysis report 5
Janette
Kendall Female N/A
Bachelor of
Business –
Marketing
The lady has more than 23
years’ experience of board
across all type of
organizations covering a wide
range of advertising,
marketing, digital media, arts
and supermarkets. In addition
to this, Kendall is a former
senior executive including
various roles played by her
that are added in her career.
Such as she has held as a
senior vice president of
Galaxy Entertainment Group,
marketing general manager
(executive) at Crown
Melbourne and many more.
Independent
Non-
executive
director 10,920
Samantha
Lewis
Female N/A Bachelor of
Arts (Hons)
She has 20 years’ experience
at Deloitte Touche Tohmatsu
and has also worked as a
partner there. She also
provided accounting advice
and conducted many audits
while playing her role at
Deloitte. Furthermore, she
Independent
Non-
executive
director
47,989

Accounting financial analysis report 6
was also appointed as on the
board of Orora Ltd and
Aurizon Holdings Ltd.
Catherine
West Female 51
Bachelor of
Laws
(Hons) and
Bachelor of
Economics
She has an experience of
business and legal affairs in
media industry for almost
more than 20 years. Recently,
she was appointed as the
director off legal at Content
Commercial and Joint
Ventures for Sky Plc. in
United Kingdom. Also,
currently she is a non-
executive director of
Southern Phones and Vice
President of Sydney Breast
Cancer Foundation.
Independent
Non-
executive
director 190,685
(Nineentertainmentco.com.au. (2017).
Characteristics of Board
The directors of Nine Entertainment are educated and proficient people who have ample of
experience in media industry and their respective fields. The role of company’s directors is to
approve the Nine’s strategies and various business plans. In addition to that, the board is held
responsible for approving the annual report of the company which includes its financial
statements, corporate governance statement and the remuneration report of the directors.

Accounting financial analysis report 7
NEC’s board consists of majority of independent directors except from February 2017 to
March 2017. In that period there were two non-independent directors and 2 independent
directors. Also, before and during this period, the board was actively putting efforts in
securing additional independent directors in order to create a proper balance between both
types of directors. The chairman Peter Costello is been responsible to look after the workings
of the board and review them timely. The chief executive officer of Nine Entertainment Hugh
Marks, has a strong career history and he motivates and assists the employees to achieve their
personal as well as organizational targets. To add further in the responsibilities, the board is
required to act legally and ethically on all the matters related to the business and must make
sure that all the ethical standards are been maintained (Nineentertainmentco.com.au. 2017).
NEC’s board of directors apply the concept of delegation of authority where the power in
been delegated in the hands of Chief Executive Officer and other senior management staff.
Each member of the team or the staff is well qualified and experienced to handle the
responsibility assigned. The board is also capable of assessing and reviewing the performance
of each team. NEC has its formal board charter which reflects the role and responsibility of
its members, assignment of duties between the management and board and the operating
procedures. There are various committees of NEC formed for respective purposes. For
framing the remuneration policies and incentive plans, the charter has a committee of people
and remuneration. In addition to this, to prepare the audit reports, reviewing the accounting
policies, overseeing the final accounts of the company and to manage and approve the risk
management strategies and to ensure the auditor independence.
The company sectary of Nine Entertainment is also appointed by the board of directors and
they all have the direct access to approach the sectary whenever they want. The role of CS
include monitoring the policy of board and reviewing the procedures followed along with the

Accounting financial analysis report 8
accountability to the board on all the matters related to corporate governance. Overall, NEC
has the qualified directors and their composition is also as per the ASX recommendations.
Investment and financing decisions
On September 2016, Nine Entertainment acquired the CarAdvice.com Pty Ltd, a leading
publisher engaged in publishing the online automotive editorial content. The company
purchases 59.22% shares with the voting interests in CarAdvice.com. In consideration, NEC
invested or paid $17.3 million cash along with the acquisition costs of $153,150. The basic
purpose of acquiring or making investment in such company is to expand the business in
automotive sector. At the year ended 30 June 2017, the company decided to declare the fully
franked interim dividend of 4.5 cents per share amounted to $39,151,434 and proposed a final
dividend of 5.0 cents per share amounted to $46,568,660 that are fully franked.
Recommendations of ASX CGC
The ASX Corporate Governance Council provides eight recommendations and principles that
are required to be followed by every listed company. Being an Australian company and ASX
listed, NEC also complies its corporate governance practices with the principles of ASX CGC
(Asx.com.au. 2018). The key recommendations are:
Principle or Recommendation Description
Lay down the solid foundation for
management and oversight
The company clearly states the roles and
responsibilities of its board and senior management
along with various committees.
Structure the Board to add value Both the independent and no-independent directors
are there and effective composition and size of the
board is there as per the principle.
Actions must be ethical and NEC corporate governance has a code of conduct

Accounting financial analysis report 9
responsible. which aims at doing the works with ethics.
Safeguarding the integrity while
reporting and making corporate
reports
Committees are been there for safeguarding the
integrity of financial reporting.
Timely and balanced disclosure
should be there
NEC has a disclosure policy followed by the
company for making continuous disclosures.
Right of security holders should be
respected
Shareholder’s right should be respected.
Recognising and managing the risk A sound risk management framework is been
established.
Fair and Responsible remuneration Proper and suitable remuneration is been given to the
directors as per the related policy.
NEC’s audit function
Ernst & Young LLP is the external auditor of the company who is responsible for auditing
the annual reports of NEC. E&Y is a financial service provider company which offers several
number of professional services like enterprise risk management, auditing, assurance,
mergers and acquisitions, transaction support and many more (Bloomberg.com. 2018). The
financial report of NEC is been audited by the auditors which includes the consolidated
statements like balance sheet, cash flow and income statement. According to the auditors, the
report is been audit as per the Australian Auditing Standards and is in compliance with the
Corporation Act 2001. It gives the true and fair view of the financial position of the company
as on June 30, 2017. In addition to this, E&Y is independent of the group as per the the
ethical requirements of APES 110 ‘Code of Ethics for Professional Accountant’ and

Accounting financial analysis report 10
provisions of the Act. E&Y was entitled to get a total remuneration of $1,355,031 in year
2017.
Ethical judgements and Ethics
Key measures taken are as follows:
 NEC holds the license of commercial television which bound the company by
Commercial Television Code of Practice. This code make sure that NEC complies
with the AANA Advertiser Code of Ethics and AANA Advertiser Code of Marketing
and Communication with children. NEC provides training to its employees in this
regard so that they can properly comply with the laws.
 The company has established a code of conduct which is applicable to all the
directors, senior management and employees that provides a clear guidance on
company’s ethical standards and value to shareholders (Nineentertainmentco.com.au.
2017).
Key Shareholders and Investors
Shareholder Shares Holding %
HSBC Custody Nominees Limited 285,508,984 32.79
J P Morgan Nominees 125,942,531 14.46
Citicorp Nominees PTY Limited 122,943,851 14.12
Birketu Pty Ltd 99,677,718 11.45
National Nominees Limited 57,743,485 6.63
The above list shows the largest investors and shareholders of NEC Ltd. it can be clearly seen
that HSBC has the highest stake of 32.79% followed by J P Morgan with a holding of

Accounting financial analysis report 11
14.49%. Citicorp also holds almost same percentage of the shares in NEC
(Nineentertainmentco.com.au. 2017).
Ratio analysis
Liquidity ratios
2016 2017
-
0.50
1.00
1.50
2.00
2.50
Liquidity ratios
Current ratio Quick Ratio
Years
Values
(Refer Appendix 1)
The current and quick ratio of the company are almost same as there is no inventory in the
past two years. However, an increase is been there in both the ratios as in 2016, they were
reported at 1.36:1 and in 2017, it increased to 1.90:1. This indicates that the liquidity position
of the company has increased (Jenter and Lewellen, 2015).

Accounting financial analysis report 12
Asset Management ratios
2016 2017
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Asset management ratios
Debtor Turnover Ratio Total Assets Turnover
Years
Values
(Refer Appendix 1)
2016 2017
80
81
81
Number of days
Average Collection Period
Years
Days
(Refer Appendix 1)
Debtor turnover shows the efficiency of the enterprise in collecting its accounts receivables.
In case of NEC, the ratio has been slightly increased in 2017 from 4.52 to 4.54 and also there
was a reduction in collection period from 81 days to 80 days. The total assets turnover ratio

Accounting financial analysis report 13
has also shown an increasing trend and it rises from 0.55 to 0.61 during the year, reflecting
that more revenue is generated with the assets (Higgins, 2012).
Capital structure ratios
2016 2017
(20.00)
(15.00)
(10.00)
(5.00)
-
5.00
10.00
Capital Structure ratios
Debt to Equity Ratio Interest Coverage Ratio Debt to Total Assets
Years
Values
(Refer Appendix 1)
The D/E ratio shows the amount of debt taken by the company against its equity. NEC’s D/E
ratio has been increased from 0.18 to 0.30 showing an increase in its debt and reduction in its
equity. The ICR of the company became negative due to the loss made by the company in
2017. In 2016, it was 6.07 times which reduces to -14.16 times in 2017. The total debt to total
assets ratio has also increased from 10% to 15% showing high proportion of debt taken by the
company (Ferrarini, Hinojales and Scaramozzino, 2017).

Accounting financial analysis report 14
Profitability ratios
2016 2017
-30%
-20%
-10%
0%
10%
20%
30%
Profitability ratios
Net Profit Margin Operating Profit Margin
Return on Equity Return on Assets
Years
%
(Refer Appendix 1)
Talking about the profitability of NEC, it can be said that company has faced a reverse trend
in 2017 as compare to its performance in 2016. It has made a loss amounted to $203,438
million which make all of its ratios negative (Kimmel, Weygandt and Kieso, 2010). The NPR
reduces from 25% to -16% along with the reduction in return on equity 26% to -21%. Similar
trend is been shown in the OPR and ROA of the company (Gibson, 2011).
Market value ratios
2016 2017
-10.00
-5.00
0.00
5.00
10.00
15.00
Market value ratios
Book Value per Share Dividend Yield Earnings per Share
Market price per Share Price Earnings Ratio
Years
values
(Refer Appendix 1)

Accounting financial analysis report 15
The book value per share of the company has been reduced during the year. BVPS reduces
from 1.40 to 1.12 due to the reduction in shareholder’s equity. The market price increases
from $0.91 to $1.3 per share. Talking about dividend yield, it shows a reduction due to the
decrease in the value of dividends per share declared by the company. EPS and P/E ratio
became negative in 2017 with -0.23 cents and $-5.56 due to the loss incurred (Bragg, 2012).
Cash flow management ratios
2016 2017
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Cash flow management ratios
Operating Cash flow ratio
Years
%
(Refer Appendix 1)
NEC’s OCFR has become negative in 2017 reflecting a huge reduction as compare to 2016.
Prior to 2017, the ratio was 12% which significantly falls to -1% in 2017. This is because of
the cash used in company’s operating activities worth $4186 million. Hence, company needs
to manage its flow of cash (Godwin and Alderman, 2012).
Conclusion
The above report concludes that NEC needs to take measures to improve its financial
position. Apart from its assets efficiency and liquidity, company must take efforts to increase
its profits and improve its stock performance and position in the market. Apart from that, it
properly follows the ASX CGC guidelines and operates in a prescribed legal framework. It

Accounting financial analysis report 16
has also established ethical standards and complied with them properly. However, NEC needs
to focus on enhancing its financial position and performance.

Accounting financial analysis report 17
References
Asx.com.au. (2018). Corporate Governance Principles and Recommendations with 2010
Amendments. [Online] Available at:
https://www.asx.com.au/documents/asx-compliance/cg_principles_recommendations_with_2
010_amendments.pdf [Accessed 4 July 2018].
Bloomberg.com. (2018). Ernst & Young LLP: Private Company Information - Bloomberg.
[Online] Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapId=97518 [Accessed 4 July 2018].
Bragg, S. M. (2012). Business ratios and formulas: a comprehensive guide (Vol. 577). 3rd
ed. New Jersey: John Wiley & Sons.
Ferrarini, B., Hinojales, M. and Scaramozzino, P. (2017). Leverage and Capital Structure
Determinants of Chinese Listed Companies.
Gibson, C. H. (2011). Financial reporting and analysis. USA: South-Western Cengage
Learning.
Godwin, N., and Alderman, C. (2012). Financial ACCT2. USA: Cengage Learning.
Higgins, R. C. (2012). Analysis for financial management. New York: McGraw-Hill/Irwin.
Jenter, D. and Lewellen, K. (2015). CEO preferences and acquisitions. The Journal of
Finance, 70(6), pp.2813-2852.
Kimmel, P. D., Weygandt, J. J., and Kieso, D. E. (2010). Financial accounting: tools for
business decision making. New Jersy: John Wiley & Sons.
Nineentertainmentco.com.au. (2017). Board of Directors. [Online] Available at:
https://www.nineentertainmentco.com.au/investor-centre/board-of-directors [Accessed 4
July 2018].

Accounting financial analysis report 18
Nineentertainmentco.com.au. (2017). Corporate Governance Statement 2017. [Online]
Available at: http://prod.static9.net.au/_/media/Network/ASX-Release--Corporate-
Governance-Statement.pdf [Accessed 4 July 2018].
Nineentertainmentco.com.au. (2017). Nine Entertainment Company annual report
2016/2017. [Online] Available at:
http://prod.static9.net.au/_/media/Network/NineEntertainmentCo/PDF-Downloads/Nine-
Entertainment-Co-Annual-Report-2017.pdf [Accessed 4 July 2018].
Reuters.com. (2018). Nine Entertainment Co Holdings Ltd (NEC.AX). [online] Available at:
https://www.reuters.com/finance/stocks/overview/NEC.AX [Accessed 4 July 2018].

Accounting financial analysis report 19
Appendix 1
Liquidity Ratios
Current ratio Quick ratio
2016 2017 2016 2017
Current Assets (A) 550830 607391 Quick Assets (A) 550765 607370
Current Liabilities
(B) 405779 318867
Current Liabilities
(B) 405779 318867
CR (A/B) 1.36 1.90 QR (A/B) 1.36 1.90
Asset management
efficiency
Debtor Turnover Ratio
Total Assets
Turnover
2016 2017 2016 2017
Sales (A) 1286360
124495
5 Sales (A)
12863
60
12449
55
Average Accounts
Receivables (B)
284335.
5 274021
Average Total
Assets (B)
23219
53
20248
01
DTR (A/B) 4.52 4.54 ATR (A/B) 0.55 0.61
Average Collection
Period 81 80
Capital structure
ratios
Debt to Equity Ratio
Interest Coverage
Ratio
2016 2017 2016 2017
Debt (A) 220485 291175 EBIT (A) 65782
-
178466
Equity (B) 1233839 973700
Interest Expense
(B) 10844 12600
D/E (A/B) 0.18 0.30 ICR (A/B) 6.07
-
14.16

Accounting financial analysis report 20
Debt to Total Assets
2016 2017
Total Debt (A) 220485 291175
Total Assets (B)
214804
0 1901561
D/TA (A/B) 10% 15%
Profitability Ratios
Net Profit Margin
Operating Profit
Margin
2016 2017 2016 2017
Net Profit (A) 324755
-
203438 Operating Income (A) 65782
-
178466
Sales (B)
128636
0
124495
5 Sales (B)
128636
0
124495
5
NPR (A/B) 25% -16% OPR (A/B) 5% -14%
Return on Equity Return on Assets
2016 2017 2016 2017
Net Income (A) 324755
-
203438 Net Income (A) 324755
-
203438
Shareholder's Equity
(B)
123383
9 973700 Total Assets (B)
214804
0
190156
1
ROE (A/B) 26% -21% ROA (A/B) 15% -11%
Market value ratios
Book Value per Share
2016 2017
Shareholder's Equity (A) 1233839 973700
Average Outstanding shares
(B) 883387 870028
BPS (A/B) 1.40 1.12
Dividend Yield
2016 2017
Dividend per share (A) 12 9.5
Market price of share (B) 0.91 1.3
DY (A/B) 13.19 7.31

Accounting financial analysis report 21
Earnings per Share Price Earnings Ratio
2016 2017 2016 2017
Net Income (A)
32475
5
-
203438
Current Market price
(A) 0.91 1.3
Average Outstanding shares
(B)
88338
7 870028 EPS (B)
0.36
8
-
0.234
EPS (A/B) 0.37 -0.23 P/E ratio (A/B) 2.48 -5.56
Market price per Share 2016 2017
0.91 1.3
Cash flow management
Ratios
Operating Cash flow ratio
2016 2017
Cash flow from operations (A) 50279 -4186
Current Liabilities (B) 405779 318867
OCFR (A/B) 12% -1%