It’s no wonder Sam Chisholm has wielded a very big and bloody axe at the Nine Network. Today’s PBL annual profit statement reveals the damage done from a blowout in costs and a slowdown in advertising income in the last six months of the year to June.

Sam’s end of financial year cleanout in the last week of June cost $27.9 million before tax, with $3.5 million of that relating to the cost of the cleanout at head office in Willoughby, especially management.

In addition, the Network has slashed the value of its program inventory, particularly TV movies and series by $113.7 million. This also included an unspecified amount write-down in the cost of the Commonwealth Games.

Second half costs jumped 10% or more than $29 million, while revenue growth eased in the second half to only one per cent, or just $5.7 million. Revenue over the year only grew by $42.1 million (up 4.8%) while costs jumped 8.8% or $51.1 million.

Second half earnings before interest tax and depreciation of $98.8 million, compared to more than $138 million in the last half of 2004. It was that decline that led to the rising pressure on David Gyngell, who quit before he could be pushed and brought Sam Chisholm in to wield the axe.

Costs for the group overall rose 21.1% (even the tightly managed magazines saw a rise in costs in the second half, linked to the launch of two new magazines and the revamp of The Australian Women’s Weekly, which continues into this half).

Revenues (“normalised” to take account of win rates in the gaming operations at Crown and Burswood in Perth), rose by 20.6%, much of that came from the 10 month contribution from Burswood, which was acquired during the year.

Overall Nine reported a 3.6% decline in earnings before interest tax and depreciation and amortisation to $270 million (down from $280.1 million) with the company’s gross profit margin plunging from more than 35% in the first half to 23% in the second half.