Southern Cross Media Group Limited, the parent company of Southern Cross Austereo (SCA), has reported strong results for the financial year ending on 30 June 2022, announced on the ASX.
The media company reported an underlying net profit after tax of $27.4 million, up 38.4% on the 2021 financial year. Audio audiences and revenue grew as television improved margins after SCA’s affiliation switch to Network 10.
See the company’s presentation here
Southern Cross Media Group Limited results highlights:
• SCA recorded underlying EBITDA of $87.9 million, up 2.8% on FY21. Underlying NPAT of $27.4 million was up 38.4% on FY21.
• Benefitting from continuing recovery in all audio segments, SCA’s audio revenue of $392.9 million was up $33.1 million (9.2%) on the prior year. Broadcast radio revenue grew by 9.4% to $182.7 million in metro markets and by 6.4% to $168.5 million in regional markets, while digital audio revenues grew by 35.2% to $20.8 million. Underlying audio EBITDA of $86.7 million was 1.8% up on the prior year, despite ongoing significant investment in maturing SCA’s digital audio ecosystem, LiSTNR.
• LiSTNR crossed over 850,000 signed-in users with on-platform listening in the most recent six months growing 3.7 times to 2.7 million average monthly streams from 0.7 million average monthly streams in the same period in 2021.
• Following the affiliation transition from Nine to Network 10 in the 3 aggregated markets, SCA’s television assets generated underlying EBITDA of $29.9 million, which was neutral compared to FY21. Television’s underlying EBITDA margin rose from 17.6% to 23.7% reflecting SCA’s operational efficiency and market leading sales power ratio of 1.09 in east coast markets.
• SCA’s balance sheet continues to be robust, with healthy liquidity. Net debt was $78.5 million on 30 June 2022 and leverage of 0.95x EBITDA is well below the covenant of 3.50x.
• Free cash conversion of 67.2% reduced compared to earlier periods due to capital expenditure for relocation of the Melbourne office and unwinding of COVID-19 related tax and supplier payment deferrals. Free cash conversion is forecast to return to 90-100% in FY23.
• The result includes impairment charges of $178.6 million (net of tax) relating to impairment in the carrying value of radio licences, goodwill, and brands. The impairment reflects current economic uncertainty and an increase in the cost of capital globally. The result also included $0.8 million of charges relating to impairment of investments, restructuring costs and expenses associated with deferring refresh of SCA’s finance systems.
Television strategy
Following completion of a strategic review, SCA has concluded that value will be maximised by continuing to hold its television assets. Supported by SCA’s financial adviser, Grant Samuel, the review included engagement with several interested parties. Bids from these parties did not align with SCA’s valuation of the television assets.
Capital management
SCA will pay a fully franked dividend of 4.75 cents per share, representing 85% of NPAT excluding significant items. This is at the top end of SCA’s policy to pay dividends of 65% to 85% of NPAT. The dividend will be paid on 4 October 2022.
The Board will resume the current on-market share buy-back after release of these results.
Management commentary and outlook
Grant Blackley, SCA CEO and managing director, said: “SCA is pleased to report underlying EBITDA of $87.9million and underlying NPAT of $27.4million, up 2.8% and 38.4% respectively on the prior year. With a robust balance sheet and strong cashflow, we are continuing to invest for the future while returning funds to shareholders through fully franked dividends and our on-market share buy-back.
“Commercial radio audiences in metro markets reached record levels in recent surveys. The total audience of 12 million recorded in GfK Survey 4 was the highest ever and a 7.6% jump over the prior year. SCA’s Hit and Triple M stations have led this rise as audiences return to entertainment and music formats.
“SCA’s broadcast radio revenue grew by 8.0% to $372.1M. This was led by growth in national revenue of 9.7% in metro markets and 8.9% in regional markets. Local advertisers were directly affected by floods and supply chain issues resulting in lower levels of growth in local advertising,” he said.
“SCA has completed a five-year program to install digital operating infrastructure across all offices and every asset. This allows SCA to distribute our premium content from any location to audiences at a time and on a device on their choice. In addition, expansion of our on-demand content is materially adding to audience and advertiser awareness of our radio assets.
Grant Blackley
“Our investment in a fully owned and operated digital audio ecosystem, LiSTNR, also positions SCA to take a leading share of the rapidly expanding Australian digital audio market.
Blackley continued: “LiSTNR hosts a library of compelling digital audio content including SCA’s 99 live radio stations; 25 music genre stations; 108 original podcasts (including Australia’s favourite Hamish & Andy podcast); live AFL, NRL, and international cricket; local news and information around Australia; and domestic and international licensed content from the BBC, ESPN, Schwartz Media, the Royal Institution of Australia, SoundCloud, and other partners.
“We are very comfortable retaining our television assets. SCA’s television assets delivered an EBITDA margin of 23.7% and a market leading revenue-to-audience power ratio. The business is streamlined, efficient and capital light.
“Television is also a strong marketing platform for the growth of LiSTNR, delivering around $10M of in-kind marketing support in FY22. The ongoing contribution from television will support future returns to SCA’s shareholders through fully franked dividends and resumption of the current share buy-back,” Blackley added.