Southern Cross Media Group Limited, the parent company of Southern Cross Austereo (SCA), has announced strong results for the year ended June 30, 2022, reported on the ASX.
The media company reported underlying after-tax net income of $27.4 million, up 38.4% from fiscal 2021. Audio ratings and revenue increased as television grew improved its margins after switching from SCA’s affiliation to Network 10.
See the company presentation here
Highlights of Southern Cross Media Group Limited results:
• SCA recorded underlying EBITDA of $87.9 million, up 2.8% compared to FY21. Underlying NPAT of $27.4 million increased 38.4% from FY21.
• Benefiting from continued recovery across all audio segments, SCA’s audio revenue of $392.9 million increased $33.1 million (9.2%) over the prior year. Broadcast radio revenues increased 9.4% to $182.7 million in metropolitan markets and 6.4% to $168.5 million in regional markets, while digital audio grew 35.2% to $20.8 million. Underlying audio EBITDA of $86.7 million increased 1.8% year-over-year, despite significant investments underway in the maturation of SCA’s digital audio ecosystem, LiSTNR.
• LiSTNR has crossed over 850,000 connected users with listening on the platform over the past six months, growing 3.7x to 2.7 million average monthly streams from 0.7 million average monthly streams over the past six months. the same period in 2021.
• Following the transition of Nine’s affiliation to Network 10 in the 3 aggregate markets, SCA’s TV assets generated underlying EBITDA of $29.9 million, which was neutral compared to FY21 . TV’s underlying EBITDA margin increased from 17.6% to 23.7%, reflecting SCA’s operating efficiency and its 1.09 commercial power ratio in East Coast markets.
• SCA’s balance sheet remains strong, with healthy liquidity. Net debt was $78.5 million as of June 30, 2022 and leverage of 0.95x EBITDA is well below the covenant of 3.50x.
• Free cash conversion of 67.2% down from prior periods due to capital expenditures for the Melbourne office move and the cancellation of COVID-19 related tax and vendor payment deferrals. Free cash conversion is expected to return to 90-100% in FY23.
• The result includes impairment charges of $178.6 million (net of tax) related to the impairment of the carrying value of radio licenses, goodwill and trademarks. The impairment reflects current economic uncertainty and an increase in the cost of capital globally. The result also included $0.8 million of charges related to impairment of investments, restructuring costs and expenses associated with the postponement of the refresh of SCA’s financial systems.
Following the completion of a strategic review, SCA has concluded that value will be maximized by continuing to hold its television assets. Supported by SCA financial advisor Grant Samuel, the review included dialogue with several interested parties. The offers from these parties did not match SCA’s valuation of the television assets.
SCA will pay a fully franked dividend of 4.75 cents per share, representing 85% of NPAT excluding significant items. This is the high end of SCA’s policy of paying dividends of 65% to 85% of NPAT. The dividend will be paid on October 4, 2022.
The Board will resume the ongoing market buyback after the release of these results.
Management Commentary and Outlook
Grant Blackley, CEO and Managing Director of SCA, said, “SCA is pleased to report underlying EBITDA of $87.9 million and underlying NPAT of $27.4 million, up 2.8 % and 38.4% respectively compared to the previous year. With a strong balance sheet and strong cash flow, we continue to invest for the future while returning funds to shareholders through fully franked dividends and our market buyback.
“Commercial radio audiences in metropolitan markets have reached record levels in recent surveys. The total audience of 12 million recorded in GfK Survey 4 was the highest on record and a jump of 7.6% from the previous year. SCA’s Hit and Triple M stations led the rise as audiences return to entertainment and music formats.
“SCA broadcast radio revenues increased 8.0% to $372.1 million. This was led by national revenue growth of 9.7% in metropolitan markets and 8.9% in regional markets. Local advertisers have been directly impacted by flooding and supply chain issues, which has resulted in lower local advertising growth,” he said.
“SCA has completed a five-year program to install digital operations infrastructure across all offices and assets. This allows SCA to distribute our premium content from any location to audiences at once and on a device of their choosing. In addition, the expansion of our on-demand content significantly increases awareness of our radio assets among audiences and advertisers.
“Our investment in a fully owned and operated digital audio ecosystem, LiSTNR, also positions SCA to take a leading share of the growing 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 favorite Hamish and Andy podcast); live AFL, NRL and international cricket; local news and information around Australia; and national 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 TV assets generated an EBITDA margin of 23.7% and a market-leading revenue-to-audience power ratio. The company is streamlined, efficient and not very capital intensive.
“Television is also a strong marketing platform for LiSTNR’s growth, providing approximately $10 million of in-kind marketing support in FY22. Television’s continued contribution will support future returns for LiSTNR’s shareholders. SCA through fully franked dividends and the resumption of the ongoing share buyback,” Blackley added.