We saw solid results from regional media groups, Austar and Southern Cross yesterday, with both reporting improved levels of profitability.
Austar shares jumped by more than 8% at one stage after the company revealed that net profit rose to $99.6 million for the 12 months to December 31, 2010, up from $58.7 million in the 2009 year.
The shares rallied 8.5c, or 7.8%, to $1.17, then shed most of that to end up 2.5c, or 2.3% at $1.115.
That wasn’t a bad achievement given the overall fall in the market yesterday.
The company said in its ASX filing yesterday that revenue rose 5.4% in the year to $711.3 million.
The company’s gross profit was just over $392 million, giving a gross profit margin of a very fat 55%.
Austar did not pay an interim or final-year dividend.
The company said the higher net profit came in difficult trading conditions, while the January floods would have a short-term impact.
Austar said subscriber numbers grew 3% to 764,219 (up 22,500 people) in the 12 months to December 31, while average revenue per user also was up about 3%.
Chief executive John Porter said that, although some parts of the economy were looking better than others, households still were careful with spending.
New digital channels from free-to-air broadcasters also presented difficulties.
‘‘Despite this challenging environment, Austar continued to not only grow new subscribers but we also maintained our existing base, and are very pleased with the results,’’ Mr Porter said in a statement.
Subscriber churn was 1.3% per month in 2010 (15.6% annual rate), compared with 1.29% (14.6% annual rate) in 2009, Austar said.
Mr Porter said the beginning of calendar 2011 had presented ‘‘many challenges’’ to regional Australia, including the floods in Queensland.
Mr Porter said there were about 10,000 Austar homes severely affected by the floods and the widespread damage and clean-up effort would affect the company’s ability to generate new sales in these areas.
‘‘Overall, we believe the impact on Austar will be less than $3 million for 2011,’’ Mr Porter said.
Austar shares have firmed in the past week or so as suggestions of takeover interest (from Foxtel) again surfaced a week ago in The Australian newspaper. Foxtel failed to get a bid up around 3 years ago.
And while regional television and radio owner Southern Cross Media Group reported a return to profitability in the December half of 2010, investors were not impressed.
The shares dipped 3c, or 1.5%, to $1.92.
But the results are essentially meaningless at the moment because the big driver of sentiment is Southern Cross’ bid for Austereo.
Southern Cross said yesterday that net profit for the six months to December 31, was $33.61 million, compared with a $148.07 million loss in the prior corresponding period.
Revenue rose 5% to $218.71 million.
Southern Cross declared an interim dividend of 7cs per share, fully franked.
That’s double the 3.5c a share paid for the first half of the 2010 financial year.
Southern Cross chief executive Rhys Holleran said in a statement that it was a solid result that demonstrated the "resilience of our diversified multi-market, multi-media business".
"The underlying business performed strongly with improved operating margins, strong cash flow and cash conversion and good cost control," Mr Holleran said.
Television revenues rose 4% in the half, Mr Holleran said, while radio revenues were up "close on six per cent".
Southern Cross Media (formerly known as Macquarie Media Group and still 25% owned by Macquarie Bank), owns 14 regional free-to-air television licenses across South Australia, the Northern Territory, Tasmania, Queensland and NSW.
It also owns 68 commercial radio stations.
Mr Holleran said Southern remained "cautiously optimistic for the full year".
Southern Cross said it expected to lodge a bidder’s statement on its takeover offer for Austereo Ltd with the Australian Securities and Investments Commission on or before next Monday, February 28.
Southern Cross launched its $2 per share (valued at $741 million) bid for Austereo on January 31.
Austereo directors have recommended the offer to shareholders in the absence of a superior proposal.
