Reality has caught up with Prime Media Group (PRT), the Seven network’s regional affiliate in parts of Australia in the 2015-16 financial year.
Prime’s board, led by chairman, John Hartigan, the former News Corp Australia boss, have been forced to face up to the pressures sweeping through TV that has seen viewing levels fall, revenues drop, earnings under pressure and the outlook become clouded.
Like its peers and TV and cable, its the impact of new media forms, such as streaming video, the rise of social media and falling viewing levels and ad revenues – as well as viewing patterns which are diversifying.
Prime’s two trading downgrades during the year to June ending up being accurate warnings of sliding revenues and profits, and helped produce the impairment of the balance sheet values for its TV licences and goodwill.
Prime bit the bullet and written down the value of its TV licences and goodwill by just on $123 million as the outlook for regional TV broadcasting worsens. And in doing so the company became the last Australian TV network to impair its licence and goodwill balance sheet values.
Directors said of the impairment: “This adjustment reflects the impact of new and largely unregulated market entrants, increased competition in the form of global and national media platforms, and the comprehensive reach of the internet and streaming services, all of which impact regional television audiences, and revenues.”
But the most worrying part of the report yesterday from Prime was this comment by directors:
"In the 2015 calendar survey year, the Group’s total audience in the aggregated regional market of New South Wales and Victoria fell by 5.6% on the previous year. Viewers aged between 25 and 54 in this aggregated market also declined by 12.3% in the 2015 calendar year, which was the second consecutive survey year of double digit decline. Revenue in this aggregated market also contracted again, declining 6.0% in the 2016 financial year compared to a decline of 3.9% in the prior year.”
No other TV group has revealed data like this and it is bad news for the industry generally.
Prime said it "maintained its lead revenue share in the aggregated markets of 41.7%, however this was down 0.5 share points on the previous year. The Company’s revenue from television advertising in this market fell by 7.0% compared to the previous corresponding period.”
Revenue overall was down 7.7% to $238.8 million for the year to June 30, profit down 18.3% and earnings before interest, tax, depreciation and amortisation fell 7.7% to $55.4 million.
With the impairments of $122.9 million, the loss was just over $93 million. Toal dividend for the year to June was 3.7%, down from 6.8 cents a share for 2014-15.
And interestingly, after June 30, the company says it has outsourced its network playout facilities to a company part-owned by the ABC – and regional rival, WIN
"The Group has engaged MediaHub Australia (a joint venture between the Australian Broadcasting Corporation and WIN Television) to provide on-air operations services to the company. On-air operations in a television business augment the program feed with commercials, community service announcements and other materials, to create the complete schedule of content for transmission. It is a major component of television broadcasting. Outsourcing this function to a managed service is an established practice in the major and mature television markets of Great Britain and Europe, with impressive continuity of service outcomes,” directors said.
This isa big deal and shows how far prime is going to cut costs as revenues and profits fall. And, unlike Seven Network (which provides Prime with nearly all its programming) which forecast a 15% to 20% drop in earnings before interest, tax, depreciation and amortisation for 2016-17, Prime directors didn’t give earnings guidance for the first half, let alone the year. But they promised some figures closer to the AGM later this year.
Prime said it also paid of $13.3 million of debt in the year to June. It now owes $65.5 million.
Prime shares rose 1.7% to 29 cents.
