Southern Cross Austereo probably wins the prize for best in class in the ASX’s struggling media sector. It and Fairfax reported fairly solid net profits for the year to June 30, unlike rivals such as Nine Entertainment (see separate story) with a impairment driven loss, Seven West Media (ditto), and losses for News Corp (impairment again) and Foxtel a lower net income and losses on the Ten investment and Presto streaming service that was closed in the year.
The radio broadcaster and regional television operator revealed on Thursday that net profit jumped 40.5% in profit to $108.6 million. Underlying profit was up 21.5% to $93.8 million (it stripped out some small, profits and losses from asset sales). Fairfax Media earned a net profit of $83 million by way of comparison.
Nine reported on Thursday a $203.4 million full-year loss due to previously announced write-downs of assets including its free-to-air TV network and ending a big US production contract. Underlying profits was $123 million up from just over $120 million
The licence fee relief from the Federal government also helped Southern Cross in the year to June and will again boost earnings this year. Offsetting this will be a small spectrum licence fee to be paid annually.
Shareholders get a nice payoff – a 14.8% rise in full year dividends to 7.75 cents a share with the higher 4 cents a share final.
In its release, Southern Cross made it clear it was cutting its exposure to the free to air TV market (it is Nine’s regional affiliate) and was looking for other businesses.
One of these is expanding into the out-of-home market via a partnership with shopping centre owner QIC to provide content across digital screens in shopping malls.
The partnership with QIC will see it provide the audio visual content for digital screens across a range of shopping centres in Canberra, Toowoomba, Robina, Logan and Melton.
And as part of this push to lessen its exposure to free to air TV, Southern Cross sold its northern NSW TV business to WIN Corporation for $55 million – $45 million upfront and $10 million in the 2017-18 year, and received broadcast licence fee relief from the government.
Southern Cross also cut its debt by 18% to $321 million, which helped to reduce financing costs by 24%.
“In FY17 SCA has delivered on a number of our key objectives: further optimising our sales and improving the monetisation of our assets, and successfully transitioning our television broadcast business across to the Nine affiliation including rolling out fifteen new local regional news services,” CEO, Grant Blackley said.
"SCA continues to invest to improve our content and marketing with the introduction of new formats and the incorporating sixty four regional radio stations in the HIT and Triple M families."
Southern Cross topped its revised 2017 earnings guidance and lifted profit, helped by the government’s move to abolish broadcast licence fees.
The company, which operates Triple M and Hit Network radio stations and has the regional television affiliation with Nine, reported a 7.4% increase in revenue to $691 million for the year to June 30 and said it had saved $10.9 million from one-off items including the licence fee abolition.
The company in May had warned that full-year earnings would be lower than last year’s $168 million, but earnings before interest, tax, depreciation and amortisation came in at $177.4 million – up 5.8% and just inside its initial guidance range issued in December.
Regional revenue was up 10.3% to $382.2 million- radio revenues from regional areas climbed 3.3%, to $169 million while regional TV revenue jumped 15.8% to $213.2 million. Metro (radio) contributed $242.3 million to total revenue, up 2% and corporate revenue was up 24.7% to $17.8 million.
The shares ended steady on $1.32 after jumping 4% in early trade.
