The listed Australian media sector took a hammering yesterday when the best performed of the handful of companies – radio and regional TV operator, South Cross Austereo warned of a sharp slowdown in revenue in the first months of 2019-20.
The update triggered a sell-off in the price of shares in Southern Cross (down 18.6% to 94 cents at the close), Nine Entertainment (down 6.4% at $1.745), Seven West Media (down 3.8% at 37.5 cents) while shares in regional operator, Prime Media were steady on 19 cents on low volumes.
Southern Cross warned that revenues for the first two months of 2019-20 were down 8.5% from the same period of 2018-19 in both television and radio.
As a result, it now expects first-half earnings before interest, tax, depreciation, and amortisation (EBITDA) to be between $60 million and $68 million, a 24% slump on the same period in 2018.
This includes $1.5 million in restructuring costs and $2 million for outsourcing transmission and television playout services.
Southern Cross reported EBITDA in 2018-19 of $147.4 million, down from $158.4 million in 2017-18.
A 24% slide in EBITDA, is sustained through the full year to next June would see the company report a figure around $112 million, placing pressure on employment levels and costs and dividends.
The company owns two national radio networks and regional TV operations (it is the regional affiliate for the Nine Network). The message from the update is that its regional TV operation is under pressure.
“Cost discipline remains a core focus, and a series of actions have been taken to mitigate full-year costs in response to adverse market conditions. The majority of these savings will be realised in the second half,” Southern Cross told shareholders this morning.
“Advertising markets remain short and volatile and SCA will continue to focus on maximising its market share while maintaining strict cost control across all divisions.”
Data issued yesterday confirm the impact of the downturn in radio ad spending.
According to Commercial Radio Australia, September quarter ad spending fell 10.2% (The survey is conducted by Deloittes). This includes agency and direct (organised by the stations) spending.
Every capital city recorded a fall in advertising spend with Perth and Sydney hit the most, down 15.9% and 11.4% respectively. Melbourne declined by 8.7%, Brisbane was down 6.7% and Adelaide fell 9.4%.
