Macquarie radio profits slide 77% with contract costs and Fairfax merger blamed
Macquarie Radio Network has suffered a steep profit decline, down 77 per cent to $900,000 it was revealed in the company’s half-year financial results, with chairman Russell Tate pointing to costs associated with the planned Fairfax Radio merger as a factor.
The company, which broadcasts stations 2GB and 2CH, had an underlying net profit after tax was down 41 per cent to $2.2 million, despite total revenue for the period July to December 2014 was up 2 per cent on the previous corresponding period to $29.9 million.
Tate flagged the lower profit result in an earlier statement in January saying the result largely due to costs associated with the Fairfax Merger, which if approved by the regulator will be completed in late March, while a relaunch of 2CH, the renewal of hosts such as Alan Jones contracts and costs associated with broadcasting the Commonwealth Games last year were also cited as factors.
He added that the company would continue to incur one off costs as a result of the merger and did not expect an improvement until 2016.
The renewal of multi-million dollar contracts for talent such as Alan Jones has been partly blamed for a steep decline in Macquarie radio’s profits.
“Macquarie Radio’s 2015 earnings will obviously continue to be negatively impacted by the steps and costs leading up to, and immediately following, the merger,” he said in the results statement.
“But, I am confident that the merged entity, which Macquarie Radio shareholders will have an initial 45.5 per cent shareholding, can reach substantially higher earnings during the 2016 financial year based on cost synergies alone.”
Fairfax Radio assets were down in revenue 1.5 per cent to $53.7m, with earnings down with an $8.8m EBITA the company revealed today.
Macquarie’s shares were trading at $1.00 this morning, down almost 5 per cent on the previous days close of $1.05.
Robert Burton-Bradley
Revenue up and profits down 77%….how much does a merger cost. In most business it generates share price growth in the anticipation of greater future revenue and savings from day one. Does not add up at all.
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I suspect that many elderly, loyal 2GB listeners are becoming tired of the station’s continuous backing of government policies that, if brought in, will hurt their incomes, especially pensioners. The shock jocks will be in a quandary.
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Seems like a typical Fairfax deal.
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Paying their shock jocks more than they are worth. 3AW will be the cash cow once the merger goes through
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