‘Incurred significant costs’: Failed SCA takeover eats away ARN’s first-half profits
Australian Radio Network has delivered a 4% revenue jump and a 10% increase of earnings, due to “resilient” advertising revenue in a struggling market. But the costs involved in the failed SCA takeover took a chunk out of net profits.
ARN’s group revenues increased by 4% on a pro forma basis and 1% on a reported basis, reaching $168.1 million, while EBITDA increased by 10% (on a pro forma basis), although it remained flat on a reported basis at $35.5 million.
However, EBIT declined by 5% “due to the commencement of the Hong Kong Tramways contract”, and net profit after tax decreased by 19% to $10.4 million, mostly due to the costs involved in their attempt to purchase SCA.
“It closed out at the end of the process, having incurred significant costs by all parties, so it was disappointing,” ARN’s CEO and managing director Ciaran Davis told Mumbrella on Thursday morning, regarding the consolidation bid.
“We firmly believe in the merits of the deal, but also of consolidation. We’re operating in an environment whereby, global tech is increasingly impacting audiences, increasingly impacting the monetisation of Australian media operators. I think Australia needs strong media operators and local voices.
“But the harsh reality is that it’s proving increasingly difficult to trade and connect with audiences and then trade advertisers. So being able to consolidate, offer a combined offering for audiences that is bigger in scale is something that’s really important, to combat that.
“There are obviously synergies around a combined operation, which we’ve identified, and our ability to go to market with that mass audience, with that mass regional and metro audience, with a network of very strong talent, is a very attractive offering.”
Despite the significant costs already accrued, ARN is still hoping for a positive result.
“We have had some inbound calls,” Davis tells Mumbrella. “There’s nothing to update the market on – but it’s important to reiterate that we do believe in the merits of consolidation.
ARN’s metropolitan network achieved a 21.7% audience share in Sydney, and 19.7% in Melbourne — the leader in both markets — while digital audio revenues increased by 26%, to $11 million – with iHeartRadio now serving 2.8 million registered users.
Regional advertising revenues were $52.8 million for the half, up 1% on the prior period, while ARN Metropolitan advertising revenues were down 1%.
ARN’s cost management is also “on track to limit total cost growth to between 2-4%,” delivering $6.5 million in “permanent cost savings” in 2024, with the aim of an additional $5-$10 million in savings across 2025 and 2026.
“ARN Media has delivered a competitive operational performance in 2024 despite the economic challenges faced by the Australian media sector,” said chairman Hamish McLennan.
“Critical to our performance were a number of key programs delivering increased and sustainable operating efficiencies, which are part of our $10 million annualised cost out program, ensuring we limit cost growth.
“These cuts reflect the tough environment facing Australian media. The industry needs market restructure and consolidation given the increasing pressures from global technology and media platforms and a government regulatory environment that has not kept pace.
“We have made no secret of the fact that we want to be part of industry consolidation and are very disappointed that our Indicative Proposal to acquire SCA was unsuccessful as it represented a compelling proposition for both ARN Media and SCA shareholders.
“ARN continued its ratings dominance in Australia with market leading results from our metropolitan and regional radio networks and the iHeartPodcast Network which celebrated a record milestone in June as the #1 publisher for the 50th consecutive time.
“We are also pleased that our digital audio activities are forecast in Q4 to be EBITDA and cash flow positive.”
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Nathan Jolly is the Features Editor at Mumbrella. He joined the team in July, 2023.
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