‘Investment markets undervalue SCA’s business’: Sale rumours fly as SCA posts strong earnings
Southern Cross Austereo has posted strong full-year results during a twelve-month period in which it shed its television assets and recovered from a costly and fruitless takeover bid from its main competitor, ARN.
In terms of the company’s continuing operations — with its TV interests sold — revenue was up by 5% year-on-year to $421.9m. Underlying continuing operations EBITDA was $71.1m, up 34.4%, after excluding $11.8m in non-recurring restructuring costs.
On a statutory basis, which still includes TV up until its March/June divestment, group revenue was $491.3m, while reported EBITDA fell 21% year-on-year to $59.3m. The discontinued TV division contributed $2.8m profit in FY25, down from $6.5m in FY24, before being sold to Ten and Seven West Media.
In terms of continuing operations, net profits after tax have tripled, up from $4.5 million in FY24 to $15.1 million for the year ending June 30. The company has cut its net debt by close to $40m, slashing it from $107.5m to $67.6m.
Broken down into segments, SCA’s broadcast radio revenue saw a modest 2.8% leap, to $376.8 million, while its digital audio revenue jumped 28.8%, from $35 million to $45.1 million. SCA’s Listnr asset is now EBITDA cashflow positive, after just four years in market.
Expenses at broadcast radio stayed remarkably consistent — up slightly from $279.4m to $279.6m — with digital expenses falling from $46m to $43.1m. With corporate costs up by $4.6 million, the company saw a slight 0.5% rise in total expenses, which it puts down to higher commissions and increased costs for integrated audio campaigns – that latter of which it claims also adds to revenue.
The elephant in the room is the treatment of significant items, which were stripped out of underlying EBITDA as ‘non-recurring.’
For FY25, these include $9.4 million in restructuring charges, $400,000 in impairment of investments, and $2.4 million in ‘other’ costs, which are wrapped into the ‘non-recurring restructuring costs’ excluded from the EBITDA, and include redundancies.
More crucially, this also excludes the whopping $336.5 million writing down of SCA’s broadcast radio licences during FY24 — as well as $2.9 million in costs involved in ARN’s failed takeover bid in FY24.
Looking forward, revenue is forecast between $435 – $440 million, with revenue costs at approximately 20% of this. EBITDA is forecast between $78 and $83 million, with capex forecast to remain “at no more than $10 million” now that the regional TV assets have been shed.
SCA chief John Kelly said, during the investor call, that “with the successful divestment of our regional TV assets in FY25, our entire strategic focus is now on the audience that matters, successfully building upon the positive operating momentum within our leading radio and digital audio assets, led by LiSTNR, HIT and Triple M.”
The ‘audience that matters’, according to SCA’s slogan, is the lucrative 25-54 market – which the network covets and targets.
John Kelly
Kelly said his team is “re-energised by the delivery of our sustained improvement in our operating and financial performance – we know that a media company performs best when there is certainty as to the operating cost base and momentum with top line revenues.”
“For SCA, the operational leverage opportunity from a cashflow earnings upswing is demonstrable and significant and provides opportunities to both reduce debt and most importantly return improved dividends to shareholders in FY26 and beyond.”
The board has declared a fully franked 4 cents per share final dividend for FY25.
Over the weekend, The Australian reported that Nine was in talks to purchase SCA, following its sale of Domain. Interestingly, SCA highlighted its low market capitalisation — at just $157 million before the open of business on Monday — as being one of its main risks.
“Investment markets undervalue SCA’s business, especially as it transitions from its legacy broadcast operations to high growth digital audio operations,” the ASX filing reads.
“Despite the improvement in performance of the company, in the opinion of the directors, SCA’s share price does not reflect the underlying value of the company.”
SCA’s share price jumped by more than 18% following this morning’s investment call, pushing the market cap to over $187 million.
“The market reaction has been very strong to our results,” Kelly tells Mumbrella, moments after the investor call.
He notes that SCA has given a lot of market guidance over the past 12 months, in relation to the expectations around these FY25 results. “We mentioned where we thought our debt would go to. [That] we’d like to reinstate our dividend. We’ve now done all those things.”
And, he says, the market has “responded accordingly” to these results.
“I think if you look at the share price performance this morning, it’s clearly demonstrably evident that the market understand and appreciate and now can see, with their own eyes, the story coming to realisation, in terms of the results we’ve got today.”
Surprisingly, the Nine sale reports weren’t addressed during the questions portion of the investor call, with a caller named Roger instead broaching the possibility of SCA launching an “AI Kyle and Jackie O” onto its stations in order to compete in the Sydney radio market.
After sidestepping this question, as well as a follow-up asking if they plan to enter the talk-back radio market (this is not, Kelly stressed, the audience that matters) the call wrapped on a happy note, with Kelly thanking the investors, and looking forward to a fruitful 2026.
“As you can probably tell, we’re pretty pleased with the results,” he concluded.
Luckily, Mumbrella wasn’t willing to let the question of a possible Nine deal go unanswered. Kelly is quite forthcoming to Mumbrella’s probing, even while choosing not to comment “on any particular speculation” from the weekend’s papers.
“But what I can say is,” he continues, “for some time, myself and the board have commented that we believe that media consolidation is required in Australia.
“For some time on this transformation journey, our objective has been to be the best possible audio company in Australia, with very much a digital forward focus with the Listnr ecosystem.
“We believe we now are clearly the best audio company in Australia. And, if that means that there’s consolidation afoot in due course, then clearly we’ll consider that – because we think that is an important part of the opportunities for our network and our people moving forward.
“So we’ll see what happens. I think we continue to absolutely focus on our own business.
“But really, we’re mindful that consolidation may happen in the future.”
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