Prime revenue falls 4.7% in tough market, but group posts profit of $7.83m

Prime Media’s revenue has declined by 4.7% for the 2019 financial year, down $9.4m to $191.86m from 2018’s $201.25m.

The regional TV broadcaster cited a soft ad market (particularly in the lead up to the federal election), ongoing drought, increased fees and the impact of Google and Facebook as reasons for the decline, but emphasised the positive impact of the Boomtown initiative and upcoming Tokyo Olympics.

Earnings before interest, income tax, depreciation and amortisation (EBITDA) was $38.47m, down 14.8%. Operating costs were down 5.9%, mainly due to reducing the number of key management personnel to drive down employee costs.

Net interest bearing debt sat at $9.6m as at 30 June 2019, which Prime said it expects to repay in full this financial year, while reported statutory profit after tax was $7.3m, up 159.9%. This statutory profit figure includes non-cash impairments of TV licences and other intangible assets of $14m, driven by a declining regional TV market and an increase in contracted program supply arrangements with the Seven network.

Impairment charges for the media group in the previous financial year were much higher, at $51.69m.

Prime’s reported results (Click to enlarge)

Net cash flow from operating activities was $22.5m, down 30%, which Prime attributed to a declining ad market, increasing fees under the new program supply agreement with Seven, and spectrum licence fees of $6.2m under the new licensing regime.

CEO Ian Audsley took home a total package of $1.523m, including a salary of $855,613 and a cash bonus of $330,000. Audsley said that July and August in 2018 were difficult for Prime, and it has limited visibility on second quarter results, but despite the difficult conditions, Prime’s sales team maintained an “industry-leading revenue share of 41.5% in a market that declined 4.1%”.

“Overall, the regional television advertising market is subdued. Revenue pace for July and August was behind that of the prior period(s), throughout September however Prime typically experiences a late run for placement within the AFL Finals series,” Audsley said.

“Discussions with advertisers point to an improvement in demand for Prime’s major markets throughout the latter months of this calendar year.”

He added that the ongoing drought and Google and Facebook have impacted the local TV ad markets, but Boomtown – an initiative by various media players to re-educate brands and media buyers about the value of regional consumers and the effectiveness of reaching them via regional media outlets – is a bright spot.

“At [a] local level, TV ad markets are soft and look challenged going forward with consumer confidence impacted by prolonged drought conditions and the arrival of tech giants Google and Facebook in what have traditionally been ‘local media’ advertising markets,” Audsley said.

“Despite these market gyrations Prime continues to have positive conversations with dormant and under-indexed advertisers off the back of the Boomtown initiative, which has introduced a number of new advertisers to Prime and seen a number of old friends return. We expect that, over time, Boomtown will deliver a growing shift of advertising spend to Prime.”

Ian Audsley Prime CEO

Prime’s CEO Audsley

On a call to investors, Prime said Boomdown isn’t “filling the holes” made by overall market conditions, but it is “mitigating some of those declines”.

Prime expects conditions to improve in the lead up to the upcoming 2020 Tokyo Olympics, but its forecast for the 2020 financial year is still impacted by a continued decline in regional markets and increased affiliation fees. It expects EBITDA to be $23-25m and core net profit after tax to be $8-10m.

Its dividend program has been suspended in order to focus on fully repaying its interest-bearing debt this financial year.


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