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SCA adjusts earnings forecast citing ‘challenging and short’ advertising markets

Southern Cross Austereo has downgraded its expected earnings for this financial year, saying it now expects its earnings before interest, tax, depreciation and amortisation (EBITDA) will fall below last year’s $168m.

The news comes after the media group provided guidance at its half-year results on 31 December 2016 that EBITDA for the full financial year would be at the lower end of a range of $177m – $183m.

The earnings adjustment was revealed today to the ASX as the media group also announced it had executed the agreements for sale of SCA’s northern NSW (NNSW) television assets and operations to the WIN Television Network for $55m.

According to the statement, all necessary conditions are expected to be satisfied for completion of the sale to take place with effect from 31 May.

Proceeds from the sale – which includes $45m on completion and $10m on the first anniversary – will help to “further reduce leverage and financing costs, while enhancing future balance sheet flexibility”, the media group said.

Despite the sale, SCA noted the various challenged which have led to its EBITDA adjustment.

“While SCA continues to perform well in each asset class, advertising markets remain challenging and short,” the statement said.

“Metro markets have declined 2.2% over the period from January to April and are trading flat for the financial year to date. Regional radio markets continue to grow albeit at lower than historical levels. SCA has maintained or grown its commercial share in both sectors.

“Regional TV markets continue to be challenged and have declined further in recent months. The market has contracted by mid-single digits in the financial year to date and is forecast to deliver weaker revenue as the industry cycles over increased spending from last year’s Federal Election.

“SCA has achieved solid year-on-year growth in revenues following the switch to Nine affiliation along the eastern seaboard from 1 July 2016. Completion in coming months of the roll out of Nine’s regional news bulletins throughout Queensland will provide further revenue and ratings potential.”

SCA noted it had made a “concerted effort” to reduce net debt over the past 18 months and, “as a result of lower financing costs, trading NPTA [net profit after tax] is expected to show positive year-on-year growth”.

The new guidance on SCA’s earnings excludes the impact of the profit or loss on disposal of assets during the year – including the NNSW TV assets to WIN Television – “and the likely positive impact of the reduction in television and radio licence fees proposed in the Federal Budget“.

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