SCA issues warning in light of ‘volatile’ advertising market

Southern Cross Austereo (SCA) has issued an update to the ASX, noting weak media markets, and a short and volatile advertising market.

In light of the market conditions, SCA – which owns radio assets including the Hit Network and Triple M – said “a series of actions have been taken to mitigate full-year costs”.

SCA has had a tough Q1

The news comes at the same time as Commercial Radio Australia (CRA) reported commercial radio ad revenue was down 10.2% for the September quarter.

SCA said it expects its earnings before interest, tax, depreciation and amortisation (EBITDA) to be between $60m and $80m for the first six months of the 2020 financial year (1 July, 2019 to 31 December, 2019).

This includes one-off restructuring costs of $1.5m, and incremental operating costs of $2m relating to outsourcing transmission and television playout services when compared to the prior corresponding period.

Depreciation is expected to be $4m lower as a result of the outsourcing arrangement.

SCA noted the first quarter of the 2020 financial year had been tough.

“Media markets have been weak across the first quarter,” the update said. “SCA’s revenues were 8.5% adverse to the prior year in the quarter ended 30 September 2019, with declines in both audio and television segments. SCA believes that it has consolidated advertising share gains achieved in the prior corresponding period and is currently trading in line with media markets.”

Cost-control and reduction measures will be necessary, SCA said.

“Cost discipline remains a core focus, and a series of actions have been taken to mitigate full-year costs in response to adverse market conditions. The majority of these savings will be realised in the second half.

“Advertising markets remain short and volatile, and SCA will continue to focus on maximising its market share, while maintaining strict cost control across all divisions.”

In August, SCA’s full financial year results revealed a $91.395m loss, largely due to a write down of $226.9m relating to the value of carrying television licences.

Overall revenue was up 0.5% on the year prior. The audio segment of the business had a 2.3% increase in revenue (to $453.4m), but television revenues were down 3.2% to $206.558m.


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