SCA’s profit falls 21% after ‘under-performance’ of 2Day FM breakfast

Southern Cross Austereo’s revenue for metro radio fell 3.0% to $121.4m in the first half of the 2018 financial year, with the company citing the struggling Sydney breakfast show as the reason for the decline.

Overall NPAT [net profit after tax] also fell 21.2% from $48.5m in the first half of FY17 to $38.2m, the company said in an ASX update today.

SCA: Working to improve its balance sheet

EBITDA [earnings before interest, tax, depreciation and amortisation] for metro radio was also down 12.3% from $30.9m compared to the end of the first half of FY17 to $27.1m. Overall EBITDA also fell 15.7% from $347.8m to $324.8m.

The company’s overall revenue in its statutory results was $333.3m, a 5% decline from the prior corresponding period’s $351.8m.

The results were impacted by Southern Cross Austereo’s divestment of its northern New South Wales TV assets, the company said. In May last year, SCA sold its northern NSW TV operation to Bruce Gordon’s WIN Corporation for $55m. The move improved SCA’s balance sheet, which was previously carrying a net debt of $347.8m.

The latest statutory results show SCA’s net debt has now fallen 6.6% to $324.8m.

If the divestment is excluded from the results, group revenue was up 1.3%.

SCA CEO Grant Blackley said the results reflect the culmination of two years of heavy lifting to improve SCA’s balance sheet.

“With the systematic divestment of non-core assets including the northern NSW TV licence and the 45 transmission towers, the company has successfully reduced debt and leverage to improve the company’s financial health, laying the foundation for a successful refinancing of our debt facilities and accompanying reduction in finance costs.”

The contraction in metro radio revenues was attributed to the “lower than expected market demand (weighted to Q1) and under-performance of 2Day FM breakfast”.

Last year, the Sydney breakfast show on 2Day FM was hosted by Em Rusciano and Harley Breen. In the last radio survey of 2017, the show fell 0.4 points to collect an audience share of just 2.9%.

Breen announced his departure from the show in November, with comedian Ed Kavalee joining as his replacement. Soon after, Grant Denyer was added to the line-up in what is now known as the Em, Grant & Ed Show.

The new 2Day FM breakfast line-up: Ed Kavalee, Em Rusciano and Grant Denyer

2Day FM is yet to recover from the defection of breakfast hosts Kyle Sandilands and Jackie O to launch Kiis FM in 2014.

The financial results are for the six months to 31 December 2017, so do not include the performance of the new show, and the first radio ratings of the year will be released on 13 March.

Blackley flagged SCA is still looking to improve the show.

“We re-iterate our commitment to improving 2Day FM breakfast. Most recently we have expended the line-up and broadened the 2Day FM music format. The seamless transition from Hamish & Andy to Hughesy & Kate on the Hit Network and the addition of Kennedy Molloy on the Triple M Network has strengthened our national drive formats,” he said.

The metro radio contraction was also due to the Triple M network’s revenues being hit by lower cyclic investment in male-skewed briefs, such as automotive, energy and banking, the update said.

Employee costs for the network climbed 4.5% from the first half of the 2017 financial year, from $34.4m to $35.9m. SCA said this included the launch of Mick Molloy and Jane Kennedy’s drive show on Triple M, replacing Merrick Watts.

The company has also been investing in regional radio, which Blackley said had paid off.

“Our investment in rebranding regional radio stations, increasing the number of regional radio surveys and educating media and advertisers about the benefits of regional audience has paid off – with revenue from national advertisers in regional markets rising sharply by 12.8%.”



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