The 2021 financial year: ‘It’s been a mixed bag’

Today marks the start of a new financial year, and the end of the first full financial year Australian Securities Exchange (ASX) listed companies have had dealing with COVID-19, closed borders, lockdowns and more. 

Here, the Mumbrella team takes a look at the highs and lows of the past 12 months for listed advertising, marketing, media and research companies.

For the most part the Australian economy has weathered the pandemic relatively well, thanks to unprecedented monetary and fiscal policy stimulus, and resilient consumer confidence. The Australian sharemarket went up 24% the past 12 months, however, not all businesses have bounced back from the turmoil simultaneously.

“It’s been a mixed bag, different parts of the media advertising pie have been doing different things,” says Martin Currie investment analyst, Patrick Potts.

“When you look at out-of-home and radio, we are not seeing the return of advertising dollars just yet. Out-of-home, in particular airports, are still struggling.”

Potts is one of many analysts who will be keenly watching the upcoming reporting season for corporates on the ASX, when they announce the FY2021 full financial year results. Martin Currie is one of Nine’s biggest institutional shareholders.

“Radio has not bounced back yet, particularly AM talkback radio, so that is something to keep an eye on.

“If you look at the individual categories of advertisers,  there are some that have returned, but there are some yet to. Banks for instance, their ad spend is still down. Travel and leisure is obviously still limited.”

Potts says that the multi-million dollar deals signed by various media outlets in Australia and tech platforms Facebook and Google have not yet been fully appreciated by equity markets, and investors.

“The deals that those media companies have done with the global tech platforms are key in terms of earnings growth,” he says. “And potentially opens-up other areas to further collaborate with those tech platforms going forward.”

The further advancement of broadcasters such as Nine and Seven into Broadcast Video On Demand (BVOD) and Subscription Video On Demand (SVOD) are also key factor looking ahead for those companies says Potts.

“BVOD and SVOD is changing the nature of the TV business, which had been structurally challenged for a long time. The shift in audiences to digital could reinvigorate the TV business. And what drives that is data. The ability to package-up and sell that data to advertisers is a new feature, traditional media companies have historically never had that capability before.”

Looking ahead, Potts says there is optimism in the market, with macro indicators, consumer confidence, business sentiment, and GDP all getting back to pre COVID levels. “I hope we get a more positive outlook for the advertising and media companies come the august results season,” he adds.

One of the main concerns for analysts such as him is the volume of debt some of the companies are carrying, and “if earnings have been cut, then that puts a lot of strain on balance sheets and the availability to service debt levels”.

“If there is no clear pathway to recovery then it prolongs that pressure.  Equity markets in that circumstance will pencil in an equity raising at some point to reduce debt levels. Company’s share price often get marked down as a result of that.”

However, not all debt is bad, according to Potts, who is also expecting more corporate activity in the sector. “Balance sheet pressure drives more corporate activity and that is something we will be looking out for.

Financial year 2021 in review

Domain Group Australia (DHG)

Domain  is a digital property portal and associated real-estate industry business, majority owned by Nine Entertainment Co.

Domain has seen a fairly similar trajectory in terms of share price over the past year, up 60.63% on this time last year. Similarly impacting Domain, the Australian housing market has seen a strong recovery, in turn affecting Domain’s business.

Domain’s share price peaked at $5.38 on 4 February, with key figures reported in the half-term FY results in mid February including revenue of $137 million, down 5.5%, EBITDA of $54.5 million, up 3.6% and expenses of $82.5 million, down 9.9%. Net profit was $19.4 million.

Share prices have fluctuated over the past few months, however sitting now at $5.06 it appears to be holding steady, at a large increase from this time last year.

In October, Australian Community Media signed a deal to go forward with realestateview.com.au in a joint venture, ending Domain’s deal with the brand.

Enero Group (EGG)

Enero is a global agency group, founded and headquartered in Australia, that houses agencies including BMF, Hotwire and Orchard. It started off the financial year reporting net revenue up 19% to $81 million in its half year results, ending on 31 December 2020. The operating EBITDA up 129.2% to $24.3 million on the prior reporting period

The group’s net revenue was up 19% to $81 million and operating EBITDA up 129.2% to $24.3 million on the prior corresponding reporting period. Australian operations saw an increased revenue growth of 6.6% and UK and Europe 2%, which was above expected. Revenue for Australian operations in the period was $32.7 million.

Enero’s stock price took a big jump on 11 February, when the half-year results were released.

International markets (USA and Europe) represented 60% of the group’s net revenue and 73% of the group’s operating EBITDA. Australia’s revenue contribution to the first half results was down five percentage points on the previous reporting period.

In March, Enero Group sold its interest in Frank PR as part of a management buyout by founder and chairman Graham Goodkind and managing director Alex Grier. This sale, according to CEO Brent Scrimshaw (who was appointed in May 2020), would provide capital for growth opportunities and acquisitions. In the same month, Enero announced the appointment of Carla Webb-Sear as its new chief financial officer.

Year-to-date share prices hit a high of $3.27 on March 31.

In June 2021, Enero Group announced Heather Kernahan as global chief executive officer of global technological communications agency, Hotwire.

Enero’s share price has been on the decline since late April, now sitting at $2.30.

Here, There & Everywhere (HT1)

Australian Radio Network (ARN) parent company Here, There & Everywhere (HT&E) ends the 2021 financial year in a much-recovered position, after the impact of the global pandemic and lockdowns saw the entity enter the year with a share price of $1.19 (1 July 2020).

As of 29 June, 2021, HT&E is trading at $1.66, having reached a post-COVID high of $2.10 on 17 February.

Ciaran Davis

At the company’s AGM in May, CEO Ciaran Davis noted that ARN performed ahead of the market last year and is showing signs of a further upturn.

Total revenues for ARN were down 2.5% in Q1 on the prior corresponding reporting period, but with revenues for April already up 53% year-on-year, HT&E had a sizeable upturn in Q2. While Davis has told Mumbrella on several occasions over the past 18 months the company, which formerly had significant out-of-home assets, will continue to consider further diversification, HT&E’s most recent move was to offload its 25% stake in mobile messaging software group Soprano Design.

iSentia Group Limited (ISD) 

Media monitoring company iSentia began the 2021 financial year reporting a 53.6% decline in earnings for the six months to December, compared to the previous corresponding period.

The group’s media intelligence revenue was $41.8 million for the period, a decline of 19.8% compared to the previous period, and $10.4 million less compared to H1 FY20. iSentia’s market capitalisation was down to approximately $13.34 million, according to the ASX with a share price of $0.068 to $0.070.

The company’s revenue for the first half of the current financial year was impacted by a cyber incident in October 2020, creating an estimated $4.4 million impact on earnings before interest and taxes, and $3.3 million in revenue, according to the financial report. That amount is expected to rise to $7-$8 million for the full financial year results.

Ed Harrison, CEO of iSentia

As a result of the cyber incident, CBA has reset iSentia’s banking covenants to 31 March 2022. “However, there is limited headroom in the group’s forecast covenant compliance, and a failure to meet its forecasts may result in a covenant breach,” according to the financial reports.

In June 2021, iSentia received a takeover offer from Access Intelligence, which is subject to shareholder approval, after 12 months of its share price and market value plummeting.

Access Intelligence is said to acquire 100% of the share capital in Isentia it does not already own at a price of A$0.175 a share. Under the offer, iSentia shareholders will receive A$0.175 per share in cash, this implies an enterprise value of A$67 million.

The shareholder vote is scheduled for 9 July, with the First Court Hearing Date scheduled soon after on 16 July. If all proceeds, the Scheme Meeting will be held on 17 August 2021 and the scheme implementation would occur on 1 September 2021.

With iSentia’s share price and market value plummeting, the company made six reduncadies and a number of staff changes to its commercial team as a result of the automation of client services, including the broadcast transformation program,” and as a result “some manual processing roles aren’t required”.

During the first half of financial year 2021, iSentia refinanced the bank loan facilities with the Commonwealth bank of Australia (CBA). This equated to a three-year $46.6 million loan facility including A$33.5 million amortising facility, a A$12 million revolving cash advance, a $1.1 million revolving working capital, letter of credit and bank guarantee facility and ancillary facility. Under the facility, iSentia is required to repay a principal amount of A$750,000 per quarter, with the first repayment due yesterday 30 June 2021.

In April, the iSentia board saw Abigail Cheadle resign as an independent non-executive director after just two years, replaced by Peter George, executive chairman of ASX-listed Retail Food Group and previously managing director of PMP Limited from 2012-2017.

News Corp (NWS)

News Corp Australia, the wholly owned subsidiary of US-based News Corp started off the 2021 financial year with redundancies, low ad revenue, a high profile board resignation, and an ASX share price of just over $17. However, things seemed to turn around promptly for the media company chaired by Rupert Murdoch later in the financial year.

In Q1 of the financial year, James Murdoch resigned from the board of directors, citing disagreements “over certain editorial content published by the company’s news outlets” as well as “certain other strategic decisions” as the reason for his departure.

In Q2 the media outlet confirmed a number of additional redundancies, following a year of print closures and redundancies across Australia, due to the implementation of a centralised business news desk as part of a move to restructure the company’s national business journalism.

By the end of 2020, things had started to improve, with the Q2 financial results touted as being “the most profitable quarter since the new News Corp was launched” more than seven years ago, by chief executive Robert Thomson.

After months of lobbying and appearances in front of senate committees, News Corp announced global news deals with both Google and Facebook in early 2021. The three year deals are set to deliver News Corp “significant payments” although exact figures have not been disclosed.

By Q3 of the financial year, Thomson had upped his earlier statements about the outlook for the company to state that the company was on a trajectory to have the most profitable year since its reincarnation in 2013.

Just prior to that announcement, the company undertook a AU$1 billion capital raising. News Corp said that it plans to use the net proceeds from the offering for “general corporate purposes, which may include acquisitions and working capital”.

The improved financial performance of the company has seen the share price almost double by close of business 30 June, to $32.19 after reaching a 12 month high of $34.33 in May.

Nine Entertainment Co (NEC)

Financial year 2021 was a busy one for Nine, with wheelings and dealings, a COVID-19 recovery and the departure of CEO Hugh Marks all taking place during the 2021 financial year.

As of 1 July, 2020, Nine’s share price sat at $1.28, but from August onwards the media company rode a slow but consistent wave of recovery. Marks announced his departure in November, before Nine eventually named Stan boss Mike Sneesby as his successor in March.

Sneesby new CEO at Nine

At the end of 2020, Nine reported a $182 million net profit for the first half of the financial year, a 79% leap, and $1.2 billion of revenue. By then, its share price had risen to $2.32. In March, Nine announced it was ending its regional affiliate deal with Southern Cross Austereo, striking a new five-year deal with WIN.

It has also since become the latest media outlet to sign commercial agreements with Facebook and Google, following the Commonwealth Government’s enacting of the News Media Bargaining Code. Nine’s share price as of 30 June sits at $2.87.

Ooh Media (OML)

Ooh Media, like many outdoor companies, experienced a tough start to financial year 2021, kicking off the year with a round of redundancies. That followed a significant downturn in the market thanks to lockdowns, and Ooh Media began the year with a share price of $0.98, which would continue to fall over the months that followed, reaching a low of $0.71.

Ooh Media CEO Cathy O’Connor

In late August of 2020, Ooh revealed that Nova Entertainment CEO Cathy O’Connor would be taking over as CEO from Brendan Cook, and O’Connor joined the business in early 2021. Cook would receive a payout of $903,000, while Ooh Media would go on to report that Q3 figures were 43% behind the prior corresponding period. It then reported a 34% revenue fall for CY20 to $426.5 million.

By the time its May AGM came around, a turnaround was well underway, with key formats hitting 75% of pre-COVID revenues. As of 29 June, Ooh shares were trading at $1.68.

Prime Media Group (PRT)

Much like the other media companies on this list, Prime Media Group took a significant hit in share price as the COVID-19 pandemic hit Australia throughout the middle of 2020. The company began the financial year with a share price of $0.09, with recovery beginning in September. The share price has since recovered to 2019 levels, and as of 29 June is trading at $0.22.

While other regional television networks including Southern Cross Austereo and WIN striking deals across the early months of 2021, Prime has remained relatively quiet. Prime, of course, still has 18 months left on its affiliate deal with Seven West Media.

After previously standing in the way of a SWM takeover of Prime, Australian Community Media’s Antony Catalano bought 19 million additional shares at $0.225 each, at a total cost of $4.245 million. The shares had previously belonged to Bruce and Judith Gordon. The Australian Communications and Media Authority approved the purchase in April, meaning ACM’s stake in Prime increased to 19.99%.

Pureprofile (PPL)

Research, data and insights and media company, Pureprofile, started off the 2021 financial year with a new CEO, Martin Filz, a significant amount of debt and a poor balance sheet.

What has transpired in the 12 months since has been significant, and has seen its share price jump from $0.005 at start of FY21 to $0.031 in May. As of yesterday it is sitting at $0.027.

As Filz told Mumbrella during a recent Mumbrellacast his first focus was to “remove the debt” and secondly to be “laser-focused on the core business” that is the data and insights, and media.

By September 2020, Pureprofile announced a re-launch of its media business Pure.amplify to be headed by Tasneem Ali.

By December, Filz and the board had undertaken a major recapitalisation worth $18.8 million and raised $3.5 million for future growth and investment. This was shortly followed by Q2 results, which revealed a record quarter for the company, including a 26% increase in revenue year-on-year to $8.2 million. Additionally, the results included a significant upturn in EBITDA, which was up 866% to $0.7 million.

By Q3, the company was reporting consistently good results, with a 25% increase in revenue year-on-year up to $7.1 million and an EBITDA up 150% to $0.506 million.

In April the company launched an updated Audience Intelligence Software as a Service (SaaS) product to provide clients with direct access to market intelligence and consumer trends.

April also saw Pureprofile launch an exclusive survey platform for Flybuys members. The platform Pureprofile Perks enables Flybuys members to earn points by answering surveys via their Flybuys accounts.

In the final quarter of FY21 Pureprofile expanded Pure.amplify into the UK. It has also commenced planning and development for the establishment of new consumer survey panels in Europe and Asia which are expected to drive further revenue and profit growth into FY22.

REA Group (REA)

REA Group’s ASX price has been steadily rising over the course of the past year. One year ago, the share price was listed at $104.19. As of 25 June the share price was listed at $168.10, a 59.52% rise, after peaking at $169.95 on 16 June, the day after the group acquired a 34% stake in Simpology, a company offering lodgement and digital mortgage application solutions.

Other major announcements relating to REA Group over the past year have included Chris Venter’s appointment as chief technology officer. The Australian residential property market has made a strong recovery as the pandemic has continued to ease.  In Q3 of FY21, REA Group revenue (excluding acquisitions) rose by 8% to $225.6 million as property prices hit record highs. The financial results for the quarter reflected the strong recovery of the Australian residential property market.

Audience highlights for realestate.com.au included 12.5 million monthly average visitors, hitting a record 13.5 million in the month of March. REA Group also revealed it remains intent on acquiring 100% of the shares in Mortgage Choice Limited.

REA Group is majority owned by News Corp with a 61% share.

Southern Cross Austereo (SXL)

Southern Cross Austereo (SCA) has certainly made a dramatic recovery since its share price fell significantly in March of 2020, where it stayed through to the beginning of the 2021 financial year.

After opening at just $0.18 on 1 July, and dipping even lower to $0.16 on 18 November, shares skyrocketed to reach $2.65 by 24 November.

The price has since settled, sitting at $2.05 as of 29 June. In H1 of FY21, SCA saw its revenue fall by 15.9% to $259.2 million, yet thanks to a significant reduction in its debt pile, reaching a new ‘historic’ low of $66.4 million, the company actually turned a profit in H1.

SCA is betting big that digital audio will continue to deliver results, launching its LiSTNR app in February – a place to house all its digital audio content including original podcasts, digital-only live radio shows and curated music-only stations.

The most recent market update saw SCA forecast its 2021 FY EBITDA between $118 million and $125 million, while net debt is forecast to be between $55 million to $65 million. After Nine ended its affiliation agreement with SCA, the company has since signed a two-year regional television affiliation agreement with Network Ten.

Seven West Media (SWM)

Much like its close competitor Nine, Seven West Media had a strong focus on slashing its debt pile during the first half of FY21. These plans were shared early on, last July, after the company successfully negotiated a new deal with its banks, releasing the pressure of its debt.

SWM CEO and MD James Warburton

By the end of 2020, SWM reported a net profit of $116.4 million for the half ending 26 December, reducing debt 42% to $329 million, with revenue down 9.9% to $644.2 million. SWM had started the year with a share price of $0.10 as of 1 July, 2020. As the media sector recovered in the back end of the year, so too did SWM’s share price, reaching a high of $0.58 in early 2021, and currently trading at $0.45 as of 29 June, 2021.

In 2021 Seven has pushed towards first party data, BVOD and CTV to boost ad revenues, launching data platform 7REDIQ and partnering with Magnite. In its most recent trading update, SWM updated its FY21 predictions, outlining that it now expects Underlying EBITDA to be between $250 million and $255 million in FY21, including temporary benefits outlined in H21 results. Net debt is expected to come in between $240 million and $250 million. In May, SWM finalised its news agreements with Google and Facebook.


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