Southern Cross Media has announced its financial results for the year ended 30 June 2022 as well as the departure of the group’s CFO of eight years Nick McKechnie.
CEO and MD of Southern Cross Austereo Grant Blackley told B&T audio is in good health, consumption is rising, and we are well placed to be able to monetise this for our shareholders.
“Radio recovery is strong, and the industry is seeing record audiences at the moment. We enjoy being the number one for 25-54s across Australia. The maturity of digital audio is also happening at pace, and Listnr sits firmly in the middle of our business.”
SCA recorded underlying EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) of $87.9 million, up 2.8 per cent on FY21. Underlying net profit after tax of $27.4 million was up 38.4 per cent on FY21.
Benefitting from continuing recovery in all audio segments, SCA’s audio revenue of $392.9 million was up $33.1 million (9.2 per cent) on the prior year. Broadcast radio revenue grew by 9.4 per cent to $182.7 million in metro markets and by 6.4 per cent to $168.5 million in regional markets, while digital audio revenues grew by 35.2 per cent to $20.8 million. Underlying audio EBITDA of $86.7 million was 1.8 per cent up on the prior year, despite ongoing significant investment in maturing SCA’s digital audio ecosystem, LiSTNR.
LiSTNR crossed over 850,000 signed-in users with on-platform listening in the most recent six months growing 3.7 times to 2.7 million average monthly streams from 0.7 million average monthly streams in the same period in 2021.
Following the affiliation transition from Nine to Network 10 in the three aggregated markets, SCA’s television assets generated underlying EBITDA of $29.9 million, which was neutral compared to FY21. Television’s underlying EBITDA margin rose from 17.6 to 23.7 per cent, reflecting SCA’s operational efficiency and market leading sales power ratio of 1.09 in east coast markets.
SCA’s balance sheet continues to be robust, with healthy liquidity. Net debt was $78.5 million on 30 June 2022 and leverage of 0.95x EBITDA is well below the covenant of 3.50x.
Free cash conversion of 67.2 per cent reduced compared to earlier periods due to capital expenditure for relocation of the Melbourne office and unwinding of COVID-19 related tax and supplier payment deferrals. Free cash conversion is forecast to return to 90-100 per cent in FY23.
The result includes impairment charges of $178.6 million (net of tax) relating to impairment in the carrying value of radio licences, goodwill, and brands. The impairment reflects current economic uncertainty and an increase in the cost of capital globally. The result also included $0.8 million of charges relating to impairment of investments, restructuring costs and expenses associated with deferring refresh of SCA’s finance systems.
Television strategy
Following completion of a strategic review, SCA has concluded that value will be maximised by continuing to hold its television assets. Supported by SCA’s financial adviser, Grant Samuel, the review included engagement with several interested parties. Bids from these parties did not align with SCA’s valuation of the television assets.
Capital management
SCA will pay a fully franked dividend of 4.75 cents per share, representing 85 per cent of NPAT excluding significant items. This is at the top end of SCA’s policy to pay dividends of 65 to 85 per cent of NPAT. The dividend will be paid on 4 October 2022.
The Board will resume the current on-market share buy-back after release of these results.
Nick McKechnie Resigns
Nick McKechnie has given notice of his resignation as chief financial officer. The search for a replacement is underway and Nick will remain with the business until a replacement has been appointed.
SCA CEO, Grant Blackley said: “Nick has made a significant contribution to SCA since joining as CFO in September 2014. He will leave the Group with a strong balance sheet and cashflow position which has enabled us to invest in our digital transformation strategy.
“On a personal note, I have valued Nick’s support and advice in my seven years as CEO, which have included the ongoing challenges presented by the COVID-19 pandemic. On behalf of the senior leadership team and everyone else at SCA, I wish Nick success in his new role as CFO of Gurner Group.”
Mr McKechnie said he had enjoyed his time at SCA. “After nearly eight years at SCA, I feel it’s the right time for a fresh challenge. I’m pleased to have been part of a collaborative leadership team at SCA that has built a constructive culture, and which has focused on building the capabilities and platforms to support the digital transformation of the business.”
With the assistance of Korn Ferry, SCA has commenced a search to appoint a new CFO and will make an announcement in due course.
