Regional radio steady earner on back of local advertisers – radioinfo was at the SCA half year profit announcement

At a relatively subdued meeting of the media Southern Cross Media, CEO Rhys Holleran and CFO Stephen Kelly announced that the company had made a net profit after tax of 45.1 million dollars. And that’s just for the first half of this financial year. Trouble is, it’s less than half (48%) of what it was last year. Still, its slightly better than what most pundits expected.

The question around the room that hung on most people’s lips was how much of that profit shortfall could be attributed to what was being euphemistically called the “UK Incident?”

The answer is about 3.6 million dollars all up. A huge amount of money as an extraordinary item, to be sure, but insignificant compared to the fall in revenue from SCA’s regional television assets.

TV contributed 72% of the shortfall. Radio just 29%.

It must also be noted that last year a tax benefit of $40 mil jumped in, coming from the purchase of radio and TV assets by Southern Cross which isn’t there this year.

In terms of maintaining revenue, the star performer, once again, was Regional Radio. Despite a soft advertising market it was down just 1.8% on last year while TV was lighter by a whopping 16.5%. Its no secret that as a TEN affiliate, SCA was suffering from some abysmal programming decisions that were out of its control. Mr Holleran told the meeting that his organisation was in the process of renegotiating its contract with the TEN Network and is confident that the program line-up going forward will improve the ratings and thus the revenue.

Meanwhile, Metro Radio which was down by 6.1% remained the biggest contributor to SCA’s coffers with revenue of 134.5 mil compared to television at 113.0 mil and regional radio with 84.1 mil.

The revenue mix beteen local and national perhaps offers some clues as to regional radio’s resilience. About 66% of it’s total revenue comes from local business and 25% from national brands. It is almost the exact opposite for metro radio while regional TV derives almost 50% of its revenue from national ads and 40% from local.

It’s not many CFO’s that can report a 52% slump in profit and do it with a smile on his face but Stephen Kelly (left) was bullish about the company’s prodigious cash flow and despite luke-warm optimism about the ad market in coming months was confident in the company’s ability to capitalise on future upturns and integration with new media platforms.

He said the company would continue to invest in talent but warned that while talent costs are contracted for the next few years staff wages and salaries will need to rise to retain top contributors.

In  terms of new revenue streams Mr Kelly pointed to a recent $1.2 mil campaign of which almost $900,000 was spent with SCA online and the rest on radio to “support” it.

Until very recently, stations were struggling to monetise the online component of campaigns but are now starting to see a real return. “A few more of this type of campaign over the year and it would make a positive difference to the bottom line,” said Mr Kelly.

Andrea Ingham, who was recently appointed to the role of National Sales Director agrees it’s all about the content. “When you’ve great content, as we do across many platforms, you’ve got something worthwhile to sell.”

Announcing Southern Cross Media Group’s first half year results Mr Holleran confirmed that underlying net profit after tax (NPAT) came in slightly ahead of expectations at $47.6 million dollars for the Southern Cross Media Group.

The company’s key highlights include:

• Underlying or Core net profit after tax $47.6m
• Interim Dividend payout ratio is 70% of reported NPAT at 4.5 cents per share
• Full year NPAT result expected to be between $90m and $95m
• Debt covenants will improve further by 30 June 2013

“We have had one of the most difficult twelve months in our history. Despite this, we have produced a result that has met market expectations through rigorous operational management.
“We are well positioned to take advantage of any upturn in advertising markets. Sentiment is on the improve in advertising circles and our talented and dedicated staff are fine tuned and ready to respond,” said Holleran.

Chairman Max Moore-Wilton, announced an interim fully franked dividend of 4.5 cents per share, a 70% payout ratio on the reported NPAT (66% on Underlying NPAT).