Investment Matters

Southern Cross Media - a good result

Southern Cross Media released good results, showing earnings growth in line with expectations.

Overall, revenue was up 5.1% (a little better than expected) and EBITDA (earnings before interest, tax, depreciation and amortisation) increased 2.8% (a little less than expected, due to higher corporate costs).

Finance costs reduced considerably (-35.8%), thereby resulting in a net profit increase of 19.1%.  Actually, gearing reduced from 46% to 37%, and the company now considers its balance sheet repair (aka debt reduction) as complete.  The debt reduction was facilitated by cash generation of the business, proceeds from the agreement with the Australian Traffic Network and sale of non-core assets.

The dividend increased 12.5%, and we see further increases as likely given the lower gearing and strong cash flow that Southern Cross generates.

At a divisional level, Regional TV & Radio grew revenue 5.7% and earnings 14.3%.  Radio had strong advertising growth, assisted by solid audience survey results.  TV audience share improved, driving a 3.1% growth in revenue, with the new agreement with Nine expected to boost future revenue.

Metro Radio had good revenue growth (+8.1%), but earnings were (as expected) impacted by the ATN contract.

The outlook for FY-17 was good - EBITDA between $177m, and $183m.  This is an increase on 6-9% on FY-16, and it was viewed favourably by the market.

SC media