Korn Ferry hired in Southern Cross succession planning effort

Radio and television company Southern Cross Austereo enlisted a recruitment firm to explore the industry for its next chief executive as it grappled with a falling share price and industry-wide concerns the company is not positioned for growth.

Multiple industry sources, who spoke on the condition of anonymity because the process is confidential, said executive search firm Korn Ferry was enlisted by the Southern Cross Austereo (SCA) board earlier this year to help with succession planning for chief executive Grant Blackley, who has held the role since 2015. This is the first time it has hired Korn Ferry to do so since Blackley was hired.

Grant Blackley has run Southern Cross since 2015.Credit: Louise Kennerley

“SCA has performed a succession review of key executives each year for the last five years. This is the first year SCA has engaged Korn Ferry to assist in this process,” a Southern Cross spokesperson said. “This work includes advising about potential internal and external candidates for senior executive roles at SCA. The board has not briefed Korn Ferry or any other party to search for a new CEO nor for any other senior executive role.”

Multiple industry sources, who requested anonymity, said the role that was being discussed was the chief executive position.

Blackley, one of the media industry’s longest serving CEOs, has not been seen at several public events this year including the farewell of Commercial Radio Australia’s long-standing chief executive Joan Warner. Blackley is the chairman of the CRA. He also did not attend a meeting last month between the media executives and Prime Minister Scott Morrison, which included Nine Entertainment boss Mike Sneesby, Seven West Media boss James Warburton and Paramount co vice-president, Beverley McGarvey.

Southern Cross shares have fallen nearly 80 percent from when Blackley took the helm to when a capital raising was completed in May 2020. The company raised money $169 million by issuing new shares to support the company as it faced a significant hit to revenue caused by factors related to the COVID-19 pandemic. Shares in the $442 million company have fallen by 29 per cent since November 2020 when the company completed a one for 10 share consolidation.

The company, which owns regional television and the Triple M and Hit radio networks, is one of the last remaining ASX-listed media companies. It has not benefited from broader industry consolidation including the $4 billion merger of Nine Entertainment Co, the owner of this masthead, and Fairfax Media, the privatisation of Network Ten by Paramount (previously known as ViacomCBS) after it went into administration, or the more recent merger of Seven West Media and Prime Media Group.

Multiple industry sources previously said Seven was in advanced discussions last year with Southern Cross about a potential tie-up, but the talks fell through and a deal was struck with Prime.

But Southern Cross has also struggled with boosting radio ratings in key markets such as Sydney. Despite multiple attempts, the group has still not recovered the ratings loss it endured when Sydney breakfast radio stars Kyle Sandilands and Jackie ‘O’ Henderson left to join KIIS FM in 2014. During the most recent radio survey, its latest hosts Ed Kavalee, Erin Molan and Dave ‘Hughesy’ Hughes posted a 4.2 per cent share of total audience, compared to KIIS FM’s 11.3 per cent.

The company also suffered a financial hit when it switched television affiliate deals from Nine to Network Ten last year. Southern Cross’ main growth focus is through its digital audio offering, which is underpinned by audio streaming and podcast app LISTNR. But the revenue from this segment – up 40 per cent to $15.4 million in the last year – is much smaller than amount earned by traditional radio and television assets. Southern Cross expects this digital revenue to grow by 75 per cent to 100 per cent this financial year.

Blackley was CEO of Channel 10 for six years before he was fired in 2011. He became CEO of Southern Cross in 2015, replacing Rhys Holleran, who was blamed for the poor performance of the network after it lost Sandilands and Henderson.

Southern Cross net profit after tax fell 48.3 per cent to $16.8 million in the December half, while earnings before interest, taxes, depreciation and amortisation (EBITDA) dropped 36 per cent to $48.2 million. EBITDA, excluding JobKeeper and a Public Interest News Gathering Grant (aka PING) in the prior corresponding half, rose 16.3 per cent.

In a bid to entice investors, Southern Cross launched a $40 million on-market buy-back scheme funding it from existing cash reserves and debt facilities. It also reinstated its interim dividend and announced it had engaged Grant Samuel to assess strategic options for its business. Key shareholders – which include Allan Gray, Ubique Asset Management and Investors Mutual, believe the company is undervalued.

Shares in the group that trades as Southern Cross Media Group closed at $1.72 on Friday, down 1.2 per cent.

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