Ad spending turning the corner, say Southern Cross and HT&E radio chiefs

Australia’s major radio station owners have reported a big drop in earnings but are seeing signs of improvement in ad spending.

Southern Cross CEO Grant Blackley. Picture: Hollie Adams

Australia’s major radio station owners Southern Cross Media and HT&E are seeing some early signs of improvement in advertising spending as coronavirus restrictions start to ease following a big hit to revenue and earnings.

Southern Cross, which operates 98 radio stations across its Triple M and Hit Networks around the country, has reported monthly ad revenue has steadily improved from big falls in April and May of more than 45 and 50 per cent, respectively.

Chief executive Grant Blackley said all the data suggested the sharp ad spending falls in April and May has passed, adding that the second lockdown in Melbourne hadn’t had as big an impact as the early days of the crisis.

“So I would hope to think that the markets have effectively seen the worst, and that we will see a progressive improvement,” Mr Blackley told The Australian.

“That is subject to the health crisis and secondly, the way in which the government opens up the economy but all of those things at this point in time look promising.”

HT & E also said on Thursday that its radio business ARN, which operates radio stations KIIS, Pure Gold and The Edge, has also seen an improvement in trading in July. Trading was down 27 per cent last month, compared with a 46 per cent drop in the second quarter as some advertisers return as lockdown restrictions eased.

“At this stage, August and September are tracking similar to July”, HT&E said, adding that early signs suggest the trend could improve further into the fourth quarter if current COVID-19 restrictions in Melbourne moderate and aren’t tightened elsewhere.

Mr Blackley said the Morrison government had “displayed very strong leadership and effectively has done an outstanding job for business and all Australians” during the health and economic crisis.

“I think the JobKeeper was a welcome relief at a time of crisis for many employees and many companies”, he said, adding that the group was also grateful to receive $10m from the federal government’s $50m regional program PING.

Southern Cross reported a 37 per cent drop in annual underlying earnings to $93m, hit by an 18 per cent drop in revenue to $540.1m. Difficult conditions in the fourth quarter to June were primarily to blame for the falls.

It swung to a net profit to $25.5m, helped by a near 13 per cent drop in expenses. It also received $16m from the federal government’s JobKeeper wage subsidy. That compares to a net loss of $95.7m last year, hurt by impairment charges against its television operations.

Southern Cross also told investors that it doesn’t expect to resume paying dividends until the 2022 financial year after halting its dividend payments in April, alongside its $169m capital raising.

Mr Buckley described the group’s results as “credible”, given the “very difficult circumstances”.

HT&E booked a 49 per cent drop in first-half underlying earnings to $19.5m following a 29 per cent fall in revenue to $93m, and suspended its interim dividend to preserve cash during the crisis.

The group swung to an interim net loss of $59.3m, hurt by exceptional items of $61.7m including non-cash impairments in ARN and its Hong Kong outdoor ad business Cody Outdoor. That compares to a net profit of $13.3m a year earlier.

HT&E said it remains on track to deliver total temporary operating cost savings of between $11-$14m this year, before the current JobKeeper subsidy benefit of about $9m.

Southern Cross also announced that its chairman Peter Bush has resigned and will retire as a director at the group‘s annual shareholder meeting on October 30.

Mr Bush has been replaced by Metcash chairman Rob Murray, who has been an independent non-executive director with the radio group for nearly six years. The group has also appointed Carole Campbell to the board, with Leon Pasternak to retire at the AGM as previously announced.