Prime Media warns regional advertising revenue to remain ‘depressed’
Prime Media reports a 56 per cent drop in first-half net profit, hit by rising operating costs and Big Tech competition.
Prime Media has warned that regional advertising revenue will remain depressed for the rest of the 2020 financial year after reporting a 56 per cent drop in first-half net profit, hit by rising operating costs and competition from technology giants Facebook and Google.
The embattled regional broadcaster, which boasts three media bosses as its top shareholders following Seven West Media's failed $64m takeover just before Christmas, said regional markets remain "challenged", with overall declines expected to continue until June.
Chief executive Ian Audsley described the past six months across regional Australia as "difficult", with regional TV ad markets coming under pressure as early as October with the Tamworth fires in northern NSW.
"Trading conditions have not improved in the current quarter and forecasting is difficult given the short trading conditions," he said in a scheduled announcement after the ASX close of trade on Tuesday.
Prime’s net profit slumped to $4.5m for the six months to December 31 from $10.2m, with revenue down 7.2 per cent to $90.8m. The group’s operating costs rose by 3.1 per cent, which included $1.5m in transaction costs associated with the proposed scheme of arrangement with Seven and a drop in costs of $805,000 from the introduction of new accounting rules.
First-half core profit after tax dropped 46 per cent to $5.5m, within market guidance. That is expected to climb to between $8m to $10m by the end of the financial year to June.
Mr Audsley said the Tokyo Olympics would be a key focus for Prime in the lead-up to the sporting event's broadcast in July and August.
"The Olympic broadcast has attracted significant interest from national advertising sponsors, with major advertising packages being negotiated.
"Local advertising markets continue to be influenced by local conditions and competition for local advertisers from platforms such as Facebook and Google," he said.
Billionaire businessman Kerry Stokes-controlled Seven bought a cornerstone 14.9 per cent stake in Prime on December 19, just hours after its proposed takeover of the regional broadcaster collapsed because of opposition from its two major shareholders, Bruce Gordon and Antony Catalano.
The deal resulted in Seven becoming Prime's biggest shareholder, giving it a seat in any future industry consolidation.
Mr Catalano, who bought Fairfax Media's former regional newspapers with billionaire investor Alex Waislitz last year, is close behind in second spot on Prime’s share register with a 14.57 per cent stake.
Mr Gordon, the chairman of regional media group WIN Corporation, is Prime's third-biggest investor with a 11.59 per cent shareholding.
Prime shares closed 3.3 per cent lower at 14c on Tuesday, valuing the group around $55m.
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