Southern Cross earnings, dividend slump as advertising bites

Tough advertising markets have put a hole in Southern Cross Media earnings and slashed its dividend.

Southern Cross CEO Grant Blackley. Picture: Hollie Adams

Southern Cross Media shares rallied after the owner of radio stations Triple M and Hit delivered interim underlying earnings in line with its guidance, amid a difficult advertising market downturn, as management targets further cost cutting.

Its shares jumped 13.9 per cent to 86 cents on Thursday, making it the biggest riser by percentage among the top 200 companies on the Australian bourse.

Investors were relieved that Southern Cross delivered on its guidance after the Kerry Stokes controlled-Seven West Media on Tuesday swung to a first-half net loss and cut its annual earnings guidance, stung by the ad downturn.

Southern Cross booked a 27 per cent drop in underlying earnings to $62.2m for the six months to December 31, hurt by tough advertising conditions, and in line with the company’s forecast last October. That profit warning, on October 15, had triggered a 24 per cent drop in the company’s share price to a five-year low of 88c, before it closed the day at 94c.

Chief executive Grant Blackley said Thursday’s announcement was a “pleasing result” against the backdrop of a difficult advertising market over the past year.

First-half revenue dropped 8.2 per cent to $308.1m, but its digital audio revenue jumped 140 per cent, which Mr Blackley said “will not only continue but potentially accelerate as we get into next year”.

Southern Cross said its capital expenditure for the year would be $6m to $8m lower than last year, due to the outsourcing of its broadcast transmission services and television playout, along with other cost initiatives.

The group also expects costs to be $5m to $10m below last year’s after accounting for increases of $8m in wages and other contracted costs, along with about $4.5m in incremental operating costs.

Southern Cross’s recent acquisition of Redwave from Seven West Media is forecast to contribute $2m to underlying earnings in the second half and earnings accretive.

Redwave’s eight radio stations in regional Western Australia will be rebranded within Southern Cross’s Triple M and Hit networks from March 16.

Despite the difficult ad market conditions, Mr Blackley was upbeat about the group's outlook.

“Audio remains an attractive platform for audiences and advertisers and is well positioned to benefit from improvements in media markets.”

Mr Blackley said total average audiences for metropolitan radio rose last year, while average time spent listening remained stable.

“Consumption of digital audio is growing strongly, providing opportunities for growing revenue through premium addressable advertising.”

Southern Cross will pay an interim dividend of 2.75c a share, fully franked, down from 3.75c at the same time last year.