radioinfo speaks to SCA CEO Grant Blackley about the company’s full year financial results, cross platform strategies, 2 Day FM breakfast and whether Abbie Chatfield will end up on 2Day FM breakfast.
Financials
radioinfo: Your presentation shows underlying net profit after tax, up 38%, but revenue is down slightly, expenses are up and debt has increased. Can you explain the financial aspects of that.
Blackley: The first thing to note is the composition of our revenue, 80% of our revenue comes from our audio products which are owned and operated, and about 20% of our revenue comes from our television business, of which we take a portion of that revenue on the way through.
So you have a different contribution coming through at the revenue line. When we were with the affiliation of Channel Nine, we had much higher revenue and ratings than we do now with TEN. Nevertheless, what we have been able to deliver is a flat line in terms of the EBITDA. So some $200 million less revenue, but what we’ve seen is that we’ve been able to mitigate that with lower fees to our affiliate. So that’s that’s one of the changes.
The second change is that over the course of the last year we are cycling over around about $40 million of Job Keeper, which is no longer afforded to the industry and more broadly to Australians. To that end there was some trailings seen, but essentially we’ve cycled over that in terms of income coming through.
Our debt levels at the half year were $58 million. We’re now sitting at a debt level a little higher at $78 million. That’s purely because we have a buyback of our own stock. We think our stock is undervalued and we are using debt funded finance to buyback our own shares on the way through… The objective is to add more value for shareholders.
Buying back your own shares and then deleting those shares means that there is less shares available and in circulation in the marketplace, which means those who are holding the shares end up owning more of the company. On top of that. We’ve also resumed dividends… we are now paying a full year of 9.25 cents per share, fully franked, which is a very strong yield… an improvement in the payout to our shareholders.
radioinfo: So the objective is to add more value for shareholders?
Blackley: Most definitely. Buying back your own shares and then effectively deleting those shares means that there is less shares available and in circulation in the marketplace, which means those who are holding the shares end up owning more of the company.
On top of that. We’ve also resumed dividends so there is an improvement in the payout to our shareholders.
radioinfo: Let’s look at the audio division. Revenue is up, but audio expenses are up too.
Blackley: What you’re seeing is a number of things, coming from a locked down environment you’re seeing a resumption of normal behaviour and normal patterns of work. So naturally as people return to work, you end up returning to a level of normal discretionary costs… The majority of the development of the LiSTNR App is through our books as opposed to through CapEx. So there’s a range of different things impacting each.
We’re very pleased to say that we continue to put pressure on to ensure that we’re as effective and efficient as we possibly can be. We expanded our margin to 28%, so broadcast radio is recovering.
We’d like to see it recover at a faster pace to achieve that goal, what we need is the market to recover at a slightly higher pace. And we must remember in the last 12 months, we’ve had no state lockdowns in the first half of the year. We’ve had we’ve had major events in terms of the floods and rainfall across the East Coast. We’ve had major supply chain issues forced on the market, which has hit all of those SME market participants…
We have to take the first premise that radio and audio consumption is increasing, so we don’t have a consumption problem like many industries. Secondly, what we are seeing is that we are a cost effective medium with broad reach. And yes, we can be an inflation buster. So if more people are consuming our products, if more advertisers are aware of the need to be more critical and sometimes even frugal in the way in which they present themselves to market, radio is an extremely good option to actually improve the reach and have a greater share of the overarching pool of investment…
What you’re seeing is strong revenue growth and continuing recovery. We’re not yet back at a pre-COVID level, but we would hope that over the next 12 months that we’d be getting close to that benchmark on a more consistent basis.
Cross Promotion From Audio to TV
radioinfo: Do you run ads for your radio stations and LiSTNR on your regional TV stations? How is that valued across the company?
Blackley: Yes… in the last 12 months alone, we’ve provided ourselves $10 million worth of in-kind marketing support for the promotion of LiSTNR.
So there’s a lot of benefits from that perspective… how we unlock more value when we do use our own unsold inventory to fundamentally audio and radio on TV.
We’ve provided $10 million worth of in-kind marketing support for the promotion of LiSTNR, [resulting in] a very unique situation in the digital world, which is that half of LiSTNR’s users come from the regions and half of the users come from metro geographies. I don’t think you’d find too many places, too many different products and services in Australia that operate either at a global or domestic level that would have that balance between the two. The balance is there because of the weight of assets we have in radio and TV… In the last three years we’ve used around about $10 million per annum to promote LiSTNR and its predecessor PodcastOne in in-kind non-cash support.
Most major digital companies launching in Australia use traditional media because of its reach and its large scale audience… naturally, we’re tapping into that ourselves with our own inventory.
Digital Audio Strategy
radioinfo: In your presentation, you mentioned the digital audio strategy is to own your own destiny. Tell me about that philosophy.
Blackley: We think that our digital future is so important that we want to own our future… we want to own the house we live in. We don’t want to rent a house where you’re not directly in control of your future… you can be kicked out of a rental house. More importantly, if there’s something you need to do within the house, then you have to ask for permission.
We control our own destiny with respect to building what is now a world class product in LiSTNR and in doing that we can chart our own journey in terms of the style of content, the functionality, the scale that we wish to get to. We don’t have to ask for permission… we can grow at whatever rate we choose to grow it in the future… and we own the monetization, our own product and our own content. We don’t share that with any third party. This is the operating model within SCA moving forward, so that gives us enormous clout in the marketplace and it gives us enormous opportunity to continue to grow our revenues and our audiences.
2Day FM
radioinfo: What about 2Day FM, you have a problem there. What’s your strategy?
Blackley: With 99 stations around the country we are always going to have a problem somewhere. In regard to Sydney specifically, we are delighted with what’s been achieved following lockdown… we’ve seen 24% growth in audience across the SCA network and there is a higher rate of growth than that in our breakfast show at 2Day… we are pleased with that momentum.
We’re sitting here at a high in terms of breakfast audience… I have to go back to 2005 to see a similar number… but we have to work harder to get more time on platform, TSL. What we want is people spending more time with us… the cume is there, we’re at record cumes, but what we want to do is make it even more sticky. Dave and the team have got well laid plans for the next 12 months in that regard.
2Day has a cume of 858,000 weekly listeners in the survey released today. It rates 4.3% in the Sydney market.
Abbie Chatfield and Hughesy
radioinfo: Are you going to give us any hints to your plans. I’ve noticed that Hughesy and Abbie Chatfield are appearing together on various podcasts, on each other’s shows and on TV. Anything happening there for the future in breakfast?
Blackley: You shouldn’t read anything into that, but what you should read into all of that is the depth of talent that we have pre-existing and the depth of talent that we are introducing.
You will start to see a blurring between what is on demand content and what is broadcast content… we can move people back and forth across those platforms. Abbie is classic example She has come from a world of principally on demand content and she is now doing more broadcast work with us… we’re doing that across all of our talent… we’re willing to take risks with lots of different formats and talent to see what can achieve.