Austereo profits slightly down in the face of new competition

Austereo’s revenue and profits declined in the first half of this financial year. The company’s interim results, presented today, show a drop of 5.4% in revenue and a 1.3% dip in profits.

Austereo recorded just over $128 million in revenue, compared with $135 million for the same period last year. Profit is $26.9 million.

CEO Michael Anderson says increased competition is responsible for the downturn.

Despite the decline in revenue, Austereo has contained costs and managed to post an interim dividend of 3.6 cents per share higher than last year’s 3.4 cents. Costs were reduced by 3.1% on the previous period.

The good dividend figures have been achieved “in the most competitive radio market,
marked by intensive marketing and new license launches,” according to Anderson. Despite new entrants, Austereo grew its key audience demographics, 18-39, 25-39 and 25-54.

Some of the most significant competition this year has been from Nova 1069 in Brisbane, according to Anderson: “The pattern we’ve seen is when a new station comes in it does enjoy success and that does have a revenue impact.”

The launch of new Nova stations in Brisbane and Adelaide, as well as Vega stations in Sydney and Melbourne are responsible for the decline in sales revenue.

The results presentation highlighted Triple M’s continued audience regrowth. Sales increased almost 13% on the Triple M stations and rates increased on the eastern seaboard. 2DAY Sydney lifted from the number 5 position at the beginning of the period to be back in the top three Fm stations by year’s end.

Anderson and Chairman Peter Harvie are confident “strong new programming and marketing” will drive the networks to further success. During the reporting period Austereo disposed of its 50% holding in mcm networking to focus on its core business.

Austereo is using its new media initiatives to “broaden client options and brand differentiation.” The company has focused its programming energy on a “clear brand differentiation in each market,” with the Today Network chasing 18-39s and the Triple M Network after 25-54s.

The Triple M network had the biggest revenue growth, up 13% with strong yield improvement, while the Today network suffered declining revenue, which was down 18% due to the launch of new stations.

Austereo has taken a number of initiatives to build excitement from advertisers and cross platform output opportunities, including: joining with a major music label to launch the first music based podcast; the expansion of podcasts to 60 per week, with close the 300,000 downloads per month; the development of Crank TV; and the creation of M-ville – new database technology with total on-air integration.

Anderson says: “Our multimedia strategy is central to our core business and it maximizes the rich and compelling creative content of our networks. We have already seen the success of multimedia, with our program of offering our best shows as daily podcasts, seeing their downloads rise from just a few hundred in July last year to almost 300,000 in December.”

Chairman Peter Harvie’s outlook is that the radio market will “remain short term and down.” Due to the current tight cost management approach, earnings per share have increased from 6.6 cents last corresponding period, to 7 cents in the past six months due to the Company’s share buyback capital management initiative which it completed in the 2005 calendar year.

While times are tight now, Harvie and Anderson believe that Radio is “extremely well positioned” because audience
increases demonstrate rising usage in the face of new
media growth. “The Radio industry will return to more stable conditions once the license expansion period is all over… Digital will bring value-add appeal to radio.”

Peter Harvie says advertising growth was slow in January but predicted the metropolitan radio market would grow at around 2% over the next six months. “The fundamentals of the advertising industry are there.”

Austereo shares closed 3.5 cents weaker at $1.62 after the interim dividend announcement.