SCA has flagged $40M to $45M savings in costs for the next year, and it is hoping to raise $169 million equity in fully underwritten funding in an effort to keep the company operating during the COVID-19 crisis.
The interim and final dividends for FY20 will not be paid, and the board expects that no dividend will be paid in FY21.
While SCA’s advertising revenue for the nine months ended March 31st is down by just 10% compared to the previous period in the last financial year, the company says the impact of the coronavirus could result in a 30% or more reduction on previous expectations.
SCA has told shareholders that $20 – $23M will be saved through salary and bonus reductions that include 10% pay reductions for all staff earning over $80,000 per year, as well as the cancellation of executive bonuses and mandatory annual leave.
The other $20 – $22M in savings will come from reduced marketing and programming spend, reduced or cancelled travel, entertainment, conferences and non-essential equipment upgrades, as well as relief from key suppliers and landlords.
These cost savings exclude SCA’s estimation of additional potential bad debt provision of another $5M in the second half of FY20.
SCA has also had good support from its lenders who have agreed to amend its Syndicated Debt Facility to increase the leverage covenant from 3.5x to 4.5x Net Debt/EBITDA from June 30, 2020 through to June 30 2021.
CEO Grant Blackley says “SCA believes these initiatives will provide the business with the balance sheet and a more efficient operating model appropriate to the current uncertain macroeconomic environment. The COVID-19 crisis is causing significant dislocation across advertising markets, but the fundamentals of SCA’s business remains sound. The initiatives announced today position us to trade through this crisis and rebound when toe recovery phase begins”