Southern Cross Austereo has downgraded its earnings expectations for the first half, as a tough ad market and poor ratings across television and radio weigh on the broadcaster.
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Departing chairman Max Moore-Wilton denied that Tuesday's downgrade was a signal to the market that the company could not compete without a merger with a television network, but said Southern Cross was "hogtied at the moment by the nature of [media ownership] regulation".
Following a tough start to the 2015 financial year, earnings before interest, taxes, depreciation, and amortization are now expected to be down 18 per cent to 20 per cent in the first half, compared with previous guidance of down by 10 to 15 per cent. During the first half of last year, Southern Cross reported EBITDA of $105.1 million.
The company said it now expects first-half revenue to be down 7 per cent to 8 per cent from the year-earlier period, compared with earlier guidance of down by 5 per cent to 7 per cent. In the six months to December 2013, Southern Cross reported revenue of $331.9 million.
Southern Cross Media shares plunged on the downgrade, finishing the day down 6.5 per cent at 86.5¢.
"The business is a tough business, it will go through cycles. We, and our affiliate Channel 10, are going through hard times," Southern Cross chairman Max Moore-Wilton said at the company's annual general meeting on Tuesday.
Current media regulations are preventing Southern Cross from adjusting its television business, Mr Moore-Wilton said, and the company is still working on turning around The Today Network radio business, which was mauled by the loss of Kyle and Jackie O to KIIS FM in 2013.
"I think hindsight is a wonderful thing. Would have are preferred to continue as the number one breakfast show in Sydney, unequivocally yes. But, that's life, we have to move on," he said.
Management will be putting a lot of time and money into turning around the Today Network, Mr Moore-Wilton said.
On November 1, 2013, Southern Cross announced the departure of Kyle and Jackie O by media release. The announcement pushed shares down 6.4 per cent on the day. The company was then issued with a price query by the Australia Securities Exchange to explain the price movement as the departure of the star breakfast duo was not announced to the sharemarket.
Southern Cross said that the number of stories written about Kyle and Jackie O may have led to the share price drop, but that the media did not take into account the rest of the business and that changes to the radio schedule occurred regularly.
At Tuesday's AGM, when asked whether the decision to not announce Kyle and Jackie O leaving 2Day FM as market sensitive was wrong, Mr Moore-Wilton stated: "The market is always right."
"I'm not in the business of holding myself against the market. The market is always right, it makes its judgements. Kyle and Jackie O, we would have preferred not to happen, but it happened."
Chief executive Rhys Holleran said that the national market remains challenging with both TV and metro radio being impacted by a competitive ratings environment.
"Whilst the Commonwealth Games was successful locally, it has failed to attract much attention from our national clients and we are yet to see a sustained improvement in Channel 10 ratings from the incremental investment in special events and we continue to see year-on-year decline in our television revenues."
The media company avoided a spill of its board with shareholders overwhelmingly voting down a second strike against the media company.
Close to 98 per cent of Southern Cross shareholders voted in favour of the company's remuneration report. Last year, 31 per cent of shareholders voted against the remuneration report, deliver Southern Cross its first strike.
Mr Moore-Wilton, who will leave Southern Cross during the current financial year, when asked whether the company would look externally for his successor said the board would be "open minded."
The company had been lobbying shareholders to get support for the re-election of long-time director Leon Pasternak ahead of its AGM. Mr Pasternak joined the board in 2005. Mr Pasternak was re-elected with more than 82 per cent of votes cast in support of his return.
The election of the newly appointed board members, Robert Murray, Kathy Gramp and Glen Boreham passed with all three receiving more than 99 per cent of votes for their appointment.
In the year ended June 30, Southern Cross Austereo reported a $296 million loss, following $392.5 million non-cash impairment losses – related to goodwill and the value of its regional television licence assets.
