Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ARN Media Ltd (ASX:A1N, Financial) maintained a cumulative audience reach of 6.2 million people and remains the number one network in Sydney and Melbourne.
- The company's digital audio strategy saw a 9% growth in live streaming and now has 2.8 million addressable registered users on the iHeart platform.
- Total group revenues increased by 1% on a reported basis and 4% on a pro forma basis, reaching $168 million.
- The company declared a fully franked dividend of $0.012 per share, representing a payout of 70% of NPAT after significant cash items.
- ARN Media Ltd's regional radio and digital audio segments showed strong growth, with regional revenues up 15% and digital audio revenues up 26%.
Negative Points
- Net profit after tax (NPAT) was down on the comparative period due to higher depreciation charges and financing costs.
- Net debt increased to $86.8 billion, which is higher than the company's target range of 1 to 1.5 times EBITDA.
- The statutory reported profit of $5.4 million was down from the previous year, impacted by higher depreciation and interest costs.
- The company's Hong Kong Tramways contract underperformed initial expectations, affecting overall revenue projections.
- Operating cash conversion was impacted by transaction costs related to the proposed SCA acquisition and the working capital rebuild in Hong Kong.
Q & A Highlights
Q: Can you provide an update on ARN Media's metro market share and its performance relative to the market?
A: (Ciaran Davis, CEO) We have seen strong performance in Sydney and Melbourne, which has helped us maintain and slightly improve our market share. Despite challenging advertising conditions, our campaigns are resonating well with advertisers. Our sales teams are effectively responding to briefs and maintaining competitive CPMs without trading too hard.
Q: What are your thoughts on the gap between audio media consumption and ad budgets, and how can this gap be closed?
A: (Ciaran Davis, CEO) The growth of digital audio is becoming more appreciated in the market. We have invested in our digital audio platform, content creation, and tech stack to deliver solutions for clients. Our 2.8 million registered users, 60% of whom are addressable, provide valuable metrics in a digital trading environment. We are now looking beyond traditional radio share to include video and social budgets, offering a product that is tradable in a digital environment with measurable audiences.
Q: What is the long-term ambition for the Hong Kong business, especially after recent contract wins?
A: (Ciaran Davis, CEO) Securing the two contracts for bus body and tram advertising in Hong Kong allows us to rebuild share and scale in the market. While the business is not core, these long-term contracts are beneficial for valuation and provide a good foundation for future opportunities.
Q: What gives you the confidence to provide second-half revenue expectations for ARN Media this early?
A: (Ciaran Davis, CEO) The strong pipeline of briefing activity and contract clients gives us confidence. Although there is still uncertainty, the growth we have projected is achievable based on current activity and contract businesses.
Q: Have you seen any negative impact on bookings due to events like the Olympics?
A: (Ciaran Davis, CEO) The radio market performed well in June and July, and large events like the Olympics do not significantly impact radio. Therefore, we have not seen any special event-driven outcomes for radio.
Q: What are your options if the SCA transaction does not go ahead? Would you consider discussions with other media operators?
A: (Ciaran Davis, CEO) We are disappointed that the SCA transaction did not progress, but we have received inbound queries. We believe in the need for consolidation to compete with global tech for dollars and audiences. While we focus on the audio market, broader consolidation within the media industry is likely to be a topic of discussion in the near future.
Q: Will the recent Hong Kong contracts require increased CapEx in FY25?
A: (Ciaran Davis, CEO) The CapEx required for these two contracts is minimal, so there will be no significant impact on Cody's CapEx and growth.
Q: How much of the recent Hong Kong contracts were factored into the first-half revenue, and what were the early trading conditions?
A: (Ciaran Davis, CEO) The bus body contract performed above expectations, while the tram contract was slightly behind. We are seeing improved pacing for trams into the fourth quarter. Specific numbers will be provided later as our Head of Finance, Andrew Nye, is not available today.
Q: How much of the metro market share improvement was driven by the Kyle & Jackie O show launching in Melbourne?
A: (Ciaran Davis, CEO) The Kyle & Jackie O show launched in April, contributing two months of share growth. It is too early to expect them to go number one immediately. The show is new to the Melbourne market, and it will take time to build a loyal audience.
Q: How do you ensure future investment levels in digital audio given the competitive landscape?
A: (Ciaran Davis, CEO) Our license agreement with iHeartRadio covers platform development and BAU CapEx, reducing our need for significant investment. Most of our investments in content and sales teams have already been made. Future investments will be performance-based, focusing on expanding our sales teams to target digital budgets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
