Uneven ad spend recovery as ASX-listed media companies report financial results

Seven West Media, Nine, Southern Cross Media Group and oOh!Media results show ad spend is recovering but it’s not uniform across all areas

ASX-listed media company results show ad spend is recovering faster than expected, but it’s not uniform. In line with easing lockdowns and digital-first consumer behaviour, but continuing travel restrictions, some areas of ad spend are recovering better than others.

ASX-listed Seven West Media (SWM) confirmed strong recovery in ad spend for the second-half of 2020, with revenue of $644.2 million. This was however down 9.9 per cent on the prior corresponding period, driven by lower broadcast TV revenue and a decline in third-party productions and program sales.

“Seven is set up to benefit from the recovery underway in the advertising market. Our new content lineup is drawing larger audiences and improving the demographic mix in prime time. We are determined to monetise those results in 2021 and are targeting a material increase in revenue share,” said SWM MD and CEO, James Warburton.

Despite these softer numbers, statutory net profit after income tax was $116.4 million and underlying net profit after tax (excluding significant items) was $86.6 million, an increase of 26.5 per cent on the previous year. Driving this was cost savings from SWM’s major transformation initiatives and temporary cost savings related to the impact of COVID-19.

For SWM, underlying EBITDA of $165.7 million and EBIT of $151.7 million increased 24.4 per cent and 29.4 per cent respectively against the corresponding period in 2019. Looking ahead, SWM TV advertising is expected to remain strong, although for the network it’s still too early to predict the ongoing impact of COVID-19 later in the year.

“Our digital transformation can be seen in the success of 7plus, which has had a phenomenal year. Its revenue was up 79 per cent in the period versus market growth of 44 per cent,” said Warburton.

Free-to-air and BVOD spend rises

In other network results, Nine also benefited from a rapidly improving ad market at the end of last year, driven by both free-to-air and BVOD TV. For the second-half of 2020, it reported revenue of $1.2 billion, down 2 per cent for the half, and net profit of $182 million.

After a September quarter decline of 14.3 per cent, the metro free-to-air ad market grew by 16.6 per cent in the December quarter, combining for growth of 0.6 per cent across the half.

Nine’s broadcast TV division comprises Nine Network (FTA), 9Now as well as Nine Radio, which together, reported EBITDA of $207 million on revenues of $622 million for the half. Group EBITDA of $355 million equated to growth of 42 per cent on the first-half of the 2020 financial year, with operating conditions gaining positive momentum across the half-year. Net profit after tax and minority interests was $178 million, up 69 per cent on the previous corresponding period.

Nine Entertainment CEO, Hugh Marks, said the business has weathered the volatility caused by the pandemic. “We acted swiftly when circumstances changed, whilst continuing to embrace opportunity and remain true to our vision of building Australia’s leading cross-platform media business,” he said.

In these latest six months, Stan and 9Now, together with the digital components of Domain and publishing, grew by 53 per cent to more than $140 million and equated to 41 per cent of its total EBITDA.

“The lessons we have learned from COVID are clear. Our focus on strict cost efficiency at our traditional media assets delivered the profitability we were targeting. And continued investment in our digital businesses is delivering strong digital profit growth. Together, enabling us to continue to migrate the business to a more flexible, digital-base,” said Marks.

For Southern Cross Austereo Group, it’s a more restrained recovery story, with ad revenue recovering at pace, led by stronger national advertiser spend in multiple categories. However, it posted a 15.9 per cent drop on revenue at $259.2 million against the corresponding period, with EBITDA of $75.3 million, up 11.5 per cent on the prior year and NPAT of $32.5 million, up 59.3 per cent on the prior year.

The group cut expenses by $56.7 million, reflecting operational cost savings, coupled with temporary government support (JobKeeper $31.9 million and PING2 $3.4 million).

SCA has invested in new metro radio shows and marketing to boost network audiences and group revenues and has seen strong growth in digital audio revenues and its power ratio for TV grew to 1.11 versus 1.09 in the second-half of the 2020 financial year.

At the same time, SCA’s digital transformation is accelerating through the launch of LiSTNR, its digital audio network of radio, podcasts, music and news. For SCA, LiSTNR will provide a platform to accelerate digital audio revenue growth, this ad revenue base is well established and delivered 59 per cent year-on-year growth, despite adverse economic conditions.

SCA expected ad markets to continuing improving towards, with third-quarter revenue forecast to be between just 6 per cent and 8 per cent below the prior corresponding period.

“We are reaping the benefits of the steps taken to streamline our television business in recent years. With a higher proportion of variable revenue-related costs and significantly reduced employee costs in the period, our television EBITDA was $19. 5 million, 38 per cent higher than in the prior corresponding period,” said SCA CEO, Grant Blackley.

“LiSTNR is at the core of SCA’s digital-first operating model, efficiently deploying smart technology to create, distribute and commercialise premium audio content. LiSTNR will combine transparent audience measurement with real time insights about listener routines, needs and preferences, enabling advertisers to deliver their brand messages to addressable and targeted audiences at scale,” he said.

It’s also been a mixed recovery story for oOh! Media, which saw a strong pick up in revenue across key outdoor formats in the final quarter of 2020 and that has continued into this year as people movement restrictions have eased. Revenue declined by 34 per cent to $426.5 million for the calendar year 2020. Underlying EBITDA was $63.2 million in 2020 compared to $139.0 million in 2019.

oOh! reported a net loss after tax of $35.7 million for 2020, although there was a significant revenue recovery and the final quarter in 2020 was 70 per cent of 2019 revenue for the same period, and which compares with just 57 per cent in the third-quarter of 2020 against the same time in 2019.

However, the recovery in outdoor wasn’t consistent across all areas. Road, retail, street furniture and New Zealand outdoor markets recovered better, with revenue in the final quarter for retail and NZ over 90 per cent of the same corresponding quarter in 2019. The recovery has continued into 2021, with total revenue for January 2021 pacing at 80 per cent of January 2019 levels.

In a sign of potentially further recovery, road, retail, street furniture and NZ revenue levels for January 2021 were close to the same as January 2019 revenue levels. Given flight restrictions, fly and locate locations continue to be impacted by significantly reduced passenger numbers and CBD audiences.

While the unprecedented restrictions on people movement hit outdoor ad audiences severely, oOh undertook a $167 million equity raising, refinancing of debt facilities and negotiation with property partners to deliver $63 million in net fixed rent savings.

“The company remains focused on margin growth through the recovery cycle by achieving rent reductions beyond 2020, delivering structural cost savings approaching $10 million annual run rate achieved at the end of CY20 and remaining disciplined on capital expenditure,” said oOh! CEO, Cathy O’Connor.

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