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Southern Cross impresses investors

Southern Cross Media Group (ASX: SXL) announced a net profit after tax (NPAT) of $96 million today, slightly ahead of guidance and the prior year. The group declared a final fully franked dividend of 4.5 cents per share taking the full year payout to 9 cents. That’s a dividend payout ratio of 66% on reported earnings of 13.6 cents per share.

The operating environment remains difficult and the group conceded ‘on-air incidents’ affected metropolitan radio share and advertising revenues. A scandal erupted last December after two 2Day FM presenters phoned a London hospital impersonating the Queen and Prince of Wales. Short-term tomfoolery like this should not concern investors focused on the long-term though.

The group attributed a revenue decrease of 5.4% to underperformance in its television business. It signed a three-year affiliation agreement with the Ten Network (ASX: TEN) recently and will be hoping Ten’s ongoing makeover delivers improved results in terms of future audience and revenue share.

The group also looks set to benefit from regulatory change in the near future, with the proposed abolition of the audience ‘reach rule’ that prevents broadcasters reaching more than 75% of the population.

Foolish takeaway

The slight increase in net profit has given the share price impetus. The group continues to carry significant balance sheet debt however and needs to keep delivering positive results for a while yet.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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