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Macquarie Radio Network Limited reports full year results: What you need to know

Macquarie Radio Network Limited (ASX: MRN) recently released its full year 2015 results. Here’s what you need to know.

Macquarie Radio (MRN) is engaged in radio activities. The company owns a public relations and marketing communications agency, Map and Page and media websites, 2GB.com, 2CH.com and Rugbyleaguelive.

It also operates Sydney Radio Stations 2GB, 2CH and Regional Stations.

Its 2CH and 2GB shops provide a range of products, including binoculars, digital cameras, printers, cooking accessories and gifts

In addition, it has a podcast service, which provides downloadable interviews, highlight packages and whole shows.

On 30 January 2015, MRN completed the sale of its Perth-based radio station 96FM to APN News & Media Limited (ASX: APN) for $76.1 million. The business of Macquarie Regional Radio Pty Ltd is also being actively marketed and the sale is highly probable. Both businesses were therefore presented as discontinued operations.

On 31 March 2015, the group acquired 100% of the share capital of Fairfax Radio Network Pty Limited from Fairfax Media Limited (ASX: FXJ) in exchange for shares in Macquarie Radio Network Limited.

The proposed ‘merger of equals’ brings together Australia’s leading news-talk radio operations which occupy number one overall positions for ratings in Sydney (MRN’S 2GB) and Melbourne (Fairfax’s 3AW). The joint venture will also consolidate the operations of an additional five radio stations across Australia:  2UE (Sydney), Magic 1278 (Melbourne), 4BC (Brisbane), Magic 882 (Brisbane) and 6PR (Perth). As part of the transaction and due to regulatory requirements, MRN will seek to divest 2CH and Macquarie Regional Radio network.

As such, MRN’s Financial Statements included 9 months of Fairfax Radio Network Pty Limited results and 3 months of combined Macquarie Radio Network Ltd results.

Here are the highlights of MRN’s full year 2015 results:

  • Total revenues and other income up 15% to $97.467 million
  • Operating revenues up 14% on the prior year
  • EBITDA of $48.677 million represents a 267% increase on the previous corresponding period, largely due to a one off gain on sale of subsidiary 96FM
  • Underlying EBITDA, which excludes a net gain of $39.753 million in discontinued operations and significant items increased by 96% to $8.96 million (The improved underlying position was largely a result of the inclusion of three months of combined results following the merger on 31 March 2015)
  • Net assets increased by 20% (which is largely attributable to the addition of Macquarie Radio Network Limited assets effective from 1 April 2015)
  • Borrowings increased by 100% to $39.391 million with undrawn debt facilities of $10.609 million
  • Earnings per share (EPS) $0.39.
  • The net cash ouflows generated by operating activities of $1.803 million represent a 113% decrease

So what

MRN has a strong competitive advantage with News Talk stations 2GB in Sydney and 3AW in Melbourne taking out number one in both markets, according to the latest Gfk Survey 4 results.

MRN’s network of News, Talk, Sport and Music stations have a national reach of more than 2.284 million Australians (All People 10+) and a dominant share of more than 1.89 million of the influential (All People 40+) age group. The time that MRN’s audience spends listening to its stations continues to be almost double that of the nearest commercial competitor.

MRN Chief Operating Officer Adam Lang said: “A strong news cycle and a red-hot footy season, with the nation’s best NRL and AFL coverage, have seen both listeners and advertisers turn to our dominant network offering. We continue to be Number One in the two key markets of Sydney and Melbourne offering the best radio talent in the country as trusted sources of news, views, sport and information,”

“Macquarie Radio Network is the preeminent national information and entertainment network with Australia’s best radio and digital brands. We deliver the biggest over 40 demographic for advertisers through our ‘audience first’ strategy across News, Talk, Sport and Music. This is an audience no other radio company can match.”

What now

Earlier this year BRW magazine reported tough economic conditions have seen media agencies and advertisers return to the radio medium due in part to its cheapness.

According to Deloitte, commercial advertising revenue rose 5.03 per cent to $374 million for stations in the five metro markets for the first six months of 2014-2015. And industry sources believe ad revenue growth stayed on trend in February, at about 5 per cent.

Commercial Radio Australia claims more Australians tuned into live and local commercial radio throughout 2014 than ever before, with an average cumulative audience of 10.1 million people listening each week in metropolitan areas throughout 2014, up 4.13 per cent from 2013.

Advertising revenue for metropolitan commercial radio stations showed growth for the fourth month in a row in December 2014, up 2.64 per cent to $55.401 million, according to Deloitte.

Verdict

For me, even if media agencies and advertisers return to radio, MRN’s revenues, net profits after tax, earnings per share (EPS), and dividends per share (DPS), have all been erratic over the past 5 years. More importantly, I’m not sure what’s likely to happen following the merger with Fairfax Radio Network, and that’s why I’ll be watching from the side-lines.

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Motley Fool contributor John Hopkins has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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