It has been a very disappointing day of trade for the Southern Cross Media Group Ltd (ASX: SXL) share price.
This morning the media company's shares fell as much as 23% to 88.5 cents.
Why are Southern Cross Media shares crashing lower?
Investors have been heading to the exits in their droves today after the media company released a trading update.
According to the release, media markets have been weak during the first quarter. As a result, its revenue for the quarter ended September 30 was down 8.5% on the prior corresponding period. This was driven by declines in both its audio and television segments.
One small positive is that management advised that it believes it has consolidated the advertising share gains achieved in the prior corresponding period and is currently trading in line with media markets.
Another positive was that its first quarter operating costs were $1 million below the prior comparable period. This includes one-off restructuring costs of $1.5 million related to the outsourcing of transmission services.
Management advised that cost discipline remains a core focus. A series of actions have been taken to mitigate full year costs in response to adverse market conditions. The majority of these savings will be realised in the second half.
EBITDA for the first half is expected to be in the range of $60 million to $68 million, before adjustments for AASB1. This compares to its underlying EBITDA of $82.9 million in the first half of FY 2019.
Looking ahead, management tried to ease the concerns of shareholders by reminding them that advertising markets remain short and volatile. In the meantime, Southern Cross Media will continue to focus on maximising its market share while maintaining strict cost control across all divisions.
This news has weighed heavily on the shares of rivals Nine Entertainment Co Holdings Ltd (ASX: NEC) and Seven West Media Ltd (ASX: SWM). They are down 5.5% and 3.5%, respectively, in late morning trade.
