The Southern Cross Media Group Ltd (ASX: SXL) share price price is up 2.94% to 17.5 cents in morning trade today. The jump follows the company’s AGM this morning and comes amid a broader upbeat in market trading today.
The company announced some negative news about its performance in FY20, which was already expected by analysts.
Highlights from Southern Cross’s AGM today
- The company acknowledged that FY20 has been a difficult year for Southern Cross, citing COVID-19 as the most significant factor affecting its performance.
- Full year revenue of $540.2 million was 18.2% lower than the prior year.
- Earnings before interest, tax, depreciation and amortisation (EBITDA) of $93.0 million was 36.9% below the comparable amount in the prior year.
- The metropolitan free-to-air radio advertising revenue decreased 25.3% year on year. Regional radio performed somewhat better, but was also down by 13.1% compared to 2019. In contrast, revenues from digital audio streaming and podcasting doubled to $7.1 million.
- The television business delivered EBITDA of $19.5 million which is 40.5% lower compared to prior year.
- The company emphasised the importance of digital radio and podcasts to its future plans, and will aim to divert its resources to these platforms.
Quick take on Southern Cross business
Southern Cross is a media provider that broadcasts programmed contents on free-to-air commercial radio, television, and online media platforms across Australia.
The company has 100 radio stations and 105 TV signals in both regional and metropolitan markets. It generates about 70% of its advertising revenue from radio and 30% from television.
Why the market has been tough for Southern Cross this year
Southern Cross’ business revolves around generating advertising revenue from marketers.
Advertising on free-to-air television has slumped significantly since the mid-2000s as advertisers follow eyeballs to digital platforms.
Although the radio industry is more stable, the same dynamics apply. Management admitted that listeners now have more choices especially with the increasing popularity of streaming services such as Spotify and Pandora.
At today’s AGM, chief executive Grant Blackley emphasised the urgent need for the government to review the current broadcasting regulations on free-to-air television in regional Australia. He noted that the current regulation “constrains the ability of incumbent operators to compete in the internet era”.
Analysts have often said that the advertising industry is highly cyclical and fickle. Advertisers spend big when the economy is booming, but might eliminate their entire marketing budget at the slightest hint of a downturn.
How the Southern Cross share price performed
The impact of coronavirus on Southern Cross has been severe, given the financial pressure that most advertising clients are under. This has been reflected in Southern Cross share price YTD.
The Southern Cross share price has declined by about 70% this year. It traded as low as 10.5 cents in March, before bouncing back to today’s level at 17.5 cents per share at the time of writing.
The broader ASX Communications Services Sector Index (ASX: XTJ) is down 10% YTD.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Motley Fool contributor Eddy Sunarto has no position in any of the 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 Scott Phillips.
- These 2 ASX small cap shares just hit 52-week highs – January 12, 2021 5:41pm
- Objective (ASX:OCL) share price continues its rise in 2021 after doubling last year – January 12, 2021 4:41pm
- New twist in 5G Networks (ASX:5GN) takeover of ASX-listed Webcentral – January 12, 2021 4:03pm