The HT&E Ltd (ASX: HT1) share price is currently up around 7% after announcing an acquisition and revealing an update to its outlook.
HT&E describes itself as a leading media and entertainment business operating radio, audio and digital businesses in Australia as well as outdoor assets in Hong Kong.
Grant Broadcasters acquisition
HT&E has announced it’s going to buy Grant Broadcasters radio and digital operations for $307.5 million on a cash and debt free basis.
Grant Broadcasters was described by HT&E as a family-owned business, which is the leading regional radio broadcaster in Australia. HT&E’s Australian Radio Network (ARN) business is the number one metropolitan radio broadcaster in Australia.
The combined businesses will create a national broadcast network of scale made up of 58 radio stations and 46 DAB+ stations across 33 markets resulting in a presence in every state and territory in Australia.
Management believe this acquisition will unlock new growth markets and that it will provide the potential for “significant” digital audio expansion by accelerating the rollout of ARN’s established iHeartRadio digital audio platform into regional areas.
Grant Broadcasters had annual pro forma revenue of $100.7 million and generated $35.5 million of pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) in the 12 months to June 2021. The acquisition represents a pro forma EBITDA multiple of 8.7x and a pro forma earnings before interest and tax (EBIT) multiple of 10.3x.
Geelong Broadcasters Pty Limited and certain joint ventures are excluded from the transaction.
HT&E is going to fund this acquisition through its existing cash reserves, financing facilities and the issue of new HT&E shares. Approximately $238 million of this will be funded by cash and debt, while the rest will be funded by new shares issued at a HT&E share price of $1.93 per share.
This acquisition is expected to add 20% or more to earnings per share (EPS) on a pro forma 12-months to June 2021 basis. That’s before the synergies and one-off integration costs.
Trading update and outlook
HT&E also gave a trading update as part of the announcement. Updates can have an impact on the HT&E share price.
ARN revenue for the three months to September 2021 grew 17% on the prior comparative period, with “consistent ratings and a strong commercial offering” driving increased yield on certain key stations. October radio revenue finished up 8.1%, ahead of the broader radio market, up 6.1%.
Management revealed that forward bookings are “pacing well ahead” of the same time last year, and radio revenue is expected to finish up between 5% to 10% for the quarter with a strong comparative period in 2020.
HT&E was pleased to say that digital audio revenue continued to gain “strong” traction and now averages around $1.5 million per month, up from $1 million in the previous quarter.
ARN operating costs are expected to be between $2 million to $3 million above 2019 levels.
Soprano, a global communications solution for large enterprise and government that HT&E owns a stake of, maintained its “strong” financial performance for FY21.
Total revenue was up 25% to $93.9 million, gross profit increased 12% to $52.5 million and underlying EBITDA rose 23% to $27.2 million. This result was due to organic growth and the integration of the Silverstreet acquisition. HT&E said Sopranos’ performance in the first quarter of FY22 to September 2021 achieved budgeted growth and it’s on track to achieve its forecasts for the current quarter.
Cody Out-of-Home has 450 outdoor advertising panels in Jong Kong, the tram shelters on Hong Kong Island, as well as growing taxi body advertising.
Full year revenue is expected to reach HKD 120 million to 125 million – up 40%. It has returned to being cashflow positive on a monthly basis.
HT&E share price snapshot
In the last month alone, HT&E shares have gone up around 40%.
According to the ASX, HT&E now has a market capitalisation of $548 million.