Shares in the Gina Rinehart-backed Southern Cross Media Ltd (ASX: SXL) are trading lower after the company said earnings would fall in a difficult trading environment, while it also announced massive staff cuts.
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Revenue under pressure
The company, which merged with Seven West Media earlier this year to create a media conglomerate that includes the Seven Network, Triple M in radio, and a number of other digital and audio assets, said group revenue for FY26 was now expected to be $1.86 to $1.87 billion, down from the previous guidance of $1.91 to $1.92 billion.
The company added:
Proactive cost management has partly mitigated the revenue shortfall. However, underlying FY26 EBITDA is now expected to be $185 to $190 million versus previous guidance of $200 to $220 million. Reported EBITDA is expected to be $190 to $195 million.
Southern Cross also announced a new, "significant", cost reduction program on top of its merger synergy activities, which it said had delivered savings of $30 million, in line with expectations and earlier than expected.
The company said:
Including those merger synergies, the expanded cost reduction program is expected to deliver annual run-rate benefits of $145 to $150 million upon its conclusion, offsetting future cost inflation and funding targeted growth investments. Subject to finalising consultation and other processes, the program will lead to 250 to 300 FTE leaving the Group before 30 June 2026, which will result in a FY26 restructuring charge of around $20 million.
The company also said it had reviewed the outcomes expected from its legacy television contracts and expects to raise an onerous contract provision of $65 to $75 million.
Southern Cross Managing Director Rohan Lund said of the measures:
We must reset our cost base to meet current market conditions and capture the full benefits of scale across our trusted platforms for our audiences and advertisers, now and into the future. Unfortunately, this means saying goodbye to some talented colleagues who have helped build our business. We are deeply grateful for their contributions, and we are committed to supporting them through this transition.
The company said its media assets were delivering strong audience outcomes, but the advertising market was challenging and had softened more than was expected in the fourth quarter, particularly in television.
The staff to be let go would largely be mid and back office and corporate staff, the company said.
Southern Cross shares traded as low as 55 cents on the news before recovering to be 4.2% lower at 56.5 cents.
Billionaire buys in
It emerged in late May that iron ore magnate Gina Rinehart had bankrolled the purchase of a 9.15% stake in Southern Cross Media by former Seven Network commercial director Bruce McWilliam.
Documents lodged with the ASX list Mr McWilliam as the owner of the shares, with Ms Rinehart's company, Hanrine Finance, holding a "security deed" – a loan agreement – over the shares.
Ms Rinehart has previously owned interests in Network Ten and Fairfax Media.
