Southern Cross Austereo (SCA) CEO Grant Blackley has called the group's substantial financial year profit announcement a “vindication,” but says the market still underestimates the power of regional markets across the media landscape.
Blackley was speaking to AdNews following what was the first full year profit announcement since he took up the CEO mantle in May last year. The result was substantial, with SCA reporting revenue of $642.3 million, a boost of 5.1% on FY15 and net profit after tax (NPAT) of $77.2 million, a boost of 19.1%.
We caught up with Blackley on what has worked so far in the group's transformation and what is next for SCA:
AdNews: You've been at the helm of SCA for a year now. What was the highlight of the results for you?
Grant Blackley: The result is a vindication of a set of strategies that the board and management put in place 12 months ago. We had a vision to reset the company, effectively through set of strategies that involved firstly, a reduction of debt and better capital management; secondly an improvement in content and improvement in ratings; thirdly the resetting of our TV affiliation arrangement which we've now executed; and most importantly, the monetisation of those existing assets that we've spent the most time and money on. And I guess the fifth one being the review of our corporate executive structure and how we operate. We've actually been able to achieve each of those items to a reasonable level of success and I think the results reflect those efforts.
AdNews: Is that work over now?
GB: As a company that always wants to strive to have better results, our work is never done, but in relation to capital management, we are at a level of debt that we're very comfortable with. That has given us a lot of financial security given the reduction of about $166 million in debt in the last 12 months. The executive team are very focused and we're very comfortable that we're substantially through if not completely through the realignment of the business drivers and effectively in some cases the talent that we've employed across the board so those two issues are substantially complete. In terms of content and monetisation, that will never end. We will always strive to improve our content and marketing, improve our audiences and monetise at a better rate, so that's just an ongoing development and that's the principal focus in the year ahead.
AdNews: SCA seems quite bullish on its outlook for its TV assets as a result of its new affiliation deal with Nine. Why is that?
GB: We have for 30 years had an affiliation with Network Ten in our primary markets, although we have also had arrangements over that term with both Seven and Nine. But The Ten Network's performance in the last five years hasn't been at its historical position. Effectively we see that naturally an affiliation with Nine offers us a great opportunity to gain audience and revenue and that's exactly what has occurred. It is a step change in that regard from where we've been. So are we bullish? Yes we are. We're bullish because we now know we have exposure to more audience and revenue.
AdNews: The long-tail trend for regional television markets seems to be a negative one. Do you see that having an impact on SCA and if so, what is being done to address it?
GB: We watch the marketplace as a whole in terms of regional audiences and we have seen some erosion of audience in the last 12 months. But that being said I think there are a set of strategies that will be employed over the next 12 months to positively call out the value of regional markets. There will also be a concerted effort in regards to television.
I believe there has been a slight swing and probably a bit of an over-swing towards revenue that is attributed to metro markets versus regional markets. Regional markets, we must remember, still have markets like Canberra, Newcastle, Townsville (etc). These are high population areas with high disposable incomes and some of those markets are bigger than Adelaide and Perth. But these markets are still categorised as regional. So I think it's worth the industry investing in calling out and noting the value of regional audiences and the economic wealth that comes from investment in those regions. I think both in radio and television will see increased investment in those areas.
By way of example SCA has actually led that in the last 12 months by lining up a number of new surveys in regional radio that hadn't been surveyed in 20 years. What we're providing is clear measurement in those markets which without a doubt will attract national advertiser attention. We now have a measurement profile there that hasn't been there in 20 years. That must at least provide a stimulus for those clients to look at those markets in a different way to how they had before.
AdNews: Turning to radio, you mentioned in the results announcement there would be a change in the marketing spend, with more investment going toward Triple M. Why is that and what impact will it have on the Hit Network's investment levels?
GB: We had a lot happening in the Hit Network in the last 12 months and deservedly they gained a higher share of the available marketing because of all of those initiatives. Going forward we will have a more balanced approach between our two brands. Therefore it will probably be more noticeable that we're spending money on Triple M which will be equal to that of the Hit Network.
AdNews: What is next on the agenda?
GB: The focus going forward is firstly to consolidate all of the gains that we've made in the last 12 months. Secondly, lean on those achievements to actually move the company forward even more. That will include continued investment in our existing brand in radio. Remember that 80% of our earnings comes from radio, so we will look to extend those brands into social, mobile and web related assets. I think we'll also turn our attention to adjacent markets that we can naturally migrate to with good confidence. That will be into digital radio, and podcasting and related platforms which I think is another overarching area of growth for the radio sector. So while we say we are 80% radio I'd like to say that in 12-18months we'd be sitting here saying we are the best service provider in the audio market in Australia. That is a very different conversation than being the most respected and best in radio.
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