Sydney Aug 27, 2015 (Thomson StreetEvents) -- Edited Transcript of Southern Cross Media Group Ltd earnings conference call or presentation Thursday, August 27, 2015 at 1:00:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Grant Blackley Southern Cross Media Group Ltd - CEO and MD * Nick McKechnie Southern Cross Media Group Ltd - CFO ================================================================================ Conference Call Participants ================================================================================ * Entcho Raykovski Deutsche Bank - Analyst * Jarrod McDonald JPMorgan - Analyst * Lucas Goode Credit Suisse - Analyst * Brian Han Morningstar - Analyst * Sacha Krien CLSA - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by and welcome to the Southern Cross Austereo full year results conference call. (Operator instructions). I must advise you that this conference is being recorded today, Thursday, August 27, 2015. I would now like to hand the conference over to your first speaker, Grant Blackley. Please go ahead. -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [2] -------------------------------------------------------------------------------- Good morning and welcome to Southern Cross Austereo's full year results presentation. As many of you would know, this is my first results presentation as the CEO of the Group, and I'm delighted to join you today. Southern Cross Austereo has an excellent set of high quality media assets. With a new chairman and a refreshed Board, we all look forward to growing the Group and delivering increasing returns to our shareholders. I'm joined today by our chief financial officer, Nick McKechnie, who will run through the results in financial terms shortly. You will note a presentation which we'll work through. Slide 2 I'll obviously note the disclaimer there. But we'll move straight to slide 4 being the results summary. So, moving to our actual results for the full year to June 30. 2015 has been a challenging year for the Group, with television experiencing difficult market conditions and our metro radio group operations not meeting the high expectations of the Group. That said, our regional radio and broader digital assets have performed well. The overall trading result is below 2014, with revenue back 4.6% to AUD611 million, and EBITDA excluding significant items back 13% to AUD163 million. The pleasing note is that the comparative performance has improved relative to our position at the half year, indicating that our performance has stabilised, and we are trading through the bottom of the cycle. The result this year has also been impacted by a AUD361 million impairment charge to the carrying value of our metro and regional assets. Following the impairment charge the carrying value of our assets more closely aligned with the market capitalisation of the Group, and therefore reports a net loss for the year of AUD285 million. I'm pleased to say that the net debt has reduced by nearly 14% over the year due to a range of capital management initiatives, and now sits at just over AUD500 million. Moving through to headline achievements. Regional radio advertising revenue continues to show consistent growth, with less volatility than in most other advertising markets. Revenue was up for the fourth consecutive year with 3.5% growth across the board. Our television business outperformed the market due to a strong local sales performance and improving ratings at Channel 10, which resulted in the regional business growing EBITDA by 1.9%, and with margins expanding by 0.7%. Southern Cross continues to be efficient in its use of working capital and converted 100% of EBITDA to cash. Cash flow was also helped by financing costs, reducing by 14% in the year with a further reduction to come in 2016. The capital management strategy has been pursued by the Group in reducing net debt and leverage and is naturally showing clear progress. In fact, net debt has reduced by AUD81 million in the year and the leverage ratio, having peaked in December 2014, has now reduced to 2.84 times at June 30, 2015. This provides a clear glide path to our target leverage ratio of 2.5 times and provides the Group with comfortable headroom against a covenant of 3.75 times. Today we have declared a fully franked dividend of AUD0.03 per share. This takes the total dividend for the year to AUD0.06 fully franked, representing a 67% payout ratio of underlying earnings per share before significant items. The DRP will continue to operate for this dividend in order to conserve cash, but the dividend will not be underwritten. Moving through to operational strategy, slide 6. Since joining the Group at the end of June I've had an opportunity to evaluate the business and to formulate a layered strategy in pursuit of growing the earnings and maximising the asset base of the Group. To that end, the key pillars of operational strategy outlined in previous presentations remains relevant to the earnings recovery process for Southern Cross. Regeneration of the metro radio assets remains critical to revenue growth in the short-term as we seek to re-establish a clear market leading position in metro radio. Whilst the Triple M network goes from strength to strength, and is a clear leader in its target demographic, we remain fully focused and committed to improving the performance of Today's Hit network in all markets, and notably in Sydney. As you know, we have all invested heavily in content and will continue to focus on delivering the highest performing quality formats to our listeners and advertising partners to improve ratings and revenue. The pursuit of this goal will ensure we continually evaluate and benchmark success across all stations in every timeslot in both the metro and regional markets. Whilst we have seen positive momentum in recent survey periods, we believe more work is required to achieve these goals. I will point out that earlier this week we delivered some very encouraging signs for Hamish & Andy in our new national drive show, respecting they were only partly active in this survey period. In recent weeks we have also strengthened the management team's skills and experience, with the appointment of Brian Gallagher as chief sales officer, and Creina Chapman as head of regulatory affairs and corporate communications. Both these individuals are highly respected and seasoned executives, and will provide the Group with greater focus and performance across their respective fields. In the coming financial year, we have a clear focus on strategic initiatives and operational priorities. In particular, our front of house performance being ratings growth and revenue maximisation. Furthermore, we will work behind the scenes to ensure we are adopting world's best practice to ensure our cost base, use of technology, and operating structure is both efficient and meets the Company's strategic objectives. The combination of these actions will provide a platform to maximise the return on our assets. In the past year, cost control was strong with overall costs down. Our reduction in net debt was aided by better use of working capital and lower financing costs. Our affiliation agreement with Network Ten expires in June 2016, and planning is underway for the next contract. Pleasingly, we have seen improved rating performances in recent times. This has strengthened the level of inbound sales enquiry. In regard to our digital assets, we remain committed to ensuring we are able to maximise the opportunities presented by our large and committed talent pool. This involves utilising our digital platforms to expand the reach and quality of our content while simultaneously finding new ways of providing more and better solutions for our clients. Our digital revenues grew by 13% in the year and radio continues to lead the way in the levels of engagement it has with the audience through digital and social media platforms. Our focus is on procuring engaging quality content to drive our digital revenue growth. During the year we also entered into a partnership with Triton Digital, a global leader in digital audio technology, and launched Australia's first digital audio exchange. The exchange aggregates audiences and inventory for a range of premium digital services such as RDO, [Gavira], Omni, and SCA. Through this exchange clients and agencies can target specific audiences across each of our published partners on a one-to-one basis. It's a significant step forward for the Australian radio landscape and helping the industry continue to deliver on our clients' needs in this ever increasing data- and technology-driven world. Moving forth to slide 7. Turning to our capital management strategy, I'm pleased with the progress that's been made this year. We have set a target of reducing our leverage ratio to 2.5 times and we have made good progress with leverage now below 3 times and reducing. The capital management strategy is built around the execution of the operational strategy to improve the earnings in business while conserving cash flow and reducing net debt. Cash flow has been improved as a result of a 14% reduction in our financing costs. We are focusing -- or forecasting a further 25% reduction in FY16 which will add to both net income and cash flow. We've also improved our working capital position through entry into a securitised receivables facility that has increased cash by AUD22 million in the period. Nick will take you through that detail in just a minute. AUD43 million of cash was conserved in the year through the use of an underwritten DRP and used to reduce net debt. We will continue to use the DRP for the dividend announced today, although this dividend will not be underwritten. Finally we successfully disposed of a property we were no longer using in Sydney, and this realised over AUD9 million in cash proceeds. Our review of non-core assets will include unabated, and may include any or all property and related assets, but only if it is determined that a suitable sale price, potential lease-back, or the like, can be achieved. Please turn to slide 8. I'd like to invite Nick to walk through the numbers before coming back to wrap things up. -------------------------------------------------------------------------------- Nick McKechnie, Southern Cross Media Group Ltd - CFO [3] -------------------------------------------------------------------------------- Thank you Grant, and good morning everyone. I'll move straight on to slide 9, the Group reported statutory results, with revenues for the year of AUD611 million, a decline of 4.6% on the prior year. Costs reduced by 1.1% to AUD448 million, resulting in EBITDA of AUD163 million. An impairment charge was taken against the regional and metro assets of AUD361 million, which I'll cover in more detail shortly. Net financing costs reduced to AUD38.5 million, and the net loss after tax was AUD285 million. As I mentioned previously, an impairment charge of AUD361 million before tax was taken in the period, being AUD275 million against the metro business, and AUD86 million against regional. This has reduced the gap between the carrying value of the assets and the market capitalisation of the Group, and reflects more conservative assumptions regarding the markets we operate in. Moving to slide 11, looking at the results on an adjusted basis excluding the significant items, EBITDA remains at AUD163 million, a 13% decline on last year's result. The impairment charge resulted in a reversal of a deferred tax liability of AUD11.7 million, so on an adjusted basis the tax charge was AUD31 million, giving an adjusted net profit after tax of AUD64.8 million. On slide 12, and looking at cash flow. A feature of media businesses, particularly radio, is their efficient use of working capital and it's pleasing to report that 100% of EBITDA was converted into cash from operations. Financing payments reduced by AUD12 million to AUD41 million as the benefits of both the 2014 refinancing and recently established new swap contracts are realised. The conservation of AUD43 million of cash from the underwritten DRP together with the inclusion of proceeds from the disposal of non-core property and the securitisation of our receivables has resulted in cash flow increasing by AUD81 million in the year. On to slide -- the debt facilities. Net debt has increased to AUD507 million at 30 June, a significant improvement on the AUD588 million from 12 months ago. AUD63 million of the reduction has come from operating cash flow, with the balance being the one-off items as set out in the table on the right-hand side. On slide 14, and our facilities summary. There have been a number of changes to our banking facilities, and this next slide sets them out. During the year we entered into a trade receivables facility with one of our lenders. This facility which matures in June 2017, and which is capped at AUD65 million, enables Southern Cross to sell a portion of its trade debtors to the lender on a non-recourse basis. At 30 June the balance of the facility was AUD22 million. The benefits to the arrangement are that it improves cash flow and working capital, whilst offering a lower cost of funding than the senior facility. Other changes that have occurred are the cancellation of an undrawn AUD50 million working capital facility following the successful resolution of the dispute with the ATO in 2014. Furthermore, subsequent to the year-end, AUD80 million of available cash has been used to repay the senior facility. This will have a small benefit to financing costs. This amount remains available for redraw. Looking at our covenants on slide 15, and as Grant mentioned earlier, it's very pleasing to see that the leverage peaked in December 2014 and is now reducing towards our stated target of 2.5 times. With the temporary increase in covenant headroom to 3.75 times, there is ample headroom under the covenants as well as a downward trajectory. The leverage covenant of 2.84 times was assisted by the partial securitisation of our receivables, but even absent this change the chart shows that leverage would have reduced to below three times due to the reduction in net debt achieved in the period. Net finance costs have reduced as a result of lower debt levels, lower variable rates, realisation of benefits from the last refinancing, and new fixed interest rate swaps which were taken out in March 2015. As a result we're forecasting net finance costs to reduce by a further 25% to between AUD28 million and AUD30 million in FY16. Our second banking covenant, interest cover ratio, continues to be healthy at 4.59 times. With the forecasted significant drop in finance costs this current year this is expected to increase further. I'll now move on to the operational review and look at operations in more detail, passing through 16 on to slide 17. This sets out the split of revenue expenses and EBITDA for the operating units, but I'll move straight on to slide 18 and comment on each division in turn. Revenue for our regional business was 0.4% lower than in 2014, a solid performance given the challenging television markets, and one which highlights the benefit of our diversified asset portfolio. Revenue performance was underpinned by consistent growth in our regional radio business as well as strong local sales growth which helped us to outperform the market. Costs reduced in the year by 1.4% helped by television affiliation fees being variable with revenue, as well as cost control initiatives that were put in place across the business. This resulted in regional EBITDA increasing by 1.9% to AUD115 million. On slide 19 and metro. The result in metro was disappointing with revenues back 9.9% as a result of a weak performance in our Hit Network, principally in Sydney. This was partially offset by a strong performance in Triple M, which grew 8.4% and with continued growth in our digital revenues. Costs reduced by 5.2% in the year, but due to the high operating leverage in radio, this was not sufficient to fully offset the revenue decline, resulting in EBITDA of AUD57.8 million, 21% lower than 2014. I'll touch on our corporate unit briefly on slide 20 as there's been a substantial EBITDA swing. Non-advertising revenues have declined by AUD4 million in a year, partially due to the end of some government grant income in 2014 related to the rollout of digital TV in regional areas. In addition, the credit in our selling expenses line has reduced. National sales costs have recovered through charges to the metro and regional divisions, but due to the decline in national revenue, the value of the recharge is lower. The net result is an EBITDA loss of AUD9.3 million and in FY16 we're forecasting to produce a similar result. I'll finish off by looking at advertising revenues in more detail. Moving to slide 22. Southern Cross's TV revenue outperformed the market in FY15 with revenues back 2.7% against a market back 4.5%. This was due to the performance of our local sales teams, which performed well, particularly in the sale of special events such as Big Bash League and in July 2014, the Commonwealth Games. The chart at the bottom of the slide shows the steady growth that Channel 10 has made with audience share improving to 21.5%. Commercial share still lags, as is normal during a ratings growth phase, but the power ratio improved relative to the first half of the year. Onto slide 23, and regional radio had another very solid year with revenues up 3.5% to AUD153 million. National revenues were very strong, up 8.9%, helped by state elections in the earlier part of the year and regional radio is a consistent performer aided by a very large, diverse client base that delivers stable high margin earnings. Onto slide 24 and the overall metro market remains in good shape with market growth of 5% in FY15. After the share losses in Q4 of FY14, metro share has stabilised at close to 28%. As Grant mentioned, steps have been taken to increase the focus on the monetisation of ratings through an improved sales strategy and we continue to invest in content to improve ratings and drive revenue performance. On slide 25, we look at metro survey results and this slide shows survey results since 2013 for both SEA metro brands. The strategy for the reestablishment of our metro assets as the leading brand in the market is gaining momentum, with consistent ratings growth since survey 2 this year. We will continue to focus on improving the performance of both brands with ongoing investment to ensure we are delivering compelling content for our listeners. A final point to note is that survey 5 only includes a partial impact from the return of Hamish & Andy to the Hit Network. I'll now hand you back to Grant to summarise and cover the outlook. -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [4] -------------------------------------------------------------------------------- Thank you Nick. If we could move through to slide 27 outlook. In general, radio markets have started the year positively with regional radio continuing to grow steadily. Television markets remain more challenged with a weaker start to the year, although this has been partially offset by better ratings and more consistency with Channel 10 compared to the prior year. The metro business grew in July compared to the prior year, helped by a strong market and improved ratings momentum. The forward view for the rest of the quarter is robust and we would expect metro revenues for the first quarter to be around 5% greater than a year ago. Costs will increase in FY16 at CPI-like levels due to increased investment in talent and assuming we gain revenue share increases, this sales line will naturally rise as well. For the first half of this year, we are expecting EBITDA to be flat on the same period in financial year 2015 due to the impact of increased talent investment and the normal lag effect of sales monetisation. However we are focusing -- or forecasting mid-single digit growth in the second half of the year and I will provide more colour on that as the year progresses. Moving through to slide 28 and the summary, as I said at the outset, Southern Cross has a high quality set of diversified media assets which offers a good platform for growth. I've commenced the process of strengthening the management team and if FY16 we will have a renewed and acute focus on our sales strategy and in delivering more robust and compelling content to our audiences. We have invested in our programming to re-establish the Hit Network as the leading brand in market and we will continue to focus on maintaining Triple M as the number one network for men. We will also continue to execute on our capital management strategy which will deliver reduced gearing metrics and a stronger balance sheet. This year will see reduced financing costs which will benefit net profit, cash flow and further improve our debt serviceability. Looking forward, the Group is focused on a multi-tiered drive to improve efficiency and profitability. This will be achieved through a strategy of investment and content, improved monetisation of ratings and a reengineering of operations. Thank you for your time and I'll now hand back to the operator and open the lines for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- We will now begin the question and answer session. (Operator instructions) Entcho Raykovski, Deutsche Bank. -------------------------------------------------------------------------------- Entcho Raykovski, Deutsche Bank - Analyst [2] -------------------------------------------------------------------------------- Hi guys, a couple of questions. First one around metro radio and the guidance that you've given for the first quarter. That 5% year-on-year revenue growth, are you essentially assuming growth in line with the market or do you have some revenue share gains baked in as well on a year-on-year basis? Secondly, just around your contract with 10 which is obviously set to expire in the next 12 months and Grant, particularly interested in your views on this; will you be looking for another feed to supplement that or to replace that contract or is that still expected to be the primary source for you? What will be some of the criteria that you take into account? Finally, is that dependent on changes to media ownership legislation or is it completely separate? -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [3] -------------------------------------------------------------------------------- Okay, just first and foremost, metro radio, we are forecasting 5% revenue growth in Q1. We would see that as a combination of two parts. I consider that we're going to see the radio market naturally rise as it continues to do and secondly, that we may pick up just a little bit of share. I don't see the full monetisation of our ratings at this point being achieved in such a short period, but nevertheless I think it's a combination of the two. In regard to the affiliation agreement, I don't have much to say in that regard because we haven't opened negotiations with the 10 Network, but we're certainly preparing, from SCA's perspective, key issues and attributes to the contract. To answer your third question in regard to media regulation, I don't see that having any bearing on the affiliation negotiations moving forth. -------------------------------------------------------------------------------- Entcho Raykovski, Deutsche Bank - Analyst [4] -------------------------------------------------------------------------------- Okay and just to supplement the last question, there's been a lot of press reports obviously around what the government's position is going to be there, whether there are going to be any changes. From your position, are you actively lobbying the government and is it your view that those changes should come through sooner rather than later? -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [5] -------------------------------------------------------------------------------- To answer the last question, yes, we fully support that the changes should be addressed immediately. They have been under discussion and debate for quite some time and as the Minister for Communications has recently noted, he knows that technological advancements are ahead of media policy and regulation. So without doubt there, we are calling upon government to repeal those particular legislative items to allow us the freedom to compete on a level playing field, whilst acknowledging the regulation that we currently live under and secondly, compete unencumbered in other marketplaces. So yes, we're certainly looking for change there. -------------------------------------------------------------------------------- Entcho Raykovski, Deutsche Bank - Analyst [6] -------------------------------------------------------------------------------- Right, thanks. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- Jarrod McDonald, JPMorgan. -------------------------------------------------------------------------------- Jarrod McDonald, JPMorgan - Analyst [8] -------------------------------------------------------------------------------- Thanks Grant, Nick, just one question from me. I was wondering if you could just talk us through the current trading across regional TV. Obviously in FY16 you're benefitting from 10's increased ratings and it seems to be quite a weak local and national market in July and August. Just wondering if you could give us some colour on the trading and what your outlook is there for the first quarter. -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [9] -------------------------------------------------------------------------------- Thank you Jarrod, it's Grant. The current levels -- in actual fact, as you know, the resilience of the diversified group of clients that we have across our regional network has always supported the asset very strongly. We're seeing different sectors there competing with each other and there's a slight improvement in certain areas and it's detracting in others. Certainly radio's performing better than TV at this point in time. What I will state though is, the offering by 10 and the improvement by 10 is only really just flowing through into the cycle of buying and planning at agencies and clients more broadly. As we know, there's a longer lag effect within television than there is in radio, so we're yet to monetise fully those particular gains and some of that rebounding in ratings, but we look forward to doing that, particularly between now and Christmas and thereafter, particularly if this level of consistency can be -- is continual. Nick would you like to add anything on different measures for regional radio and television? -------------------------------------------------------------------------------- Nick McKechnie, Southern Cross Media Group Ltd - CFO [10] -------------------------------------------------------------------------------- Yes, so just looking at the market over July and into August, the radio has started well at the start of the year; TV is a bit more challenged. Locally, again, it's holding up much better, so it's more at the national level that we're seeing some weakness in regional TV. -------------------------------------------------------------------------------- Jarrod McDonald, JPMorgan - Analyst [11] -------------------------------------------------------------------------------- Thanks. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- Lucas Goode, Credit Suisse. -------------------------------------------------------------------------------- Lucas Goode, Credit Suisse - Analyst [13] -------------------------------------------------------------------------------- Hi guys. Firstly on regional TV: just wanted to get a bit of input into -- your market share gains both in terms of audience and revenue share look to be less than what 10's achieved in metro areas for the year. Just wondering if you can give us a bit of an indication as to why you think that is and whether you expect it to continue or if you think there'll be a bit of a catch up. Then just quickly on the gearing, can you confirm exactly what that calculation is because it looks like the net debt to LTM EBITDA is more like 3.1 times than the 2.8 times that you gave. -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [14] -------------------------------------------------------------------------------- Thanks Lucas. I'll address the first question and pass to Nick on the second. In regard to regional TV, history has proven that there always has been a differential between the respective markets of metro and regional. There's no question there's still a bit of catch up and I see that, most importantly, down to the efforts by Southern Cross sales team to effectively monetise the ratings that are in the market; I see that as our responsibility, but I also see it as our opportunity moving forth. Whether the gap will narrow -- and I believe it will -- but whether it will ever come to parity, history says it won't, but nevertheless it becomes a good challenge for us. But I think you should expect to see some better monetisation in the future than what you're seeing right now. But just remember my earlier comment, is a more immediate effect, those efforts in radio than what you see in television, just because of the planning cycle. Nick, gearing? -------------------------------------------------------------------------------- Nick McKechnie, Southern Cross Media Group Ltd - CFO [15] -------------------------------------------------------------------------------- Yes, just on gearing, Lucas, I appreciate you're new to the coverage. We have some corporate costs which sit outside the borrowing group, so you need to take the reported EBITDA number of AUD163 million and add on AUD15 million which represents costs that sit outside that group and then divide by the net debt or the other way around and you'll get to the 2.84. -------------------------------------------------------------------------------- Lucas Goode, Credit Suisse - Analyst [16] -------------------------------------------------------------------------------- Excellent, thanks guys. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- Brian Han, Morningstar. -------------------------------------------------------------------------------- Brian Han, Morningstar - Analyst [18] -------------------------------------------------------------------------------- Good morning, Grant. Just listening to your presentation, it sounds like you feel that Southern Cross could do better in terms of sales and monetisation. Is that correct? Do you think that the Company has been leaving some on the table in terms of these sales efforts? -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [19] -------------------------------------------------------------------------------- Grant, thanks for the question. The simple answer is yes, I think the quality of the assets that are being delivered across a national radio network which is unique in market; no one has the breadth and scale that we have within the radio segment and the crosspollination with our television assets. I do believe that we can improve the structure internally, which we've set about doing with the appointment of Brian Gallagher and some related personnel and that will be a continued evolution to improve that cycle. We will also lean on technology and the manner in which we engage with the marketplace. We will continue to fill our pipeline with, hopefully new, business of people who haven't been an advertiser more directly with our assets, that may be not an advertiser or could be with our competitor, or alternative, is on another medium. I think the collective efforts and single strategy to improve our revenues will put positive pressure on yield and ultimately deliver improved results. So I see that some of the steps forward, particularly with Brian's appointment -- which was a new role -- to have an aggregated effect on the assets will improve and I know that through the wealth of experience that he can bring under the guidance of the leadership group, I'm sure that we can place positive pressure on that revenue line. -------------------------------------------------------------------------------- Brian Han, Morningstar - Analyst [20] -------------------------------------------------------------------------------- Okay, great, thanks. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Sacha Krien, CLSA. -------------------------------------------------------------------------------- Sacha Krien, CLSA - Analyst [22] -------------------------------------------------------------------------------- Good morning guys. Grant I'm just wondering if you could give a bit of an indication of what sort of metro radio revenue share you're assuming for your EBITDA forecast for the first and the second half. You've talked about a stabilisation at 28% at the moment and you've talked about a bit of a pick-up in the first quarter. Can you give us some rough numbers about how you're thinking about the full year? -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [23] -------------------------------------------------------------------------------- Yes, certainly. Naturally our aspirations are north of the current numbers of 28%. I'm not necessarily going to give ourselves a target at this point in time other than to say that we're going to move that needle as soon as we can in a positive light. I think the justification for a movement in share north would be effectively be better results from our radio assets. There's no question that, as Nick said earlier on, we've only got a half a wave of Hamish & Andy coming into the last survey, we saw some very good gains. We are above the three-year average that we've seen and I actually think that trajectory can continue down that path if two things happen. The first thing is, one, we're naturally going to get a full book with Hamish & Andy and they will start to find their stride. Secondly, that we start to improve in a very organic manner the operations and content we deliver in market across every single timeslot. I don't often wish to focus on the tent poles of breakfast and drive, but they are critical to the business and what I'll say is, certainly through drive, that has already been addressed and the benefits are ahead of us. Triple M is performing, so breakfast becomes a very strong focus. But beyond that, I will say that we've certainly introduced an acute focus on every other timeslot in every day part, across every market, inclusive of every regional station. That current review is looking at how do we optimise our content to be the best it possibly can. What that yields in the short to medium term, we hope to be positive and that's certainly our target. If that puts positive pressure on the 28%, we'd like to think that there's growth on that, hopefully by a few share points, within the foreseeable future. -------------------------------------------------------------------------------- Sacha Krien, CLSA - Analyst [24] -------------------------------------------------------------------------------- Is there any prospect, I mean given that Hamish & Andy are reasonably well-known quantities to the market, that that sort of historical lag effect that you might expect is sort of shortened in this case? -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [25] -------------------------------------------------------------------------------- Oh there's no question. We're already seeing a bit of positive pressure, as we've said. Revenues will be up for the first quarter. We like the outlook at this point in time for the month we're in and the month we're about to go in. As we know, the cycle of booking within radio is less pronounced than TV that has a longer booking cycle, hence a delay in monetisation. But yes, there's been an attractiveness of Hamish & Andy to the market at a sponsorship level which wasn't there before, certainly at a more premium level in terms of our pricing and yield management and our natural attractiveness to the broader spot market. So Hamish & Andy is only one part of the solution. They're a very interesting part, but nevertheless, they're not the end result. We need a sum of the parts solution here, but they're certainly delivering on their role. -------------------------------------------------------------------------------- Sacha Krien, CLSA - Analyst [26] -------------------------------------------------------------------------------- Just a final question, if I can, on gearing. So I don't think you're underwriting the DRP this year, can we take that as a sign that you're now relatively comfortable with the trajectory of your gearing? -------------------------------------------------------------------------------- Nick McKechnie, Southern Cross Media Group Ltd - CFO [27] -------------------------------------------------------------------------------- Hi Sacha. Yes, certainly the trajectory is very good and that's largely been achieved -- almost exclusively -- through the reduction in net debt. We will continue to reduce net debt and we're looking for some growth in the earnings line. That combination will get us down to the target that we've set. So certainly we've had good participation levels in our DRP over the last two dividends, which means there's only a partial amount of cash that we'd expect to see going out through the dividend. -------------------------------------------------------------------------------- Sacha Krien, CLSA - Analyst [28] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- There are no further questions at this time. Mr Blackley, please continue. -------------------------------------------------------------------------------- Grant Blackley, Southern Cross Media Group Ltd - CEO and MD [30] -------------------------------------------------------------------------------- Wonderful. Well thank you for your attendance and time this morning. You'll naturally hear from us in due course as we have issues that we wish to discuss in market, but I appreciate your time and we look forward to talking again. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- This concludes today's conference. Thank you for your participation. You may now all disconnect.
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