SCA break-up: CEO John Kelly explains why board not yet happy with offer


Questions remain around ARN and Anchorage Capital plan for Triple M, Hit, LiSTNR: Is it ‘executable’

Did I misread the tone of the SCA half-year results yesterday? After the lousy numbers, it seemed the fight for ownership of the SCA assets was all but over.

Speaking to Mediaweek after the analysts’ call, SCA chief executive John Kelly said not so.

Kelly doesn’t think it is by any means game over yet when it comes to the consortium getting its hands on the SCA radio and TV assets.

“This has been going four and a half months. If we were going to accept this offer [it might have happened by now].

The two questions we pose are: is this deal of value to shareholders and is it executable? Both are still significant questions for our board.

A key word here is “executable”. A different operating model is emerging between what ARN is proposing and how SCA built its business.

Radio Ratings

Will audiences warm to networked breakfast shows?

ARN New Co – the proposed new-look ARN that will be KIIS, Triple M and a bigger regional network – will be networking breakfast shows in (at least) the biggest radio markets. A model yet to be proven in Australia.

Is future of breakfast networked or local?

SCA is big on local, both in metro and regional. Kelly indicated networking might take costs out, but there are challenges. “Our model is local announcers in local markets.”

Costs out are questionable too if some of those hosts are getting about $20m a year. Even if it is revenue-linked.

“The value we have created in advance of the offer coming has a significant impact on the offer. Has that been factored into the reaffirmed offer from the consortium? An offer that hasn’t increased.”

Not all shareholders though are on the same page as Kelly and the SCA board. The AFR reported yesterday some want change, and they want it now.

Fox 101.9 - Fifi Box, Brendan Fevola and Nick Cody Melbourne radio

Fifi Box, Brendan Fevola and Nick Cody: SCA’s local Fox Melbourne breakfast

Improving value… for whoever is in charge of SCA

John Kelly further explained: “It’s clearly a very complex deal. Not only are we getting some cash, but shares in a new company which has never operated before which will be KIIS, Triple M and half of a new JV [joint venture] not yet in operation.

“We have made considerable ground in laying the groundwork for an improved set of results in the future. We have done $30m of cost out which is more than 10% of our cost base. That has impacted some people and other aspects of the business including technology, contracts and marketing.

“The point we are making – unlike some of our other peers in media – we have actioned costs out and it’s nearly complete. That’s why we have the confidence to say we will improve our earnings significantly in the full year.

“We have only benefited $4.8m in the first half, but that will be $15m in the second half and then another $10m in FY25.

“That is a significant increase in value and earnings in the future.”

LiSTNR making a noise

Kelly also was enthusiastic about LiSTNR’s performance. “We have now completed our LiSTNR ecosystem. We are now utilising our first-party data where we can use it in targeting and that too gives us confidence about the digital outlook.

We will break even in Q4 FY 2024, just three years since we launched LiSTNR. We now have 1.85m sign-ups.”

While LiSTNR might be about to break even, what does the future revenue and profit line look like?

Kelly: “We are talking about attracting new money. Trailing 12-month digital revenues are $28m. They are pacing to grow by 50% in Q3. We have new structures, new teams and a new way of selling.

“We are now competing with Meta and the other major [tech] players. Part of it is podcasts, part of it is radio, partly music channels.”

Kelly was clearly excited about the digital outlook and he stressed the determination they have about building digital profits.

“We have increased our digital audio client count in the past year from 650 to over 3,500. We are getting new clients who are getting success.”

Market outlook

Kelly wouldn’t be drawn on any Q4 market prediction. “Visibility remains at about 4-6 weeks. I do believe we will see an improvement in FY2025.”

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