SCA expects its digital business to turn a profit by the end of the financial year in June.
And at the same time, the broadcaster has pulled a bigger than expected lump of costs, $30 million instead of the forecast $15 million, out of the company.
This, SCA argues, makes the company more valuable than it was and this would have a bearing on any takeover proposal.
Competitor ARN Media, backed by private equity firm Anchorage Capital Partners, is offering SCA shareholders 94 cents per share, valuing SCA at $330 million.
The complicated offer, made in October last year, made up in part cash and part shares in a new entity, is still being negotiated.
“The cost out and the growth of LiSTNR, we don't think have been factored into the valuation of all the offer that was provided to us,” CEO John Kelly told AdNews. “However, this is new news to the market and to the consortium.”
SCA, in releasing its results for the half year to December, told the market mutual due diligence and active discussions continue with ARN Media and Anchorage Capital Partners.
A key point is getting “sufficient information” to accurately form a view on the value of the proposal.
SCA’s audio revenue in the December half was flat at $199.6 million. Regional radio was up 2% and digital audio 27%, offsetting a 2.2% fall in metro radio.
Kelly says the digital side of SCA is growing in the current quarter at 50%, better than any other media.
“That growth rate gives us the confidence to say that LiSTNR will be profitable in Q4 this year which means that the losses we've incurred the last couple of years will evaporate and will be in profit making territory at a cash flow level,” he says.
“This has only been going for three years and I think people forget that. And it's now up to over 1.8 million signups.
“And to get a business profitable in three years is remarkable.
“I know it's been a big investment. Sometimes the hardest thing to do is invest in your own business, as opposed to buying another business, because you're impacting your earnings every month.
“Now we've built … it's time to harvest and reap the benefits.”
SCA started reducing overheads last year and has since shaved staff numbers by about 100 to 1,550, avoiding large scale redundancies by not replacing vacant positions.
“Unlike the majority of our media peers, who talk about the need to do cost out in FY 25, we've done a significant amount of cost out in FY 24,” Kelly says.
The company in August told the market it was targeting $15 million in costs but has since found $30 million, delivering $20 million this financial year and the rest in the next year.
“An appreciable increase in efficiency and earnings going forward for the business,” says Kelly.
“We've done it under the radar, and not made a big noise. We've done it in a progressive way across that period, but it has been done. And we’re showing our people that only 10% to go in terms of the cost out, which is only $3 million.”
A slide from SCA' results presentation:
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