The Southern Cross Media Group Ltd (ASX: SXL) share price is down 22% in early trading after it gave a trading update.
Southern Cross says that its radio, television and digital assets reach more than 95% of the Australian population. It owns 76 analogue radio stations across metropolitan and regional Australia, it operates the Triple M and Hit network brands. it also owns another 10 digital radio brands in the capital cities. It also broadcasts 92 free to air TV signals across regional Australia. Southern Cross also operates a leading Australian podcast network called PodcastOne Australia and provides Australian sales representation for global open audio platform SoundCloud.
Southern Cross Media’s Trading Update
The company’s share price is down after giving a trading update and guidance for the six months to December 2019.
Southern Cross said media markets have been weak in the first quarter. Its revenue was down 8.5% compared to the prior year’s September quarter, with declines in both audio and television segments.
But in positive news, management believes Southern Cross has held onto market share gains and this trading is along the lines of the rest of the sector.
First quarter operating costs were down $1 million, which includes ‘restructuring costs’ of $1.5 million related to the outsourcing of transmission services.
Southern Cross First Half Guidance
Management are expecting EBITDA (click here to learn what EBITDA means) to be in the range of $60 million to $68 million before adjustments for the leases accounting. This guidance includes the $1.5 million restructuring costs and approximately $2 million in operating costs related to outsourcing transmission and television playout services.
The company also revealed that depreciation will be around $4 million lower than last year’s first half, with full year capital expenditure $5 million to $7 million lower than FY19. This is due to the decisions to outsource.
Southern Cross said it’s working on lowering full year costs in light of the lower revenue, but the majority of these savings will be realised in the second half.
Is The Southern Cross Share Price A Buy?
The company said that advertising markets remain short and volatile, but it will continue trying to maximise its market share and lowering its costs.
Sometimes with shares when there’s one earnings downgrade there is quite often another one in the coming months. That may not be the case here, but I wouldn’t want to buy shares yet. Although I don’t think I’d ever put Southern Cross in my own portfolio because of the industry it operates in.
I’d much prefer to buy the reliable shares in the free report below instead of Southern Cross which are growing consistently.
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