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Edited Transcript of APN.AX earnings conference call or presentation 13-Aug-19 11:00pm GMT

Half Year 2019 HT&E Ltd Earnings Call

Sydney Nov 23, 2019 (Thomson StreetEvents) -- Edited Transcript of HT&E Ltd earnings conference call or presentation Tuesday, August 13, 2019 at 11:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ciaran Davis

HT&E Limited - CEO, MD & Executive Director

* Jeffrey Peter Howard

HT&E Limited - Executive Officer

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Conference Call Participants

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* Andrew Levy

Macquarie Research - Analyst

* Entcho Raykovski

Crédit Suisse AG, Research Division - Research Analyst

* Eric Choi

UBS Investment Bank, Research Division - Director and Australian Telco and Media Lead Analyst

* Simon Conn

Investors Mutual Limited - Senior Portfolio Manager

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the HT&E interim results conference call. (Operator Instructions)

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Ciaran Davis. Thank you. Please go ahead.

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Ciaran Davis, HT&E Limited - CEO, MD & Executive Director [2]

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Good morning, everyone. Thank you for joining this morning's call. I'm joined this morning by Jeff Howard, his last investors call at HT&E, and our new CFO, Andrew Nye. As many of you probably know, the backdrop for today's results has been a challenging ad market environment across the media industry that radio is not immune from. The first quarter saw sector revenue down 3.1% than the prior year. Q2 saw some improvement in April, but post the federal elections, there was a gradual decline into June, but with ARN holding share in Q2. Before I hand to Jeff to present the financials, I just want to highlight some of the key actions and priorities over the past 6 months as we set the long-term direction for the business.

Strategically, it's all about our national radio network, ARN, where the priority is to drive strong operational performance and position it for the next phase of industry growth. Later in the presentation, I'll briefly update you on the work we've been doing to bring ARN's mission and competitive advantage to life. The key point worth noting is that our radio business remains an incredibly resilient and relevant medium that delivers strong cash flows and healthy margins. We are seeing audience numbers continue to grow and thanks to strong consumer uptake of new audio technologies, there is an opportunity to drive incremental content and revenue. Unlocking this incremental revenue means successfully pivoting ARN from being a pure radio business to an audio business, and we have the keys to do this, which is unique in the Australian market and sets us apart from our competitors. This includes our extremely valuable partnership with iHeartRadio, which we've extended to 2036. iHeart is critical to building out our full audio offering and there is a huge amount of work ongoing to integrate this platform into our content and commercial offerings. As we discussed back in February, the simplification of the management structure between HT&E and ARN and the reduction of corporate costs has been a big focus. And today, we have announced some senior further executive changes. It will be remiss of me not to use this opportunity to thank Jeff and Yvette for their outstanding contribution to this business and wish them both well in their future endeavors. We are also well underway with the review of our noncore assets, assessing their synergy with radio and audio and looking at all avenues to maximize shareholder return. This includes the closure of Gfinity, our eSports operation from November of this year. Gfinity has achieved some significant results but requires an injection of further capital to maintain its growth in a rapidly changing eSports industry, something that unfortunately does not fit with our core business and capital management initiatives. It is worth noting that as part of our mix of noncore assets, our tech business, Soprano Design, in which we have a 25% stake, has delivered a record 6 months and goes from strength to strength. We will give you more detail about this later. And finally, the Board and management remain very focused on capital management and our balance sheet remains strong. We have $107 million net cash, and today, we announced an increased dividend, updated and improved our dividend policy, and we'll be recommencing our buyback program post the blackout.

Looking to the statutory results on Slide 3, which show pre and post the impact of the new leasing standards and also exclude Adshel from 2018. Reported revenue was down 4% to $131 million, predominantly driven by a softer radio market. Cost measures taken at ARN at a corporate level resulted in EBITDA of $38 million, 26% of post the new lease changes and 1% up on a like-for-like basis. Reported EBIT is up 6% and NPAT of 34%, with underlying EPS of 45%. Capital management is a key area of focus for us. Our radio business is a strong cash-generating business and the Board have updated our dividend policy from a 40% to 60% payout to 60% to 80% and a fully franked dividend of $0.04 a share is declared payable on the 13th of September. Balance sheet strength has been maintained with a net cash $107 million while the tax dispute with the ATO is ongoing. The accretive buyback will recommence once the blackout period is over and with a focus on our radio and audio business, the Board will look at investment opportunities that fit with our audio strategy and unrestrict investment frameworks.

Jeff?

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Jeffrey Peter Howard, HT&E Limited - Executive Officer [3]

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Thanks, Ciaran, and good morning, everyone. On Slide 6, we have shown the reported result for HT&E for the first half of 2019. Like recent results, there's a bit to explain this year. Where possible, we are talking on a continuing operational basis ignoring Adshel that was in the first half results last year. We've also included material to reconcile the adoption of AASB 16 leases and more on that shortly. On that basis, the statutory results reflect aspects Ciaran has already outlined, including revenue down due to the soft Australian ad market; cost savings across a number of areas, including ARN's variable cost and marketing savings; decommissioning a site in Hong Kong reducing rent; corporate savings following group simplification, which is obviously ongoing; and the impact of AASB 16. As a result, underlying EBITDA from continuing operations and before exceptional items was up 26%. Ignoring leases, EBITDA was up 1%. We delivered net interest income in the half with cash interest received offsetting commitment fees and borrowing costs. The effective tax rate was down slightly due to a better associate result and the tax benefit associated with treasury shares acquired in the first half. A couple of exceptional items were incurred in the first half. Costs associated with the closure of eSports that we announced today was $3.6 million and restructuring cost of $1.2 million incurred as we continued to simplify HT&E, both net of tax. As Ciaran said, underlying impact was up 34%, and with the benefit of the buyback, the EPS was up 45% in the same period of 2018.

Before we go too much further, I wanted to give everyone a brief overview of the impact of adopting AASB 16. We got through these but most operating leases are now treated as if they are finance leases. As of December year-end reporting, HT&E adopted AASB 16 from the 1st of January. We adopted an approach that enabled us to apply the standard without restating prior year numbers given the changes in the business over the last 12 months. The net impact to this standard is insignificant in a P&L sense, but it does change the shape of both the P&L and balance sheet. Most rental costs are recharacterized, and as a result, reported EBITDA has increased by $7.6 million. On the balance sheet, we recognized lease liabilities based on the present value of each lease commitment. At 30 June, this was $63 million. As lease payments are made and interest cost is recognized, into the half, this was just over $1 million and the principal is reduced by balance. We also recognized right-of-use assets for each lease this reflects the lease liability, historic lease payments net of any incentive received and any initial direct or make-good costs associated with each lease. These right-of-use assets had appreciated over their contract life. Depreciation has increased by $6.7 million as a result. Roughly $95 million in right-of-use assets were held at 30 June, with approximately $40 million in accumulated depreciation against them. The chart on this slide and the table on Page 31 of the appendix show how AASB has affected the group and the segments. And for the rest of the presentation, I'm going to try to avoid talking 2 sets of numbers. So where possible, we've shown statutory outcomes in normal text and pre-transition outcomes in italics.

Turning to radio on Slide 8. As we said earlier, it has been a tough 6 months for the radio sector. As we outlined at the AGM in May, the Q1 market was soft. We saw some recovery in April and we're seeing signs of that recovery continuing across Q2. However, market softness returned post the federal election and this has continued into Q3. Against the market down 2.4% in the first half, ARN revenue was down 3.8%. Pleasingly though, we held market share in Q2 after a softer Q1. We remain very focused on cross-selling, however, maintaining this momentum is becoming challenging. Overall in the half, cost of sales were lower based on lower radio revenue. As we mentioned previously, though, this lower margin digital revenue continues to grow faster than radio. We are seeing marginal cost of sales growing. Staff and talent includes a number of contracted CPI increases and further investment in digital resources to pursue that opportunity. AASB results -- AASB 16 results in rental expenses of $1.4 million being recharacterized increasing depreciation and interest. We've saved $2.4 million in marketing compared to last year when 4 new shows were launched at the beginning of the first half. Another operating cost savings in the first half were achieved from a number of smaller initiatives. EBITDA was therefore in line with prior year after the impact of AASB 16 or down 3% on a pre-transition basis. Post the depreciation impact of AASB 16, the EBIT is down 2% year-on-year.

Cody in Hong Kong had a very strong first half. Revenue growth was achieved on all marquee assets, with the cross harbour tunnels up 7% to 8% and tram shelters up 13% on improved occupancy, with particularly strong performance through to early May. Markets have softened somewhat since then as the ongoing protests impact advertiser appetite, particularly for the nonelevated shelter assets. Another driver of performance this year is related to the nonrenewal of the Hung Hing Road large format asset at Causeway Bay that was decommissioned at the end of 2018. Nonexclusive site revenue was also slightly softer on lack of available inventory. The decline in cost of 59% was driven by AASB 16, the rental savings post decommissioning of Hung Hing Road and other direct cost savings offset by some higher staff cost in the period as we drove revenue hard. On a pre-transition basis, costs were down 21% in the half. We successfully renewed the Eastern Harbour Tunnel contract in August for initial 3-year term and possibly up to 7. This means the marketing assets are all locked in until 2022 and beyond.

On Slide 10, we've summarized the non-audio investments that are being assessed, the benefits of integration into HT&E's audio strategy, if any; the investments made for cash versus the near-term opportunity to either commercialize or exit; and the options available to maximize value. The investments that we're currently reviewing include HT&E's 51% owned powered by motion creative agency, Emotive. Emotive does continue to deliver towards strategic plan. Gfinity Australia, while we believe eSports will become a mainstream and significant content audience for commercial medium in the long term, the economics of eSports in Australia are yet to yield the sustainable positive earnings we require from our investments. We have concluded that the cash investment and time to breakeven is likely to be prolonged, and therefore, our partners, have decided to close the business at the end of 2019 once current commitments have been fulfilled.

As a result, HT&E's net investment in Gfinity eSports Australia has been impaired at 30 June, with an exceptional pretax charge of $5.3 million taken to the P&L. HT&E's 50% owned Unbound Group will launch its immersive MIA mobile and augmented reality platform with an NBA content partnership in time for season launch in October. In the meantime, Unbound continues to build its commercial pipeline, undertaking work for some of Australia's biggest brands. And Soprano continues to go from strength to strength. For those on the call not familiar with Soprano, HT&E has held a roughly 25% interest in Soprano since 2001. It is an investment we've actively supported over that time. Soprano is an independent software vendor providing a CPaaS offering to enterprise and government customers across 14 countries. Soprano's main product provides web-based application software and APIs to simplify the orchestration of trusted mobile interactions between its customers and their consumers using various mechanisms including SMS, IP, Facebook Messenger amongst others. In the last 12 months, Soprano orchestrated nearly 5 billion trusted mobile interactions. And in FY '19, Soprano delivered its best year ever. Revenue growth of 22% came from all regions, including the culmination of well established and new territories within APAC, delivering 26% growth. Cost of sales increased both with revenue and as a result of changing revenue mix, including between direct arrangements and share-based contracts. The business invested in staff to drive growth with new product initiatives in dynamic event management, policy control and certified secure communications. OpEx increases reflect the expansion to these new products and other markets during the year. Soprano is a business that is investing for growth, delivering top line opportunity and critically one that is generating positive and growing earnings and meaningful cash flow. We look forward to its continuing growth into FY '20.

Turning to corporate costs on Slide 12. We previously called out our ambition to simplify corporate and reduce costs with an aim to be on a run rate of $10 million ex tax dispute by the end of the year. In the first half, we reduced people cost by $0.5 million following changes at the beginning of the year. Board costs are also down slightly, and we moved into a much smaller premises at the end of Q1, saving rent and overheads. These savings offset some of the increased spend on support related to a number of nonaudio projects. Further savings have now been locked in that will see HT&E's corporate costs based on target run rate by the end of this year.

Slide 13 shows the balance sheet of June and on an adjusted basis ex the impact of AASB 16 compared to December 2018. Key non-AASB 16 movements related to payment of nearly $17 million 2018 tax provision in May, timing of invoices for '18 and higher revenue in radio in May and June compared to November and December lifting receivables, both of which have impacted the closing cash balance at 30 June. Other noncurrent assets for completeness includes equity-accounted investments in ARN, 50% interest in Nova Perth as well as the tax dispute deposit.

Cash flow for the year is outlined on Slide 14. Reported cash flow is shown on a continuing and discontinued basis. Adshel cash flow is included for 6 months in 2018, so again we've split it out to hopefully make 2019 results comparable. Working capital movements include the previously mentioned increase in receivables, payment of accrued borrowing, costs associated with the 2018 refinancing and the usual swings and roundabouts with accruals. As noted, we paid the 2018 taxes in May. Other cash flows in the half included CapEx for the Brisbane Station move that we previously flagged, further lanes of investments into Unbound, purchase treasury shares to satisfy prior YouTube obligations and first-half activity on the share buyback.

Net cash is outlined on Slide 15. HT&E has a net cash balance of more than $107 million and no drawn debt. With the adoption of AASB 16, $63 million of lease liabilities is now included in net debt. As noted last year, we have debt facilities available through 2023, providing HT&E with funding certainty and flexibility. Quickly on the tax dispute. Not a huge amount of progress since the last update. The final return for this view period has been lodged, with no change to the estimated tax interest or penalties. We continue to spend getting ready for the branch dispute. Other matters continue to be audited by the ATO. There's no certainty of any proposed adjustments or disputes raised by the ATO at this time.

Before handing back to Ciaran, a brief outline of the additional material in the appendix. We've included the usual reconciliation of segment to statutory results. As noted, there's a page showing the impact of the transition into AASB 16 on a per division basis and exceptional items for continuing operations and relevant currency rates are outlined on Slide 33. We've also released the trading update this morning. As noted earlier, the Australian radio market deteriorated post the federal election and this has continued into Q3. Short bookings suggest the market could be down mid-single percent in the quarter. Recent improvement in briefing activity is being observed for possible Q4 bookings. Positioning ARN for that uplift is a core part of our agenda for the second half. Maintaining the right level of investment in resources and capabilities is, therefore, critical to ensuring ARN will successfully exploit these opportunities. The changing shape of cost of sales as digital revenue grows, contracted talent and other cost increases and other possible non-repeat savings from 2018 means that cost growth in H2 is likely to exceed revenue growth. A cost and efficiency review is continuing to identify opportunities to reduce operating expenditure.

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Ciaran Davis, HT&E Limited - CEO, MD & Executive Director [4]

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Thanks, Jeff. Despite the current softness in the market, I actually want to talk briefly to the strategy we are implementing to reposition ARN as a digitally enabled radio and audio business. Firstly, radio, and it's worth pointing out its continued relevance. In metro markets, 11 million people tune in weekly to commercial radio, and this has been growing consistently over the past decade. 62% of all audio listening is through radio, making it by far the most consumed audio content in Australia, in fact, 4x higher than streaming. We spend an average of more than 2 hours per day listening to radio, which compares closely to TV at 2.5. And radio is still the #1 source of music discovery, rating 3x higher than music streaming services. New technologies, like smart speakers, are bringing radio back into the home, with 30% of people saying that listening to radio is one of the most used commands. So the performance of our radio assets is very important. And in H1, we continue to grow the number of people listening to our stations. As a network, we now reach over 5 million people weekly, a record number, with KIIS delivering 3 million and the equally important Pure Gold network attracting over 2 million.

Our dominance in Sydney continues with the #1 and #2 breakfast shows. In Melbourne, we are making solid progress with KIIS 101.1 hitting its highest station audience since 2014 and the highest breakfast share since 2015. Gold now attracts over 1 million listeners a week and the breakfast show there remains on course to meet expectations. Brisbane is a market we are very focused on with performance not where we expect it to be but encouragingly, we saw improvements over the past couple of months and now hold the equal #2 from 97.3 and 4KQ. Adelaide has been a very successful and consistent performer for us. And in Perth, we've made a number of changes on and off air that we believe will see improvement in the back half and into 2020. So radio is performing well, and as we know, streaming and podcasting are also growing audio consumption, but this fragmentation is incremental.

A recent study for IPG Mediabrands took a deep dive into the changing audio habits of Australians and found that unlike TV, fragmentation has not reduced radio listening and has, in fact, increased content opportunities. This is because radio has unique qualities, live, local and free, and a much deeper connection and trust with listeners, that means it is not impacted the same way as TV. Audio diversification, coupled with strong uptake of consumer products, like headphones and smart speakers, is actually growing new content opportunities, which in turn will grow new commercial opportunities. In fact, there is now an additional 13% of incremental audio real estate every day. Encouragingly, this incremental commercial inventory is forecasting 7% CAGR growth over the next 4 to 5 years. And finally, consumer research we have conducted indicates that over 85% of people would find it appealing to have all their audio offerings in one place, something you can only get with ARN. And over the past few months, we have been working to build out a product and commercial strategy to deliver just that. Our mission is to be Australia's leading audio company, providing the most complete audio experience for our listeners and the most comprehensive audio solutions for our partners. Put simply, we are using the strength and success of our core radio and DAB+ brands to integrate with our streaming and podcast digital platform, iHeartRadio, with our digital and social audiences to build a unique dataset of listener insights, building incremental digital inventory. This virtuous circle means we are developing a unique combination of reach, trusted relationships, content and data-driven insights to develop a truly multi-platform audio business, all under one roof. DAB+ is now integrated into our overall audio strategy, which means we are reaching over 5.1 million listeners each week. Our FM brands are adopted slightly to provide localized '80s and '90s formats, delivering over 200,000 incremental listeners, a 4% increase. And we monetize this audience by bonding with KIIS and Pure Gold or providing bespoke campaigns for national and local clients in each market. We further monetize by partnering with third-party partners and sponsors to broadcast more niche content. iHeartRadio, the all-in-one digital platform providing radio, podcast and streaming content in one location, is also being integrated into our audio offering as part of our new go-to-market approach. With the license now extended to 2036, our focus is about building usage and commercial return.

On the product side, we have expanded our library of podcasts to over 250,000, with 14 million episodes. To help drive discoverability, we launched a new AI podcast recommendation tool. We have also integrated on over 65 devices in Australia, including Android TV, Telstra TV and the Waze navigation app. For anyone on the call who listens to our broadcast stations, you will have heard iHeartRadio integrated on air significantly more over the past few weeks, using our broadcast radio to drive downloads and usage. This in turn builds registrations and our first party data, capable of delivering incremental and targeted inventory. And we close the loop by ingesting content within the app to promote our broadcast stations and drive people back to radio. App usage is progressing well with downloads up 20%. Registrations are now more than 1.4 million, MA user up 34% and time spent listening on the platform up 60% to 4.6 million hours a month. These iHeart numbers are encouraging and we expect growth levels to continue. But more importantly, they fit well with our defining audio proposition, giving us a unique advantage in the market and helping deliver a simple commercial growth strategy, which is to drive ratings success, to grow our share of radio advertising using iHeart to build new audiences and our own unique data set of listener insights, bringing data, targeting technology into our media planning and evolving our sales process to be more competitive with digital players.

In closing and before we take questions, audio remains a highly effective medium for advertisers to engage consumers, and it's absolutely our strategic focus. HT&E is the only audio provider in Australia that can deliver consumers all audio options in one place: radio, streaming and podcasts. Current market conditions will impact 2019 results but do not reflect our longer-term confidence in the medium. We continue to pursue both revenue share and cost savings to position HT&E for the long term and provide shareholder value creation. Our balance sheet remains exceptionally strong and cash generation solid. And as a result, the interim dividend and broader dividend policy has been lifted and the buyback will recommence once we are out of blackout.

Thank you for your time. I'll now take the questions on the results.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Your first question today comes from the line of Entcho Raykovski from Crédit Suisse.

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Entcho Raykovski, Crédit Suisse AG, Research Division - Research Analyst [2]

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Entcho here. A couple of questions for me around your outlook commentary. Firstly, you've obviously guided to a weaker market, particularly into Q3. What are your expectations around ARN performance within that market? I'm just interested in the extent to which you expect to see or to which you see scope to offset that weaker market with share gains, given you're a bit more stable? And then secondly, kind of you've alluded to Q2 Hong Kong performance being a bit weaker as a result of the unrest. What is the outlook into the second half? I mean, we're obviously seeing plenty of negative news flow, so I'd just be interested in whether you're seeing that business really shutting down or whether it's still tracking okay.

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Ciaran Davis, HT&E Limited - CEO, MD & Executive Director [3]

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Thanks, Entcho. Yes, firstly, in terms of the weaker quarter 3. As we called there, post the election, the market has softened. It is getting shorter, but from our perspective, we had a stronger quarter 2 share. And I expect that share to at least maintain or if not increase. So it's a market thing at the moment and if you look at sort of what's happening for quarter 4, there's briefing activity there. So what we're looking to see is that signs of the market coming back, but it's very short at the moment, as you'd expect.

In terms of Hong Kong, obviously, the protests there have impacted over the last couple of months, particularly on our tram shelters. Bookings are okay. I think there is a bit of risk in the numbers. To what extent that is, is probably unknown. But we haven't seen much revenue pulled yet, it's just that nothing -- forward bookings are not there. But is it significant? Not yet, but if it keeps on going, it's something that we're watching quite closely.

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Entcho Raykovski, Crédit Suisse AG, Research Division - Research Analyst [4]

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Okay. Got it. And can I just maybe ask a follow up around capital management and how you think you're thinking about the long-term target of gearing in or even getting to net debt for that matter? How do you think about the optimal capital structure? And is it the tax dispute that's holding you back from being even more aggressive on the capital management side?

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Jeffrey Peter Howard, HT&E Limited - Executive Officer [5]

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Hi, Entcho, it's Jeff. Yes, I think that the tax dispute is something that's just -- it's there and the Board is very conscious of and making sure that we've got the ability to cover any outcome. And the tax dispute is something we have said consistently over the years. Depending on an outcome, if -- we've also said that there's not a lot of progress on the tax dispute in the sort of last 6 months, but if there was an outcome in the short term, would it change the Board's view? Possibly. The Board has appetite to look at opportunities in the audio space. It's increased the dividends. This time, it's increased the policy. This time, we've called out that we've been in blackout for the last sort of couple of months. So we'll be looking at getting back into the buyback once the blackout is finished. So I think the tax thing is there. We don't really talk about, "Are we prepared to leverage up to a certain number to drive capital management?" But at some point, that's probably something that may be on the agenda.

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Entcho Raykovski, Crédit Suisse AG, Research Division - Research Analyst [6]

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Got it. And Jeff, given it's your last call, all the best for the future.

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Operator [7]

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(Operator Instructions)

And your next question today comes from the line of Eric Choi from UBS.

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Eric Choi, UBS Investment Bank, Research Division - Director and Australian Telco and Media Lead Analyst [8]

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I just had 2 as well, and likewise, sorry to see you go, Jeff. First question, just related to the market share point but maybe to ask in a slightly different way. If I sort of look at some of your monthly data from some of the industry data sources, it sort of suggests that, that mid-single-digit decline might be at sort of the low watermark just because July '18 and August '18 looked like especially strong pcp comps, but then as we sort of cycle into the back end of calendar '18, that's when the comps start turning really negative. So I was just wondering if that's a fair comment, whether we are sort of getting fairly easy pcp comps towards that fourth quarter. And then just a second question, just on the cost guidance again. Just wondering if you can comment on the sort of degree of separation between revenue and cost. I guess from the way that you phrased the outlook, it sounded like the revenue outcomes could be anywhere from sort of slightly negative to maybe flat, whereas it sounds very likely that cost growth will be positive on pcp. Therefore, we're sort going negative revenue growth potentially and positive cost growth, and therefore, it is sort of negative jaws. Is that the right way to think about it?

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Ciaran Davis, HT&E Limited - CEO, MD & Executive Director [9]

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Thanks, Eric. Just firstly, in terms of the market share. I think some of the industry data that's out there is not reflective of the full market, so we need to be careful to look at that. In that, one of the larger agencies is not included in it and it doesn't include the direct markets. So when you see very large variations on a month-to-month perspective, it doesn't really reflect the nature of what's happening. I think in terms of where the market sits, August is -- I can't tell you how August is going to finish, it's just so short. So therefore, trying to predict what September and Q4 is going to be is difficult. The only measure that we would look at would be around the level of briefing activity out there, which is reasonably strong at the moment. How that converts and does it convert into revenue, nobody knows. The impact of that in terms of the cost, obviously, the cost growth is related to revenue growth that we'd look at. There is some contracted talent cost increases, there's a changing nature of cost of sales in terms of our digital revenue, there's some one-off costs that we are not going to be -- savings from last year that are not going to be repeated. And there obviously is small overhead costs that we're doing in terms of building up particularly our digital offering and iHeartRadio. So in terms of the gap in the differential, it's just very hard to call. It depends on market, it depends on revenue for the back end of quarter 3 and into quarter 4.

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Jeffrey Peter Howard, HT&E Limited - Executive Officer [10]

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I think I'd just point out a thing, Eric, I mean, you pointed out the comps at the back end of last year. We are pretty aggressive on the cost front at the same time last year, trying to find every last dollar we could to mitigate that Q4 revenue shortfall. And a lot of that -- some of that may not be able to be sort of repeated this year. So some of the cost growth that we might be expecting in the second half relates to sort of nonrepeat savings from last year. The other thing to say, too, is if we see continued market softness beyond Q3 into Q4, then we'll be looking at the cost line pretty aggressively going into Q4 to the extent we can, as we always do.

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Operator [11]

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(Operator Instructions)

Your next question comes from the line of Andrew Levy from Macquarie.

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Andrew Levy, Macquarie Research - Analyst [12]

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Just a quick one for me. Just on the briefing activity that you're talking about into a bit later in the year. I was just wondering if you could give some color on the types of advertisers that are sort of coming back and briefing a little bit more. Obviously, finance and auto have been weaker categories, but I'm not -- and retail as well. So I'm not sure, did you give any color on what sort of advertisers you're starting to see a little bit more briefing activity from, even though we're not clear if that many will come through?

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Ciaran Davis, HT&E Limited - CEO, MD & Executive Director [13]

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It's across the board, Andrew, to be honest. It's them -- we're seeing briefing activity from all the major categories, which is good. So there's no one particular category driving it. It's sort of across the board really, which is a positive outlook.

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Operator [14]

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Your next question comes from the line of Simon Conn from Investors Mutual.

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Simon Conn, Investors Mutual Limited - Senior Portfolio Manager [15]

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Just a question, can you just elaborate a bit more on Slide 23 and 25, just in relation to the DAB+ strategy and the strategy in terms of new audio content growing commercial revenues, what the -- just talk us through that in detail, please?

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Ciaran Davis, HT&E Limited - CEO, MD & Executive Director [16]

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I think it's really important that the work that we've done is about integrating all our content and commercialized assets under one roof. So we're using the power of our radio assets and the strength of our radio assets and the exceptionally strong lease that we have and integrating with that offering our DAB+, our podcasting, our streaming, our events, our digital and social audience to provide content that is promotable across all of our assets and commercialized across all of our assets. I think it's really important that when you talk to advertisers, there's certainly a strong sentiment towards audio, but there's a real appetite for an audio provider to provide content and commercial opportunities under one roof, and that's where we believe we have the competitive advantage. DAB+ is a part of our audio offering, and it's part of our sub-brands and that we do. I think the limitation of DAB+ from our perspective is that it doesn't provide the level of data enrichment and two-way engagement that we can generate through iHeartRadio. And that audience and data generation means that as we build up usage, we get a better profile of our audience and we're able to target more digital commercial inventory as a result. So our whole complete offering is about providing complete audio solutions to listeners and complete audio solutions for advertisers under one roof.

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Operator [17]

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(Operator Instructions)

I have no further questions at this time. I'd now like to hand the conference back to your presenters. Please continue.

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Ciaran Davis, HT&E Limited - CEO, MD & Executive Director [18]

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Thank you, everybody. And as I said, thank you to Jeff and Yvette, and I look forward to seeing most of you over the next few days. Thank you.