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Edited Transcript of PRT.AX earnings conference call or presentation 22-Aug-19 11:00pm GMT

Full Year 2019 Prime Media Group Ltd Earnings Call

WATSON, AUSTRALIAN CAPITAL TERRITORY Sep 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Prime Media Group Ltd earnings conference call or presentation Thursday, August 22, 2019 at 11:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ian Craig Audsley

Prime Media Group Limited - CEO & Executive Director

* John Palisi

Prime Media Group Limited - CFO & Company Secretary

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Conference Call Participants

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* David Oliphant;Morgans Financial;Analyst

* James Cameron;McFarlane Cameron;Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Prime Media Group Full Year Results Conference Call. Please note that we will not be taking questions from the media today. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Audsley. Please go ahead, sir.

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Ian Craig Audsley, Prime Media Group Limited - CEO & Executive Director [2]

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Thank you. Good morning, everybody. With me is Chief Financial Officer, John Palisi.

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John Palisi, Prime Media Group Limited - CFO & Company Secretary [3]

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Good morning.

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Ian Craig Audsley, Prime Media Group Limited - CEO & Executive Director [4]

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I imagine you're on the first page of the presentation. I'll just take you through it quickly.

Core net profit of $17.2 million was within our market guidance. Statutory profit of $7.3 million was up 160% on the prior year, and impairment of $14 million against television broadcast licenses and other intangible assets. Total revenue of $192 million was down 4.7%. Total advertising revenue share is still market leading at 41.5% share.

EBITDA of $38.5 million was down 14.8% on the prior year. Operating costs were down $3.2 million or 6% on the prior year, and employee benefits expenses were down $1.4 million or 3.8% on the prior year.

Net operating cash flow of $22.5 million is down $9.6 million or 30% on the prior year with an increase in the affiliation and program supply arrangements with Seven and $6.2 million in spectrum license fees accrued in FY '18 and paid in this period. And net interest-bearing debt of $9.6 million, down from $14.8 million at 30 June.

To the second slide. As you can see, for the first time this financial year, we applied AASB 15 Revenue from Contracts with Customers. Historically, Prime has reported revenue gross of agency commission, and the new accounting standard has resulted in Prime reporting revenue net of agency commission. For the 2018 financial year, this meant that there was a restatement of the result with revenue from contracts being reduced by $17.9 million and the corresponding decrease in the cost of sales by $17.9 million. There was no change to the FY '18 statutory results.

Statutory results slide, Slide 3. As been highlighted, revenue from services of $190 million is back $9.4 million or 4.7%. This corresponded to total revenue dropping by an equivalent amount of 4.7% as well. EBITDA for the year was back $6.7 million or 14.8%. And we reported a statutory profit of $7.4 million compared to a statutory loss in the prior year of $12.3 million.

To our core earnings page explaining our statutory -- our core earnings to our statutory earnings. For this financial year, we had the statutory profit of $7.4 million. This was impacted by an impairment of television broadcast licenses and other intangibles of $14 million. This reflected the decline in audiences and the decline in revenues as a result of digital disruption. With the impairment charge, there's a release of a deferred tax liability of $4.2 million against those intangible assets. And our core profit for the year was $17.161 million, which was within our market guidance that we released in June.

Over to the power ratio. Total revenue share, total revenue share for all people 6:00 a.m. to midnight for the financial year was 41.5% compared to 41.9% for the prior year, so it's a decline of 0.4 percentage points. The audience share improved for the year. So audience, which is also 6:00 a.m. to midnight, increased to 41%, an increase of 0.6. And overall, we had a positive power ratio again.

Net debt and gearing page. Net interest debt -- net interest-bearing debt as of 30 June was $9.5 million, down $5.2 million on the prior year. There was, obviously, an improvement in our gearing ratio and in our bank covenants as well. The paydown of debt of $5.2 million included a payment to the Seven Network of $15 million on renewal of the affiliation agreement earlier in the year.

Just down at the bottom there, our facility limit has now been reduced to $30 million, and we continue to pay down debt throughout the year looking for further reduction in that limit as the year goes on.

And so to the outlook. We're still seeing challenging conditions in regional markets at both national level and local level. There are 4 different reasons. There is a greater extent of influence from Google and Facebook at regional level. And the national market seems to be slow, but it is predominantly the large retail chains that are not spending currently. However, we're seeing some new business and the return of some business that we've not seen in some time, thanks to the Boomtown project, which you might have heard about. It is not filling our holes, but it is mitigating some of those declines.

We think trading conditions should improve in the second half particularly with the lead up to the 2020 Olympics. FY '20 earnings before interest and tax should be between $23 million and $25 million, and core net profit after tax should be between $8 million and $10 million. The dividend program remains suspended. Our debt reduction strategy has been successful, and we expect that debt to be repaid this financial year based on the current forecast.

On that basis, we will open the line to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) It appears we have no questions in the question queue at this time. (Operator Instructions) We'll take our first question from James Cameron with McFarlane Cameron.

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James Cameron;McFarlane Cameron;Analyst, [2]

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Just wondering if you can take me through the EBIT. You say you go from $25 million to a core net profit after tax of $10 million.

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John Palisi, Prime Media Group Limited - CFO & Company Secretary [3]

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So the EBIT would be inclusive of the impairment charges and tax payments. I'm not really sure what else we can say to the profit and loss statement there, where we have reported finance costs of $1.3 million. Share of our profit from -- share of associated profits, which -- in joint ventures with WIN where we broadcast in Western Australia and Mildura, where we had a small profit there of $156,000. Income tax expense of $4.5 million, getting us to the profit for the year of $7.3 million. That's after the release of the deferred tax liability there that I referred to with the associated impairment charge.

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Operator [4]

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We'll take our next question from Peter Dubru, a private investor.

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Unidentified Participant, [5]

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Just a quick question regarding pricing credits. Has any work been done on releasing pricing credits if there is a change of control transaction?

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John Palisi, Prime Media Group Limited - CFO & Company Secretary [6]

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Peter, as always, we have -- pricing credits are available to us. If there is any work that is to be done there in terms of the change of control transaction, we haven't done anything specific for our change of control transaction.

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Operator [7]

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(Operator Instructions) We'll take our next question from David Oliphant with Morgans Financial.

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David Oliphant;Morgans Financial;Analyst, [8]

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John, just on the outlook slide. You've got EBIT there, $23 million to $25 million, and then core net profit after tax of $8 million to $10 million. Should that earnings before interest and tax, should that be EBITDA, not EBIT?

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John Palisi, Prime Media Group Limited - CFO & Company Secretary [9]

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It is EBITDA, not EBIT. So [we are wrong], that should be EBITDA. Yes, yes, sorry. That probably explains the question before, too. So we'll put out a correction to that effect.

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Operator [10]

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(Operator Instructions) And it appears we have no further questions at this time.

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Ian Craig Audsley, Prime Media Group Limited - CEO & Executive Director [11]

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Okay. Well, thank you, everybody. And if anybody has any further questions, we're always available. Thank you for your time, and we'll talk to you soon.

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Operator [12]

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Once again, that does conclude today's conference. Thank you for your participation. You may now disconnect your phone lines.