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Edited Transcript of PRT.AX earnings conference call or presentation 25-Feb-20 10:00pm GMT

Half Year 2020 Prime Media Group Ltd Earnings Call

WATSON, AUSTRALIAN CAPITAL TERRITORY Mar 23, 2020 (Thomson StreetEvents) — Edited Transcript of Prime Media Group Ltd earnings conference call or presentation Tuesday, February 25, 2020 at 10:00:00pm 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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* Mike Ryan

Select Equities Pty Ltd., Research Division – Senior Institutional Adviser

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Presentation

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Operator [1]

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Good day, everyone. 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’d like to turn things 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, everyone. With me is John Palisi, Chief Financial Officer.

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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 will run through the headlines. Core net profit of $5.5 million was at the top end of guidance. Statutory profit of $4.5 million was back 56.2% due to lower advertising revenues in the half and an increase in program supply arrangements with the Seven Network. Total revenue of $90.8 million is back 7.2% on the prior period, and advertising revenue in aggregated markets in New South Wales and Victoria is back $6.9 million or 7.8% compared to the market decline of 7.2% in the same period. Prime’s ad revenue share remained market leading at 41.2 share. EBITDA of $11.5 million is down 47.4% on the prior period.

Operating costs increased $800,000 or 3.1% on the prior period, inclusive of $1.5 million in transaction costs associated with the Seven bid and an $800,000 reduction in operating costs from the application of AASB 16 Leases. Costs were flat on a normalized basis.

Net operating cash flows of $13.5 million is up $5.6 million or 71.4%. The prior year includes a one-off transitional spectrum license fee of $6.2 million.

Net cash pre-AASB 16 is $3.3 million. CapEx of just $300,000 in the period is unusually low and is expected to increase in the second half of the financial year.

Please turn to Page 2.

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John Palisi, Prime Media Group Limited – CFO & Company Secretary [5]

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So as Ian identified, Prime adopted AASB 16 for the first time during this reporting period. As set out in the slide, Prime recognized on its balance sheet a $5 million intangible asset for the right to use assets under operating leases. Prime also brought a corresponding $5.2 million lease liability being the discounted value of the future lease payments associated with the right to use those assets.

As Ian has also commented on, as a result of the new lease standard, Prime’s operating expenses fell by $805,000. And we recognized an additional depreciation charge of $808,000. On a normalized basis, the operating costs are flat, and the impact of AASB 16 Leases has been immaterial on our P&L.

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Ian Craig Audsley, Prime Media Group Limited – CEO & Executive Director [6]

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And so to the outlook. Regional ad markets remain challenged. There’s been no change to the trading environment January to February, and March also looks soft. We’re forecasting subdued advertising spend for the remainder of the financial year.

Full year core net profit after tax will be in the range of $8 million to $10 million compared with $17.2 million in FY ’19 and is due to falling advertising spends and the step-up in the programming costs. Key focus for the half is the 2020 Tokyo Olympics. Most of that revenue upside from that event will be booked in the first half of financial year ’21. And given the sustained sector-wide fall in advertising spends, the board has decided not to reinstate the payment of dividends, and that position will be reviewed at the next reporting period.

So we might just hand over to questions. Kelly, if you would open the microphone.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We’ll hear first from [Peter Cooper], a private investor.

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Unidentified Participant, [2]

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Ian and John, just a quick question on the Olympics. What’s the sort of expected revenue increase that you might look to book at the Olympic Games campaign?

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Ian Craig Audsley, Prime Media Group Limited – CEO & Executive Director [3]

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We would not normally give out that sort of information. And it’s a complicated number to give because you have to look at it in the context of the overall market. And if you had a market that overall was performing strongly, the Olympic revenue would be a good cream on top of that. But if you’re in a market that is choppy as ours is or soft, then you can end up with a different result. So it’s — we have a figure. We’ve secured 8 sponsors to date, and there are another 2 that we’re trying to get on board currently. So our take-up in sponsorships is good, but the result will depend on the underlying market.

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Operator [4]

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(Operator Instructions) We’ll hear next from Michael Ryan with Select Equities.

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Mike Ryan, Select Equities Pty Ltd., Research Division – Senior Institutional Adviser [5]

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If you achieve your guidance, would you pay dividend in the second half?

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Ian Craig Audsley, Prime Media Group Limited – CEO & Executive Director [6]

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Well, that decision will be made at the end of this financial year. So there’s no response other than that. The board considers paying dividends at the half year and the full year. So that will be a decision at that point in time.

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Operator [7]

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We’ll hear next from [Adrian Bergers], a private investor.

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Unidentified Participant, [8]

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Just wondering how optimistic, if you are optimistic, are you about the ACCC investigation in the international social media platforms? And would you think there’s a certain time frame that the stranglehold of those companies over the local companies here will be kind of resolved? And would you think that the government would be prepared to take on those big social media platforms?

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

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Okay. Well, I’ll answer the second question first. No, and I think the government will take on those platforms. And number two, well, the inquiry is interesting. And yes, there are machinations of having those tech giants in the media market. But at the end of the day, it’s about the consumer. And consumers, as we’ve said previously, are moving to platforms where they can watch what they want to watch, when they want to watch it, as many times as they want to watch it. And so

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be a dramatic change from what we’re seeing today because at the end of the day, the ACCC acts for the consumer.

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Operator [10]

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(Operator Instructions) And there are no other 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 we’ll talk to you at financial year-end. Thank you.

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Operator [12]

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And that will conclude today’s conference. Again, thank you all for joining us.

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