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With an earnings season reckoning looming, The Unmade Index finally breaks through 700 points
Welcome to an end-of-week update from Unmade.
Today, we look forward to earnings season for Australia’s listed media and marketing companies, as The Unmade Index finally broke though the 700-point ceiling it’s been stranded beneath for half a year.
Unmade writes more extensively about the financial performance of our listed media and marketing stocks than anyone else. Only Unmade’s paying members get the whole picture, including access to our full archive which goes behind the paywall after two months. Subscribe today.
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Southern Cross Austereo has had its worst ever start to a financial year. Can Listnr change the trajectory?; And a bad day for Enero
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Unmade Index finally climbs over 700-point mark as a crucial earnings season kicks off
Tim Burrowes writes
For a while, it seemed like nothing would take the Unmade Index back past the 700-point mark.
But we got there last night, with the index nudging upwards by 0.21% to land on 700.3 points.
It’s the first time the index has been this high since mid-April.
The Unmade Index is our tracker of the performance of Australia’s listed media and marketing companies.
We began the Unmade Index on the first day of trading last year, with a baseline of 1000 points. And the index was never that high again.
That means that investors who have been along for the ride have seen the value of their media and marketing investments sink by 30% since then. So 700 points is nothing to write home about.
Nonetheless, yesterday saw Ooh Media lead the way, with shares rising 3.6%, followed by Domain, which rose by 2.21%. Seven West Media also rose by 1.27%.
The rest of the companies that saw movement in their share price yesterday fell downwards. Nine dropped 0.46%, while radio rivals Southern Cross Austereo and ARN Media fell 3.23% and 2.44% respectively.
Communications agency holding group Enero dropped 2.02%, and IVE Group saw a tumble of 2.08%.
Technically, earnings season is already underway. Research house Pureprofile is usually among the first to release its numbers, and it did so at the end of last month with a warning of “softer global trading conditions”.
So what to expect from the big end of town?
At around the time this email drops into your inbox, News Corp will be releasing its fourth quarter numbers.
Although we report on News Corp’s financials, we don’t include its market capitalisation in calculating the Unmade Index. News Corp’s US$12bn market cap - mainly derived from the company’s businesses in the US and UK - is bigger than all its Australian rivals combined.
We’ll analyse those numbers tomorrow, but key things to look out for will include updates on Foxtel’s Project Magneto; trends in subscriptions for streaming services Kayo and Binge; any signals on plans to bring those two services together; how news subs growth is holding up as advertising in the sector falls; and an update on the company’s current level of debt which will be a vital factor in the timing of any Foxtel float.
Seven West Media
SWM’s update comes on Wednesday morning next week.
The company’s problem will lie in persuading the market that it has growth prospects.
The bear case is that this is a company mired in legacy media - primarily an old school TV network at a time when free to air audiences have fallen 20% and the advertising market is falling too, just as the more expensive AFL rights deal is due to kick in. The company’s publishing interests in Western Australia are similarly advertising-exposed, with the likely exit of Meta funding due to impact the whole news sector.
The bull case is that Seven is as well positioned as anyone to reposition its ad-supported video on demand service Seven+ as the premier (and premium) AVOD offering. It could also be argued that SWM’s lack of a subscription streaming service is a boon given the costs involved.
Investors will also be keen to hear about Seven’s debt levels, and whether they’ll ever see the company resume paying dividends.
Nine is likely to report at the end of the following week, around Thursday August 24.
It seems likely that the number of paying subscribers to its streaming service Stan has fallen. But the company may hide that beneath a headline increase in revenues for the service, thanks to price rises.
Nine faces the same broadcast TV pressures of increasing costs and falling advertising revenues as Seven, with the added challenge of making the 2024 Paris Olympics pay. Along with News Corp, Nine is also the most exposed to the likely exit of Meta from the news ecosystem.
Nine also has the added dimension of its majority stake in real estate platform Domain.
Southern Cross Austereo
This will be SCA’s first results without Grant Blackley at the helm.
He may bequeath his successor John Kelly a final gift. The company’s audio streaming service Listnr must be approaching break even. Could it be time to rebrand the whole of SCA under the Listnr banner?
Otherwise, the focus will be on the company’s radio prospects across Triple M and Hit Network, and where it goes next with its orphan regional TV assets after signing a short extension to the Ten affiliate deal.
ARN is the tidiest big media stock on the ASX. Other than its half stake in Emotive, ARN Media is a pure play audio business, owning the Kiis and Gold radio networks along with holding the local rights to the iHeart streaming platform.
Thanks to the sale of its stake in software company Soprano, ARN Media is one of the few big listed media businesses to be nearly debt free. The numbers - which will only be for the half year as ARN follows a calendar financial year - should show whether it got there, despite June’s surprise move to buy a 14.7% stake in rival SCA.
Investors will want to hear about any moves to re-sign Kyle Sandilands and Jackie Henderson to a contract extension, and looking out for an increased dividend payout now the company has little debt to cover.
They’ll also want to know whether there’s been any blowout in costs in integrating and modernising the Grant Broadcasting regional stations it acquired at the start of last year.
Ooh Media is another company only releasing half year numbers, which are due out on Monday August 21.
Back in May, Ooh saw a share price wipeout after warning of a softening market. That was probably an over reaction. Ooh’s prospects are better than many of its ASX counterparts - digitisation has been tailwind rather than a headwind for the out of home sector.
The market will want to see whether unlisted rival QMS has taken share via its City of Sydney contract, and whether the departure of sales boss Tim Murphy has had any effect on revenues.
What’s clear for all the media stocks is that the entire ad market is experiencing a chilly advertising winter. What’s less obvious is whether that is already factored into their share prices, or whether they have farther to fall.
Over the next fortnight, we’ll find out.
Additional reporting: Seja Al Zaidi
Time to leave you to your Friday.
I’ll be back with Best of the Week tomorrow morning.
Have a great day.
Publisher - Unmade