ARN Media Limited (A1N) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to ARN Media FY '24 Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, CEO and Managing Director, Ciaran Davis. Please go ahead.

Good morning. Welcome to ARN Media's full year results. Thank you for joining today's call. I'm joined by James Marsh, our Interim CFO, and look forward to Alexis Poole commencing her role as CFO with us next Monday. Our agenda today follows the usual format: key highlights, group and segment financial performance and then a look at priorities over the coming 12 months and beyond before closing with the outlook and Q&A. The past year has been marked by macroeconomic pressures and shifting industry dynamics, yet ARN Media has demonstrated resilience, adaptability and strength. We have delivered group revenue up 9% and EBITDA up 30%, driven by a revitalized Cody Outdoor in Hong Kong. Our Australian operations achieved solid revenue and EBITDA performance in a challenging market and delivered exceptionally strong cash flow of $28 million. You'll be surprised to learn that we have had above-market radio performance on KIIS in Sydney and Melbourne following the launch of the Kyle & Jackie O Show across both markets. ARN is a truly multi-platform audio business and now connects brands with over 10 million listeners across broadcast, streaming and podcasts. Our digital listening is growing, once again, the #1 podcast publisher, and iHeartRadio now has 3 million registered users, up 10%. This is driving additional audio -- digital audio revenue growth, up 28%, and we see this trend continuing in 2025. Our Leaders In Local regional content strategy gave us 10 #1 ranking surveys out of 12, and excellent sales strategies delivered regional share growth every year since we acquired the regional network and in 2024 was up 6% on regional national sales. We have commenced a business transformation program that is expected to deliver cost out of $40 million over 3 years, positioning ARN as the most profitable audio business in Australia. And as part of this program, we identified and recruited a new COO, Michael Stephenson from Nine, to lead the next phase of profitable growth and commercial opportunities. He commences on March 20. Finally, we secured and launched 2 new contracts at Cody in Hong Kong, reestablishing its market presence as a leading player in the market. Investment launching these contracts impacted 2024 cash flows, but the investment phase is now complete. In order to give absolute clarity across the whole business, we have provided detailed information across group, Australian and Hong Kong segments. From a group perspective, revenues were $365.6 million and EBITDA at $93.1 million. NPAT of $14.3 million reflects the investment phase establishing Cody contracts, requiring cash investment to set up the new contract successfully. This was a combination of $10 million of working capital, driven by the relatively long payment terms normally enjoyed in Hong Kong and funding the early losses whilst we built up our sales capability. CapEx was within the $8 million to $10 million range as guided, and the Board has declared a final dividend of $0.011 per share, bringing the full year to $0.023 per share, a payout ratio of 60% of NPAT. In Australia, the Australian operations revenue was stable year-on-year at $318.7 million. As always, our cost management is stringent and delivered flat people and operating costs ahead of the 2% to 4% guidance. EBITDA, including investments and corporate overheads, was $63.5 million, generating free cash flow after lease payments, interest and tax of $27.5 million. We'll talk more about our digital audio performance later in the presentation, but digital audio was EBITDA and cash flow positive for H2 ahead of guidance. The launch of Tram Body and KMB Bus Body contracts grew revenue to $47 million at Cody from $16 million and EBITDA to $29.6 million. Specialized sales teams have been formed, now proficient with selling Tram and Bus inventory, and we have delivered strong quarter-on-quarter revenue growth. The team has done a great job on cash management, limiting H2 working capital investment to $10 million compared to the $12 million to $15 million previously guided. And as I mentioned, Cody was cash positive EBITDA after lease payments in Q4 2024. Looking at the drivers of ARN's performance. ARN metro revenues were back 3%, slightly behind market, which was back 1%. While the market decline accounted for about $2 million of this, audience performance on the GOLD Network was a key contributor, and we have spent a considerable amount of time looking at the areas to be addressed in 2025 to claw back lost share. These include the rebrand of WSFM to Gold and additional marketing for Gold in Melbourne. I will talk more about these later in the presentation. As the graph on the right of Slide 6 shows, above-market commercial performances at KIIS Sydney and Melbourne and solid ratings performance in other markets of Brisbane, Adelaide and Perth helped offset some of the decline. A lot has been written about our KIIS station in Melbourne, but the fact is that KIIS was the #1 national network in 2024 with a 9.4% share. In Sydney, KIIS 1065 delivered its second best ratings year ever. The station continues to appeal to people 25-54 with more listeners in this demographic than any other station. All of this contributed to KIIS 1065 achieving record commercial share in 2024. In Melbourne, a topic of conversation for many, KIIS 101.1 achieved a flat commercial share. And as we have said many times before, the opportunity for commercial growth on that station remains, and we remain committed to its long-term success. In April, the Kyle & Jackie O Show launched in Melbourne. Sydney and Melbourne together comprise 62% of the Metro Radio market value, and growing the show to mirror the audience success to that of Sydney will unlock commercial opportunity. While the launch into Melbourne has been the subject of much attention, the show remains Australia's most-listened-to radio show, reaching over 1.7 million listeners each week. In Sydney, the Kyle & Jackie O Show's partnership has seen it maintain its #1 position for 48 surveys in a row. It is the #1 radio catch-up podcast, the #1 streamed live radio show of 42%. And their popularity is unmatched even across TV, where it has doubled the weekly audience of many of the most popular shows on free-to-air. Moving to our regional performance, where our commitment to delivering live and local content really connects with communities. And this year, our survey results proved it. Across the 12 surveys we featured in, we secured 10 #1 spots in markets such as Sunshine Coast, Hobart, Ballarat, Darwin and Canberra. On the Gold Coast, our live and local strategy continues to prove its value, where we maintained our #1 position and delivered a clean sweep of #1 results across all dayparts. Total regional revenues of $104.9 million have grown significantly since we acquired the network and demonstrates the resilience of regional communities. And amid the increasing pressure on regional print and TV services, the significance of our footprint for both audiences and advertisers cannot be underestimated. Our share of national regional spend was 25.4%, up 6% year-on-year and a growth of 13% since acquisition. We continue to centralize shared services, building on already strong profitability and allowing us to maintain investment in localized content and sales teams. There's no doubt the importance of regional markets will continue to grow, and ARN is well placed to play a significant role in these economic markets. The digital audio opportunity continues to grow as audiences engage in digital formats on top of their broadcast radio consumption. Our revenue growth of 28% to $25 million was driven by exceptionally strong podcast growth. At the half year, we guided to a Q4 EBITDA and cash flow positive result for 2024. And pleasingly, this has been achieved, not just for the quarter, but for H2 with this trend set to continue for the year. A number of factors give us confidence. Firstly, diversification of formats into areas like podcasting is attracting new categories of advertisers, as the table on Slide 9 shows. ARN is the #1 podcast publisher in the country with 7 million monthly users. Downloads of the iHeart app are up 10% to 3 million registered users. We are growing our addressable audience, and our ad tech capability enables us to deliver tailored solutions to clients effectively, transparently and with precision. Our iHeartMedia partnership allows us the benefit of a development pipeline that is in keeping with other global ad tech players without the need for ongoing CapEx demands, and we are on the same product road map, facilitating faster and more sophisticated advertising and CX upgrades and experiences. Our sales teams are becoming increasingly sophisticated and proficient selling broadcast and digital, and we will be launching new products and services to the market this year to accelerate advertiser demand. Turning to Cody. During the year, Cody secured 2 pivotal advertising concession contracts in Hong Kong, reestablishing its market presence. In May 2024, we commenced a 5-year contract for the Hong Kong Tramways, while in July '24, we commenced the KMB Bus Body contract covering nearly 4,000 buses. Launching requires the building of specialized sales teams with additional working capital required to support early challenges in the trams contract and the longer cash collections in Hong Kong market. Strong local expertise with good cash management and a better-than-expected performance from the KMB contract limited working capital investment to $10 million in H2. As the graph on the right shows, quarter-on-quarter revenue and EBITDA growth with cash-positive EBITDA after lease payments in Q4. The investment phase has now finished, and Cody is targeting to be cash flow positive in 2025. The business is now one of the leading out-of-home specialists in Hong Kong. It has a 27-year track record of securing and maintaining a profitable portfolio of contracts and has long-standing collaborations with major advertising agency groups and blue-chip clients. Sammy and the team are an experienced local management team with many years' experience, and the long-term nature of these contracts covering extensive residential, business and tourist areas strengthens Cody's valuation and growth trajectory. James?

Thank you, Ciaran. I will take you through our results for the last 12 months. Additional information is included in the appendices. Our financial performance has been heavily impacted by the new Cody contracts. Over the coming slides, I will break this out to demonstrate the underlying trading performance of the Australian operations compared to our Hong Kong business. Reported group revenues were up $31.4 million or 9%. This is almost entirely driven by Cody, resulting from the new contracts we commenced in 2024. ARN revenue was broadly stable in challenging market conditions. Costs were up $9.5 million, again, driven mainly by the new Cody contracts. EBIT was down $7.5 million, almost entirely all driven by the increased depreciation we have had on the new Cody leases. In addition, we have had the impact of depreciation for the lease on the new North Sydney office. Net profit before tax has been impacted by the higher interest on the new leases. And in addition, we have had a slightly higher debt level supporting Cody in the year. Details of all significant items are included in the appendices. The largest items relates to the costs of the proposed acquisition of Southern Cross Media. Now moving on to results by geography. To assist explaining the result, we have broken our profit and loss and cash flow statements into 2 categories: Hong Kong and our Australian operations. Firstly, Hong Kong. We have effectively rebuilt the business this year with the 2 new contracts. Our revenue has grown through the period as we built up our sales team. However, our contract costs are fixed. Our Australian operations have remained very stable with revenue and costs broadly flat, with the main reason for the decline in EBITDA driven by our investments in Emotive in a highly competitive sector. Our interest costs have stepped up, driven by lease costs in Hong Kong. In Australia, our debt costs have increased due to higher average debt and new leases, mainly the new North Sydney lease. When we look at the composition of ARN, metro, regional digital and corporate, the ARN business has had a very stable year with broadly flat revenue and EBITDA. Revenue first. Our metro revenue declined year-on-year, driven by the overall market decline and a decline in ratings on the GOLD Network. Regional revenue grew year-on-year, supported by our national sales infrastructure. Digital revenue grew by 28% year-on-year. Revenue-related costs or cost of sales increased, driven by increased podcast costs from the growth in digital podcast revenue. Our people and operating costs are flat year-on-year, ahead of guidance. From 2025, we will report the ARN and corporate segments as a single segment. Now looking at the ARN cost base. Our people and operating cost base has remained stable year-on-year. A bridge to our total people and operating costs for financial year '24 shows our path. Firstly, we have reinstated some critical marketing costs we saved in '23. Then adjusting for one-off marketing costs for the launch of the new Melbourne breakfast show of $2 million. We have then seen inflation increase our costs by $3.5 million. And finally, we show the in-year savings from our cost-out program of $6.5 million. These are annualized into '25. We are focused on our people and discretionary costs as we invest in additional resources to grow our digital business. Now moving to Cody Outdoor. We've been pleased with the launch of the 2 major new contracts in Cody. These commenced in May and July into a Hong Kong market with low business confidence. Our revenue has had a total mix shift from the former roadside contracts being replaced by the new trams and buses transit contracts. We have incurred a first year loss as we started selling these new contracts from scratch in the year. However, we are pleased that we are cash positive at EBITDA in Q4 after lease payments. Now moving to group cash flow. ARN remains a highly cash-generative business with strong operating cash conversion. Cash metrics in the period were impacted by transaction costs on the proposed SCA transaction and the setup of new contracts in Hong Kong. We've been pleased that CapEx has returned to our normal range of $8 million to $10 million. Our net debt has increased year-on-year by $7 million, and this represents the setup of the new Cody contracts, including the working capital. This has been offset by our solid Australian operations cash generation after dividend payments. Now as we look at moving towards our group cash flow between Australia and Hong Kong. Our Hong Kong business required cash investment to set up the 2 new contracts successfully. This is a combination of around $10 million of working capital, driven by the relatively long payment terms normally enjoyed in the Hong Kong market. And in addition, we have needed to fund the early losses while we built up our sales infrastructure in the Hong Kong market. We've been pleased with the continued strong cash flow performance of our Australian operations. In the year, we generated free cash flow of $27.5 million despite the setup in interest, driven by the new lease and higher debt levels. We benefited from a lower tax expense in the year and benefits of resolving prior period tax refunds. Going forward, we expect the cash flow tax payments to be aligned with the income tax expense. Now finally, the balance sheet. The balance sheet remains sound with net debt of $82 million. You will see a marked increase in right-of-use assets and lease liabilities on recognition of the new Hong Kong contracts. Our debt has good tenure and access to $64 million of undrawn limits, which remain on the group facility at 31 December. In line with adopting a prudent capital management approach, we have kept the share buyback on hold. And today, we announced a fully franked dividend of $0.011 per share, making for a total dividend of $0.023 per share, 60% of NPAT before significant items. Now I pass back to Kieran.

Thanks, James. Turning now to 2025 and beyond. ARN reaches an audio audience over 10 million across broadcast, streaming and podcast weekly. And we are operating in an exciting sector of media that is growing audiences. 17 million people listen across the country with a growing number tuning in via digital devices. On top of that, 11 million people listen to podcasts. For brands, this means audio is uniquely engaged with scale and versatility, delivering attention and connection like no other medium. The total value of the market is also growing to $1.2 billion. And as the slide on 23 shows, the commercial radio industry now breaks out verifiable data across metro, regional and digital, so we can accurately measure the trajectory of performance. This tells us that a gap exists between consumption of audio and the 8% share of media it receives, and this is an opportunity for ARN and the industry to capitalize on. Looking ahead, the opportunities in the audio landscape are abundant. The enduring power of radio and the growing demand for personalized and immersive audio experiences will continue to create new avenues for growth. As we have just seen, we are operating in a sector of media that has plenty of upside. However, we must continue to adapt and maintain our competitive edge and position the business to invest in the key growth areas of content, distribution and commercialization. We have commenced a 3-year business transformation program that is expected to deliver cost out of $40 million, approximately 20% of the cash cost base aimed at improving efficiency, fostering innovation and ensuring long-term success. This transformation underscores our commitment to drive shareholder value and will focus on 3 areas: digitizing the business, leveraging technology and AI to deliver intelligent and simplified operational model and efficiencies; growing audiences and engagement in key demographics to expand reach, create new audiences and launch new innovative digital formats; and deliver all-audio commercial solutions, positioning ARN as the leading all-audio platform, connecting with brands, engaging with listeners across broadcast, streaming and podcasts. This transformation is not just about efficiency, it's about positioning our company for future growth. Before closing, I want to touch briefly on our plans for KIIS and Gold in 2025, of which growing Kyle & Jackie O in Melbourne is a priority. Focus remains on building familiarity, audience loyalty and a reinforcement of the show's fantastic DNA for bringing the biggest entertainment, celebrities and prizes in Australian radio with continued investment in marketing and high-impact activations. This year, there will be more dynamic dual-city content and has been a busy promotional start to the year with more localized events and most recently, we launched the Kyle & Jackie O $5 Million Dig. On the GOLD Network, we are repositioning the brand slightly younger to maximize commercial appeal and looking to expand the format across the country into 5 capital cities. Greater consistency on goal of programming and operations will see us create stronger commercial opportunities, including national integration options, which we expect to see coming through in H2. And finally, to the outlook, where at ARN, stronger audience ratings and renewed commercial strategy to see total revenue growth build during the year with low single-digit forecast growth for the full year. Digital audio revenues will outpace 2024 growth levels with recently launched live streaming commercial opportunities to drive accelerated growth rates. Strong cash generation is set to continue in Australia by targeting flat people and operating costs in 2025, despite investment for sustained growth in new talent contracts, digitizing the business and capability to grow our digital audio business. The transformation program is targeting, as I said, $40 million cash cost out over 3 years to drive new commercial opportunities. And at Cody, Cody is targeting to be cash flow positive in 2025, as revenue at the KMB Bus Body and Trams continue to build. Thank you. And I'll now hand over for questions.

[Operator Instructions] Our first question comes from Hamish Frazer from E&P.

My first question is about the broader ad market, specifically in the first quarter of this calendar year. Some of the other media channels like TV and out-of-home have pointed to a bit of a pickup. And I was just wondering if you could provide any commentary on the audio market specifically.

Yes. I mean it's getting shorter and shorter. I think we've mentioned over the last number of calls over the last couple of years how short the market is. It's getting shorter and shorter. And even this morning, I found out that a promotion that started on one of our stations already has just been sponsored. It's that short. What we're seeing is the continued trajectory of sort of a transition into digital audio. We launched a new live -- breaking out live streaming product into the market start of the year that's gone very well. And as I say, over the year, we see it building to a full year low single-digit growth. I think the metro market will be -- it will come back a little bit as more movement goes into digital from the live streaming products that some of our -- the industry is doing together. So overall, very, very short, but the trend continuing in terms of digital audio acceleration, podcast acceleration and Metro Radio performed very well. I also see categories of interest coming through from the pipeline of pacing that we're seeing and briefs that we have. There's renewed interest. And I think certainly, with the election, the uncertainty around that, the timing of that, I think there is a feeling and certainly the pipeline that we're seeing of an ad market that may be starting to move. But we've said that before, it hasn't quite happened. So we're looking at a cautious approach for the year. As always, we manage our costs very well accordingly. I think we demonstrated that last year. But if the market doesn't move, we anticipate, we're able to move on discretionary costs. And that's something that we're very focused on because the cash returns for ARN are extraordinarily strong. And I think we're in a great position to be able to maintain that into this year.

And are you expecting the government category to be a really important driver of that growth this year with the election?

The election is funny for radio in that, yes, I will certainly see obviously increased spend, and we're starting to see that coming through already. In some previous elections, it has happened that other advertisers have sort of pulled away for a period of a couple of weeks just while the noise is in there. I haven't seen that happen yet. So -- and certainly, the sales team who are doing a great job in market driving briefs, driving revenue. I expect we're going to try and hold as much of that. But at the moment, I'm not seeing any sign of that decline coming through. And yes, government spending is increasing.

Okay. And my last question is in relation to the Cody Outdoor business. I was just wondering if you're expecting to see any one-off working capital items for FY '25 now that the asset is established?

No, we're not. And there's no CapEx for that business either. So as I said before, we're expecting it to be free cash flow positive for the year. The contracts are up and running. The sales cadence is up and running. They're performing well and the establishment of the investment phase is over.

[Operator Instructions] Next, we have Charlie Kingston from K Capital.

Just a few questions, please. Firstly, on Cody. Just trying to get a sense of what the investment case is here, noting we're predominantly an Australian radio company. And to have a Hong Kong outdoor advertising, it doesn't really seem like a sensible fit or synergistic between the 2 divisions and didn't really generate much last year, but now we've made a decent upfront investment to grow that division. And clearly, there's over the years been speculation whether you're going to keep or sell the business. But just trying to get a sense, I mean, is that distracting for management to be trying to manage the radio company here and then a media company? And is there any synergy between the 2? And just a sense of what the payback is. Clearly, we've spent a lot of money upfront on winning these new contracts, but my understanding is they're not permanent. So you're going to have to renew them at some stage again. So it doesn't really feel like there's an annuity that we're building in terms of that business. But just if you could give us an explanation as to the investment case, what you expect to generate from spending all this upfront money on Cody, please, and what the longer-term outlook is? You said it enhances the valuation. Are you potentially looking to sell that now that you've spent some money and won these contracts? But yes, just some more color around Cody and the longer term and returns you expect to generate, please?

Thanks, Charlie. As we spoke about before, the business was to have contracts -- 2 contracts that were running down was not effectively going to not renew them because they were unsustainable from an economic perspective. These 2 contracts that we've talked about for a period of time were coming up. And rather than sort of push a business that has been operating for 27 years successfully with profitable contracts, with a very strong presence and brand in the market and let it go to nothing, the decision was made to invest in those contracts. We have great confidence in the local team. Sammy and the team are long established. They've got great relationships. They understand the market very well. They work with agencies very well. And securing those contracts gives us tenure of 5-plus years. We obviously did need to invest in 2024, which we knew about, but they're operational and running now. And they are sizable contracts. And the market itself is looking as though it's really resonating what we do with the Kowloon contracts on the bus side, the trams on the business side of the island. And I certainly would look at the business now and go, it's got long tenure. It's got profitable contracts that will return cash. It's got a very stable management team. And it's got a management team that doesn't distract much time from what we do here in Australia because they're so long at doing it, and we have a call maybe for an hour once a week. Obviously, a bit more time was spent with them as we set up the contracts and got them running. But we remain very confident in the ability of the team to operate these profitably. And from a strategic perspective, I think the business is well set up. It's got good tenure contracts. It's got a good management team. And I think we have enhanced and created valuation by taking on the contracts.

But just to be more specific, is there a payback? What's your return estimation on the money being spent upfront?

In terms of our...

It's going to be free cash flow positive, I think, in FY '25, but we're spending a lot of money upfront. What's that actually going to generate for shareholders, please?

Annualized, I would suspect we would -- I suspect we are targeting to do revenue of about AUD 65 million, $50 million EBITDA, up and running less than $10 million NPAT. What any sort of transaction might do in terms of multiples is unknown. There hasn't been one for a long time. But I do know that there's a lot of interest in the outdoor market in Hong Kong, specifically coming from other countries in the area.

Okay. So there is a possibility selling the business now that you've renewed these contracts and generated some revenue?

To be clear, I think what we've got is a good business that's up and running that looks after itself that will return free cash in '25, and we will take it from there.

Okay. And then just on the radio and with Kyle, clearly, he's had some health issues. Hopefully, he recovers as swiftly as possible with the brain and whatever happened there. But I suppose we've made a very big bet on Kyle & Jackie O at ARN, 10-year contract paying them lots of money. And clearly, they're very valuable to ARN. So again, hopefully, whatever happens with Kyle, he can continue to perform at his best. But just trying to get a sense of in the event that either Kyle or Jackie O cannot deliver on air to what we've signed them up for, just trying to get a sense of the bench strength behind ARN and the radio network. What happens if they can't deliver on? If one of them, something happens, such would, hopefully, it doesn't. But clearly, with Melbourne, we've made a big investment in those 2. So just would appreciate your thoughts in the event that something happens to one of them, which is an awful question. But yes, what happens then? And how are you protecting the company going forward? What's our bench strength like if -- or behind Kyle and Jackie O, please?

In terms of the health, delighted that Kyle hasn't had to go in for operation. He obviously is monitoring it closely. He's fit and well. He's on air all the time, and he's broadcasting as always. They're monitoring the situation, as we know. And every time I talk to him, he's buoyant and he's open about and he's very, very committed to the success of both Sydney and Melbourne as is Jackie, which is great to see. And in fact, coming back this year, I see a spring in the step and an exercise of determination in them, which I'm very pleased about. In terms of the specific contract and what's in there, we never have, never will disclose that sort of information. Bench strength is an interesting question in that not only have we demonstrated over the years that we've got incredible assets beyond Kyle and Jackie, and I appreciate that they get the majority of the media airtime that, that has put out, but we have been an incredibly successful audio business across the country. Now that doesn't mean to say you have to have big names coming through. It means that you have presenters that resonate with the audience in the market that they operate in. We continually look at new talent that's coming through. We've identified a number of personalities in the regional markets, particularly, who are very strong and have a pipeline to us. But on top of that as well, I would say we're also growing out an additional audio business and form of business operations that's beyond Kyle and Jackie O in terms of just Metro Radio. Our podcast slate is extremely strong and revenue is very good. We're breaking out digital audio opportunities for commercialization. We're building new commercial sales structures and sales teams around better integration and what we're doing there. And if I look at the issue that's happened this year and last year in terms of it, actually the GOLD Network, it wasn't Kyle and Jackie, it was the GOLD Network that probably aged a little bit too much. We're repositioning it younger. We expect that to grow new audiences, and we expect it to grow new commercial opportunities. So a lot in that, just to give you an answer, but it's well beyond what Kyle and Jackie O will do for the network. We have a very, very strong established list of personalities across all of our stations. We manage our cost base exceptionally well. We generate exceptionally strong cash flow, and we have new and emerging business models coming through.

And then just 2 more quick ones. On the free cash flow, just correct me if I'm wrong, but are you quoting that before lease interest? And if so, why? Because obviously, that's a real cost and free cash flow after interest is dramatically lower than before. So what's the internal metric for free cash flow, please?

Yes. So the answer is the numbers we're quoting are after lease, both lease costs and lease interest. So when we look at, for instance, the $27.5 million for Australian operations, that's effectively EBITDA less working capital, less exceptional items, less lease cost, less lease interest and also funding interest as well. So it's effectively the full free cash flow for the business and the Hong Kong number as well of $20.8 million, which is an outflow is again a full number. So yes, we include working capital after all of those costs -- sorry, free cash flow.

The cash flow slide, free cash flow, $25.6 million, then below that net financing cost, including lease interest, minus $18.3 million, drops it to $6.6 million. So is that the free cash flow number, the $6.6 million?

$6.6 million is the number, yes. And then the numbers that we've quoted for out is the $27.5 million, for instance, for the Australian operations that you'll see on the cash flow slide by geography.

Okay. And then just finally, any comment, please, on potential consolidation? Obviously, there was a scrip proposal in the past, but prices have moved around. So just any comment on if you are still looking to consolidate within the Australian radio market, how would you finance that given where ARN trades today? I think from memory, you're not going to be doing a buyback, but just talk me through any potential there reusing our currency to potentially acquire businesses, please?

The merits of industry consolidation are well known. We firmly believe in that. Even our Chairman has spoken to that recently as well. A media operation that's offering scale, that's offering increasingly digital products and commercialization opportunities and can benefit that with efficient cost base is absolutely makes absolute sense, and we firmly still believe in that. We will obviously look at opportunities. We obviously believe that we are a very strong -- we know we're a very strong audio business in Australia. We are focused very much on what we've got to do from a transformation program. That $40 million is going to significantly change the profile of the business, I believe, over the next number of years and give us positive trajectory. So from a strategic perspective, consolidation makes absolute sense. We'll assess our options. We'll assess where we're going to go. We still hold our shareholding in SCA, as you know. But in the meantime, we're also focused internally on driving as much value for shareholders as we can.

I see no further questions at this time. I will now turn the call back to Ciaran for closing remarks.

Thank you, everybody. Look forward to talking over the next few days. Thank you for your time.

This concludes today's conference call. Thank you for participating. You may now disconnect.