GTN Limited (GTN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the GTN Limited H1 FY '25 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Peter Tonagh, Chair. Please go ahead.

Thank you, and good morning or good afternoon, everyone, and thank you for joining us for our overview of GTN's performance in the first half of the 2025 fiscal year. We're very proud to report another solid financial performance this half as the business transitioned to having new majority shareholdings and a new Board composition. And just on that note, I'd like to welcome Rob Martino, Jason Korman and Bill Brown to our Board as nonindependent, nonexecutive directors. Personally, I'm very confident that each of them has a unique contribution to make for GTN's ongoing success. In the first half of fiscal year 2025, we delivered a 2% growth in revenues and an 11% increase in net profit after tax to $4.9 million. We finished the year with net cash of $14.5 million before lease liabilities of $2.9 million. Our cash balance in this period was affected by an increase in working capital of $11.8 million, which was predominantly due to delayed debtors collections in the U.K. and Canada. And on that note, I'm pleased that as of the 17th of February as that working capital unwound, our net cash has risen to $29.7 million. Brent will take us through a bit more detail on each market and our half year performance, but I'd like to focus on a few highlights before I hand over to him. As I mentioned, total revenue grew overall by 2% to $96.7 million. Net profit after tax increased by 11% to $4.9 million. Reported adjusted EBITDA decreased 7% to $12.5 million, but was impacted by $1.45 million of costs relating to Viburnum's off-market takeover bid and extensive rebranding of the ATN business. Removing these one-off costs, adjusted EBITDA would have grown by 4%. Australia continues to be our biggest and most profitable market, and it delivered minor revenue growth over the same period last year despite the challenging advertising market. Also within the result, there's an investment of $1.7 million in committed premium inventory with the expectation of future payoffs, and that investment led to an adjusted EBITDA of $9.8 million, which is down from $10.5 million in the first half of FY '24. In this period, our non-Australian markets accounted for 55% of revenue, notwithstanding the negative impacts of exchange rate movements. In the U.K., under John Quinn, revenue grew by 14%, delivering an adjusted EBITDA of $1.9 million, while Brazil grew 11% in local currency but declined 6% in Australian dollars, driven by a 17% devaluation of the Brazilian real against the Aussie dollar. It was a challenging half in the radio market in Canada with revenue declining 3% in local currency, but the CTN business still contributed $1.8 million to our adjusted EBITDA in the first half of FY '25. Our balance sheet remains strong even with the continued paydown of our debt facility, our ongoing share buyback program and the payment of our final FY '24 dividend. As at December 31, 2024, we had $14.5 million of net cash before lease liabilities of $2.9 million. And as I mentioned earlier, this balance was impacted by an increase in accounts receivable. Since that balance date, we've received $21.5 million of debtor collections from the U.K., Australia and Canada. And as a result of that, we held a net cash balance of $29.7 million as of the 17th of February. As a result of that cash balance, we are delighted to be able to declare an interim dividend of $0.0247 per share, and that represents 100% of first half FY '25 net profit after tax, which is in line with our intended dividend policy of distributing up to 100% of NPAT. The first half FY '25 dividend reflects an annualized dividend yield of 9.1% based on GTN's last closing share price. Looking forward, our strategic focus is on growing operating earnings while optimizing capital management. We continue to pursue opportunities to enhance the existing business' profitability through ongoing improvements in sales effectiveness and operational efficiency, and we remain open to compelling expansion opportunities. Our capital strategy prioritizes working capital efficiency and treasury optimization while evaluating various capital management options, including dividends and share buybacks to deliver shareholder value. Today, I'd like to hand first to Vic Lorusso, our CEO of ATN, so he can provide a bit of an operational update before we hand across to Brent for the financial update. Over to you, Vic.

Thanks, Peter. I'm pleased to update on our operational performance, growth and our strategic execution across our 4 country operations. We'll start with ATN. ATN has redefined its position as the media that gets attention in market backed by a refreshed brand strategy and messaging as advertisers prioritize engagement and attention. Our new attention media positioning really reinforces quality of engagement, our speed to market, our significant reach and cost efficiency across traffic, news, sport, weather, fuel and entertainment. We've invested in premium inventory across metro and regional markets, enhancing our high-value ad placements nationwide. With an expanded product suite and premium audience, ATN is really driving new demand and strengthening its market relevance. ATN, also this half, led Australia's first attention audit with U.S.-based Adelaide Metrics, proving really that ATN delivers high reach and high engagement, a winning combination for advertisers. And we've also launched a multicultural audio offering in all major markets, so reaching Australians who speak language other than English at home. ATN continues to evolve and innovate, giving advertisers smarter and more efficient ways to engage audiences. Under Fabio Menezes leadership in Brazil, BTN remains the benchmark in Brazil's information broadcasting space, now reaching 105 affiliated stations across the 9 key markets. In the past 6 months, Fabio and his team have expanded into new regional market, Florianópolis, reinforcing our growth strategy while increasing our active client base to 213 active clients. It's a 6% rise in active clients, reflecting our strong market momentum in Brazil. Operationally, in Brazil, we've streamlined helicopter operations, optimized in-market sales strategies and brought in top advertising talent, ensuring smarter engagement, more targeted prospecting and personalized client service. So with a clear strategy, expanding reach in Fabio's leadership, BTN remains a dominant force delivering unmatched value to our clients and partners. As Peter mentioned, despite industry challenges, CTN continues to hold a very strong share of agency spend, demonstrating market resilience and solid client relationships under Donna Gardener's leadership. In the last half, Donna led a strategic leadership transformation, fostering cross-department collaboration, ensuring every part of the business contributes to growth. CTN is investing in ways to expand our reach, actively negotiating new affiliate partnerships and tapping into growing demand for regional advertising. Smart strategy, CTN is set for future growth, expanding its footprint and maximizing advertiser value. In the U.K., with John Quinn's leadership, GTN U.K. has positioned itself as the largest independent radio network, so delivering premium content to over 31 million adults weekly. With 240 radio stations and partnerships, GTN U.K. provides exclusive solus ad positioning, driving stronger engagement and recall. Our content and our reach continues to set the benchmark for high-impact advertising and our position as a trusted media partner. We're proud to say GTN continues to grow and innovate backed by strong leadership, strong sales teams, strong operational teams positioning us for lasting value to our partners, our clients and you, our shareholders. On that note, I'd like to hand over to our Global CFO, Brent Henley.

Thanks, Vic, and good afternoon, everybody. I'd like to start by highlighting the key messages for the first half of FY '25. FY '25 revenue was $96.7 million, an increase of 2% compared to first half FY '24. International operations have grown to represent 55% of GTN's revenue. Adjusted EBITDA of $12.5 million was down 7% compared to the first half FY '24, inclusive of nonrecurring costs of $1.45 million. NPAT of $4.9 million was up 11% compared to the first half FY '24. We have a strong balance sheet. First half FY '25 net cash of $14.5 million was due to seasonal net working capital build, which has now unwound in the start of 2025. Our net cash as of the 17th of February was $29.7 million. There was a total shareholder return of $12.3 million in the first half of FY '25. That comprised of a dividend of $3.4 million, the final dividend from the previous year; share buyback of $1.9 million; and debt repayment of $7 million. We've announced an interim FY '25 dividend of $0.0247 per share, unfranked, which represents 100% of our first half FY '25 NPAT. And as Peter said, this represents an annualized dividend yield of 9.1% based on GTN's last closing share price. As previously stated, revenue for the first half fiscal year increased 2% to $96.7 million. When compared to the first half, the U.K. revenue increased 14% and Australia's revenue increased 0.3%. Canada's revenue decreased 6.1% and Brazil revenue decreased 6%, although in local currency, Brazil grew by 11%, but the year-on-year performance in Australian dollars was impacted by a 17% devaluation of the Brazilian real. Revenue from the U.K. operations benefited from a favorable currency movements, while Brazil and Canada were negatively impacted by currency movements. When measured in local currency, the United Kingdom revenue increased 11.8%; Brazil as we said, increased 11%; while Canada decreased 2.9% compared to FY -- first half FY '24. Adjusted EBITDA was $12.5 million compared to $13.3 million in the first half, a decrease of 7%. This result was impacted by $1.45 million of costs relating to the Viburnum off-market takeover bid and extensive rebranding of the ATN business. If we remove these costs, adjusted EBITDA would have grown by 4% compared to the first half FY '24. We consider it appropriate to add the financing component of our long-term station affiliation agreement with Southern Cross Austereo to EBITDA because EBITDA includes a large amount of noncash station compensation expense related to the agreement. And by including both amounts in adjusted EBITDA, we believe it provides a clearer view of the financial impact of the agreement. As a result of scaling back drone activity, the EBITDA loss for the drone business was contained to $170,000 in the first half of FY '25. Pleasingly, group NPAT increased 11% to $4.9 million in the first half of FY '25 with an earnings per share of $0.025. Adjusted NPAT, which is defined as net profit after tax adjusted to add back the tax-affected noncash amortization expense related to acquired intangible assets increased 7% to $7.1 million in the first half of FY '25. From a shareholder perspective, we paid a final dividend of $3.4 million, repurchased 4 million shares for $1.88 million and repaid an additional $7 million bank debt during the first half of FY '25, reducing debt to $1 million as of the end of 31st of December 2024. Due to the group's strong balance sheet and financial performance, the Board has decided to declare an interim dividend of $0.0247 unfranked, which is 100% of the first half FY '25 NPAT and represents the annualized dividend yield of 9.1% based on our last closing share price. In addition, the Board has adopted a target dividend policy of paying out up to 100% of net profit after tax to be paid as an interim and final dividend annually. This policy can be altered at any time on the liquidity needs and performance of the company and is subject to adjustment for nonrecurring and noncash items may impact NPAT. The business has received a credit-approved commitment letter from GTN's existing lender, Commonwealth Bank of Australia, for a new 4-year $35 million facility to provide balance sheet flexibility and support capital management initiatives in 2025. We continue to engage with our advisers to progress available capital management options and are looking to meaningfully progress this initiative in the second half of FY '25. I will now turn back the call to Peter for an update on the second half of FY '25. Peter?

Thanks, Brent. So I'll just give a very brief update on how we're tracking into this calendar year. As many of you will know, the market continues to have a very short sales cycle. But for January 2025, revenue finished slightly ahead of the FY '24 number. Future results are going to be very dependent on the economic conditions in the markets in which we operate. All 4 of our markets continue to be well positioned with solid affiliate lineups, strong sales teams and a very strong competitive position in our largely unique offering. We've got a strong balance sheet, and we believe that everything is in place for improved financial performance as economic conditions continue to improve. This now ends our prepared remarks, and we'll now open the lines to questions.

[Operator Instructions] We are showing no questions at this time. Pardon me, we do have a question from Finola Burke with RaaS Research Group.

Congratulations, Peter and Brent and team on the results. I just wanted to flesh out if you were looking at further capital management initiatives in addition to increasing the dividend payout ratio to 100%?

Yes, Finola, we are looking at the moment, and we're engaged with our advisers on looking at a number of different capital management options, and we hope to progress those in the second half of FY '25.

Your next question comes from Andrew Moffat with Cowoso Capital Pty Ltd. [Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Tonagh for closing remarks.

Okay. Thank you very much, and thank you to everyone for joining. Just to wrap up, we're very pleased with the current group performance, and we remain very confident about the future. GTN is well positioned to continue to deliver solid earnings growth with our new locally based executive team, our strong country heads in each of our markets. And as we've discussed, a solid balance sheet providing optionality for growth investment and optionality for returns of capital to our shareholders. We look forward to speaking to you again after the fiscal 2025 results. Thank you again for joining us.

That does conclude our conference for today. Thank you for participating. You may now disconnect.