Prime Radio offers ‘insulting’
In a strongly worded presentation at the Prime Media AGM, Chief Executive Officer Ian Audsley has stated that the company will not sell the radio assets in Queensland.
"We are in the radio business for the long term, when the market comes back it will be a good contributor to earnings. We like radio and it makes sense for us to have radio where we have television".
Audsley communicated to the shareholders, that he had received offers for the Prime Radio Network that had been declined referring to these offers as being from "opportunistic tyre-kickers" and saying the figures offered had been "insulting".
It is not surprising that Prime have had approaches.
They built the network for around the mid $70 million range over a number of years, and since doing so have impaired the value of the assets on multiple occasions.
Given FY12 EBITDA was about $4.1m for the radio division, at a nominal multiple of 6-8x earnings the market would be likely to value the radio assets somewhere between $25m – $33m. A long way south of both what Prime Media paid for it, and well below the carrying value in the annual report, even after the most recent impairment.
However, Prime Media will be hoping that three things happen to grow the value of the radio assets.
The Queensland economy improves, the appetite for media assets improves – thus putting upwards pressure on multiples and that the performance of their stations improves.
Commenting on the performance of the overall Prime Media group Audsley (left) described the FY12 results as "a terrific result in a challenging market".
However he was less enthusiastic about the radio division performance saying;
"Our radio business however, has been far more challenging, and the challenges have persisted into this new financial year"
"Radio advertising revenue declined 1.7% in FY12……..the result was a disappointing 13% (decline) in EBITDA".
"Though we are unhappy with the result, it is due to challenging conditions in the Queensland economy. Nonetheless the radio division continues to receive a disproportionate amount of executive time and effort in order to ensure that it is in an optimal state to benefit strongly from any improvement in the Queensland economy and the local advertising market."
He went on to say that the radio difficulties would persist in the medium term.
At the meeting Chairman Paul Ramsay noted of the radio division;
"Our radio business has plateaud due to difficult trading conditions in the regional Queensland market which saw revenue decline. Accordingly, directors reviewed the carrying value of the radio business and took the decision to take a write-down".
You can read the complete annual report presentation from Prime Media here.
Prime Radio recently relocated Zinc 101.9 and 4MK Mackay into new purpose built studios – the picture above is from the new studios – see our earlier story and pictures here.