06-Apr-2020: Capital Structure and Operational Initiatives
Investor Presentation and Cancel - Dividend/Distribution - SXL
Southern Cross Austereo (SCA) announces Capital Structure and Operational Initiatives Launches a fully underwritten(1) c.$169m Equity Raising
Southern Cross Media Group Limited (ASX: SXL) (SCA or the Company) has implemented a series of capital structure and operational initiatives (Initiatives) which will enhance liquidity and support a more efficient operating model appropriate for the current macroeconomic environment.
The Initiatives are outlined below:
Equity Raising
- The launch of a fully underwritten(1) c.$169m equity raising
- Proceeds to be kept on balance sheet, reducing Net Debt, and to fund transaction costs
Bank Support
- SCA’s Syndicated Debt Facility (expiring January 2023) amended to increase leverage covenant from 3.5x to 4.5x Net Debt / EBITDA from June 30, 2020 through to June 30, 2021(2)
- $50m immediate drawdown of existing facilities to further enhance liquidity, with $57m further undrawn facilities
Operating Expenditure Savings
- $40m – $45m savings in non-revenue related costs to be realised in CY20(3)
- Additional cost saving measures could be implemented depending on the length and severity of the economic impact of COVID-19(4)
Capital Expenditure (capex) Reduction
- Capex reductions of $3m – $6m over FY20 and FY21
- Capex in FY20 reduced to $17m – $18m in comparison to the previous guidance range of $19m – $21m(5)
- Capex in FY21 will be reduced to $15m – $16m
Dividends
- FY20 interim dividend cancelled ($21m cash retained) and no FY20 final dividend will be paid
- The Board expects no FY21 dividends will be paid(6)
The Initiatives strengthen SCA’s balance sheet and provide the Company with improved financial flexibility and liquidity, with pro forma leverage at 31 December 2019 reducing from 2.29x to 1.17x Net Debt / EBITDA(7) (Leverage). The Company believes these actions are prudent in the current macroeconomic environment.
FY20 Trading to 31 March 2020 by segment
Advertising Markets
FY20 advertising revenue for the nine months ended 31 March 2020 is trading 10% down compared to the prior corresponding period (pcp). Forecasting of calendar year revenue is difficult in the current uncertain macroeconomic environment and the Company is not in a position to issue guidance. However, Q4 FY20 and Q1 FY21 advertising revenues are expected to be materially impacted by COVID-19 and to be 30% or more down on pcp.
Radio & Digital Audio
SCA’s audio assets are well positioned to benefit from recovery in advertising markets. Radio audiences continue to grow while Time Spent Listening remains stable. Digital and on-demand audio is experiencing strong growth through original podcasting, catch-up radio podcasting and live-streaming of broadcast radio. PodcastOne Australia revenues of $2.1m in H1 FY20 were up 141% on pcp.
Television
Television remains challenged; however, in the current COVID-19 environment, regional TV audiences have increased across all age groups.
SCA has transformed its television business to focus on its core strength in sales, with capital intensive transmission and playout functions now outsourced to specialised service providers.
Notes:
(1) Refer to note 1 on Page 1 of the Company’s investor presentation released to ASX on 6 April 2020
(2) In addition, the Leverage Ratio and Interest Cover Ratio at 31 December 2020 will be calculated on a Q2 FY21 annualised basis, instead of the customary trailing 12-month basis
(3) Cost savings exclude SCA’s estimate of potential additional bad debts provision of $5m in H2 FY20, c. $6.5M of operating expenditure savings are noncash.
(4) Based on preliminary details announced by the Federal Government on 30 March 2020, SCA expects to be eligible for the JobKeeper subsidy for approximately 1,600 of its full time employees. This subsidy is not included in these operating expenditure savings.
(5) Full year capex guidance provided in H1 FY20 results announcement on 20 February 2020 6 Syndicated Debt Facility prohibits dividends while amended leverage covenant applies or while the leverage ratio exceeds 3.5x Net Debt / EBITDA.
[...click on the links above for more details...]
Capital Raising details:
Fully underwritten ~$169m Equity Raising, comprising:
- a $47m Institutional Placement and
- a $121m Entitlement Offer (EO) at a ratio of 1.75 New Shares for every 1 existing share held by eligible shareholders on the record date of 8-Apr-2020, as follows:
- ~$103m accelerated institutional component (Institutional Entitlement Offer); and
- ~$18m retail component (Retail Entitlement Offer).
Approximately 1,873m new FPO shares in SCA (ASX: SXL) to be issued under the Equity Raising (representing ~244% of existing shares on issue).
All shares under the Placement and Entitlement Offer will be issued at a fixed price of $0.09 per New Share, representing a 45.5% discount to the last closing price of $0.165 on 23 March 2020.
Yep, that's a discount!
