Southern Cross Media, the newly merged entity of Seven West Media and Southern Cross Radio, has reported a profit downgrade, plans to cut 250 to 300 jobs, and announced a change in its board leadership. The events follow a shareholder request for the removal of the executive chairman and are attributed to market conditions that the company states have deteriorated more than anticipated.
Leadership Transition
Heith Mackay-Cruise resigned as executive chairman of Southern Cross Media on Monday following a request from shareholder Sandon Capital for his removal. Sandon Capital had also sought the removal of two other directors, citing financial underperformance since the merger with Seven West Media in January.
Teresa Dyson, a former board member of Seven West Media, will succeed Mackay-Cruise as chair, effective July 1. Dyson will oversee the transition period required to finalize the merger. The company’s board intends to search for two new directors. Kerry Stokes holds a 20% stake in Southern Cross, and his son Ryan Stokes remains on the board.
Financial Performance and Cost Reduction
Southern Cross Media reported that its underlying EBITDA is now expected to be between $185 million and $190 million, down from the previously advised range of $200 million to $220 million. Revenues are approximately 2.5% below expectations. The company will also take write-downs of $65 million to $70 million on legacy TV content contracts that did not deliver the expected commercial benefits.
The company announced a cost-reduction program targeting annual run-rate savings of up to $150 million. As part of this program, Southern Cross Media will eliminate 250 to 300 positions by June 30. The job cuts will focus on mid and back office and corporate staff, primarily from the television side of the business. The company stated it will provide support to impacted employees.
Voluntary redundancies at West Australian Newspapers closed on Monday; the company noted that insufficient applicants may lead to forced redundancies.
Background and Statements
Southern Cross Media was formed from the merger of Kerry Stokes' Seven West and the radio group Southern Cross. Rohan Lund, a former Seven West executive, became CEO of the merged entity in May this year. Seven West holds broadcast rights for AFL, cricket, horse racing, Supercars, and the Glasgow Commonwealth Games.
Rohan Lund stated that the company "must reset our cost base to meet current market conditions and capture the full benefits of scale across our trusted platforms for our audiences and advertisers, now and into the future." He also told staff that "there is strong momentum in audience and revenue share... but we need to be honest with ourselves that those markets are under immense pressure."
"We must reset our cost base to meet current market conditions and capture the full benefits of scale... now and into the future."
– Rohan Lund, CEO
Southern Cross Media cited advertising market conditions that have "deteriorated materially more than anticipated" and noted that legacy contract provisions account for subdued trading conditions and structural changes in the TV advertising market. The company declined to specify which media arms would be affected by the job cuts, citing privacy concerns for employees.