Free to air television and radio broadcaster Prime Media Group posted a slump in annual earnings, due to the adverse impact of its investment in Destra. Net profit fell from $32. 47 million in 2007/08 to $14.04 million for the year ended June 30.
Prime took a hit on a one-off charge of $17.3 million caused by the media company¹s investment digital media group Destra. Excluding that loss, Prime’s net profit was $31.8 million, up 4.6% , with revenue rising by 24.4% to $264.3 million.
Lexicon Partners delivered its verdict on the future of Destra prior to the results, following an extensive four month review of its operations and strategy. As anticipated the review concluded that the rapid expansion of the company had created “a portfolio of businesses that were not well integrated and which in the main lacked critical mass in their chosen market segments.” Over the last three years Destra made 13 acquisitions across a range of media and entertainment areas including video, music, magazine, online community, media sales and brand funded content production activities.
Destra reported a loss of $76.9 million for 2007-08 following the write down of the value of goodwill, intellectual property and investments. “The use of debt funding in making these acquisitions had also increased the level of gearing which, combined with the tighter interest rate environment, was negatively impacting the performance and growth prospects of the company. This has been exacerbated by adverse trends in consumer and advertiser markets,” the Lexicon statement said.
It also re-affirmed its intentions to sell its entertainment division in the next 12 months.
Despite denying job cuts last week, Lexicon conceded that during the review a number of operational changes were implemented, particularly at head office level, which resulted in significant headcount and other cost reductions. The re-structure resulted in savings of around $4 million on an annualised basis.
“The key recommendation of the review is to focus Destra¹s future on a narrower range of businesses, properly integrated and which deliver synergies and the capacity for a significant share of their market.”
