Metro FM Radio Valuations – Who Is Worth What?
When the existing two-out-of-three cross media ownership rule is finally revoked, then each of the three highly profitable commercial metropolitan FM radio groups (SCA, ARN and Nova), will be amongst the most highly sought-after assets in any ensuing media match-making frenzy.
Unlike the larger newspaper and television groups which have been struggling financially in recent times, the metro FM radio broadcasters have continued to enjoy reasonable growth in advertising revenues, profits and margins over the past half decade.
Between calendar year (CY) 2011 and CY 2016, the three metro FM radio groups in aggregate managed to generate 4.6% compound annual growth in total revenues and even higher 5.4% per annum increases in operating profits, which led to record profit margins being achieved last year.
In CY 2016, the average FM group realised $226 million in total revenues from which were generated $73 million in operating profits (EBITDA), which represented a 32.3% EBITDA margin and was a staggering result for a traditional media sector.
Given both their impressive recent financial performance and their still attractive future prospects, Global Media Analysis (GMA) believes that a valuation multiple of up to 10.0 times maintainable EBITDA would not be inappropriate for the metro FM radio sector as a whole.
Applying such a multiple to the sector’s aggregate EBITDA in CY 2016, gives the sector a valuation of up to $2.2 billion, or up to $730 million per group on average.
Exactly how that gross sector valuation amount might eventually get divided up between the three metro FM groups, will ultimately depend upon how prospective purchasers or merger partners assess the comparative strengths, weaknesses and future prospects for SCA, ARN and Nova. Some of those factors are considered in the remainder of this report.
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