SYDNEY — Continuing soft demand for independent programming in Europe hit hard at major Australian TV and film producer-distributor Southern Star, which posted dismal results for the period ended March 31.
Profit before tax and abnormals fell 30% to A$8 million ($4.8 million) on sales of $85.6 million, down 1%. After tax, and $25 million in restructur-ing charges and steep asset writedowns, the bottom line was a loss of $15.5 million, compared with a $3.3 million profit the year before. No dividends were declared.
Initiatives aimed at turning the business around included a radical cost-cutting program that saw a 27% cut to staffing levels and a faster than expected integration of its U.K. purchases Circle and Primetime, while debt fell $6 million to $21.6 million. Southern Star is also looking to boost earnings from its Duplitek disc and cassette manufacturing plant, the company’s cash cow, by launching it into pressing DVDs. It has shied away from more costly dramas and boosted production of light entertainment, with overall production hours increasing 10% to 379.
“We had to recognize that given current market conditions, the balance sheet values were overstated,” executive chairman Neil Balnaves told Daily Variety, adding that there were no signs of a sustained recovery in Euro demand.
“This is severe medicine aimed at returning the company to profitability in the next two years.”
Paying for itself
Already paying for itself is Southern Star’s purchase of Primetime, after its Oz soap property “Home & Away” clinched a rich deal to move from Britain’s ITV to Channel 5 next year. U.K. reports suggest the deal could be worth up to $15 million a year to be split between Southern Star and Kerry Stokes’ Seven Network, which produces the show.
But Southern Star’s misfortunes have created tensions with 20% share-holder Reg Grundy’s RG Capital, which is campaigning for a Southern Star board seat and accuses Balnaves, who has a 30% stake, of mismanagement.
Without commenting in detail, Balnaves said if RG Capital “can find a way of adding value for all shareholders, we’ll be interested in listening but we’re still waiting.”