Seven CEO dumping was ‘very considered,’ says Southern Cross’s new chair

Southern Cross Media’s new executive chairman said he removed former Seven boss Jeff Howard as CEO of the merged company just hours before its first results to “accelerate the delivery” of its new strategy.

In an interview following Southern Cross’ half-year earnings release on Tuesday, Heith Mackay-Cruise said he made the management change because he needed the right person in place to take the company forward.

“At the end of the day, this is actually about finding the right leadership for tomorrow’s business, not today’s,” Mackay-Cruise said.

He added the decision, made on his first day since taking over from billionaire Kerry Stokes as chair, had been “very considered” after significant opportunities to improve the business had been identified.

Seven West Media, the television and publishing arm of the newly merged business, saw its net profit plummet by 42.2 per cent to $21.9 million in the December half. The company, which was previously controlled by Stokes, announced its tie-up with Australia’s largest radio company Southern Cross Austereo, in September, with the latter taking a 50.1 per cent majority stake. The deal was finalised last month, and Stokes formally stepped down as interim chair on Friday, handing the reins to Mackay-Cruise as of this week.

Mackay-Cruise rejected suggestions that Howard’s exit after just 48 days in the new role was a move designed to cement Southern Cross’ control over Seven, or that he and his board should have already been aware of the structural headwinds facing the television industry. The TV division’s operating earnings plunged 28 per cent to $66.9 million in the six months to December.

However, Howard’s removal effectively spells a takeover of Seven by Southern Cross, with Mackay-Cruise now assuming the role of interim executive chair alongside John Kelly, the former Southern Cross Media CEO, who has been appointed interim CEO for its TV and radio business.

The pair were chair and CEO of Southern Cross before the merger, and Kelly had been announced to head the company’s audio division, which includes the Triple M Network, Hit Network and digital audio brand LiSTNR, following the tie-up.

Howard, who was the boss of Seven and had been appointed to run the combined entity, was not personally named in the company’s investor briefing on Tuesday, with Southern Cross instead referring only to “key management personnel changes” announced to the market.

“The board recognises these announcements are significant, but in our view […] the changes we have announced are about accelerating the delivery of our strategy and positioning the company to move more quickly and realise the benefits of our merger,” Mackay-Cruise told the briefing.

Questions were put to Mackay-Cruise and Kelly over that strategy, which appears to be a U-turn on what was announced in September. Executive management personnel from Seven now appear all but wiped out following Howard’s exit and Kelly’s re-elevation to CEO while the board conducts its search for a permanent new chief executive.

In the new entity’s first post-merger results, Southern Cross’ revenue was down 1.5 per cent to $1.01 billion in the half year to December. Net profits were down 16.5 per cent to $34.7 million, while earnings before interest, tax, depreciation and amortisation fell 14.5 per cent to $106.9 million in what Mackay-Cruise called “a frustrating economic and advertising environment.”

The company did not declare a dividend for investors, saying it was focused on reducing debt.

Mackay-Cruise said The West Australian newspaper continued to “demonstrate strong digital momentum,” with its digital platforms recording 56.8 million page views in December, up 27 per cent year-on-year. The West Australian recorded EBITDA of $14 million, down 5 per cent from the previous reporting period.

Southern Cross’ audio division recorded earnings growth of 28 per cent to $40.1 million, while revenue rose 3.2 per cent to $216.5 million.

Asked how he would run the Seven Network and the West Australian, which have been so closely associated with Stokes for many years, Mackay-Cruise said he has “different shoes to Kerry”.

“I would make the comment that today’s board is an independently governed board. We’re very lucky to have Ryan [Stokes] and [the Stokes-controlled investment company] SGH be the main shareholder and sit around the board,” he continued.

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