Thank you for standing by, and welcome to the ARN Media HY23 results. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star one one on your telephone. To remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Ciaran Davis, Chief Executive Officer and Managing Director. Please go ahead.
Good morning, everyone, and thanks for joining the call today. Our agenda will follow the usual format, executive summary, followed by financial performance, operational performance, and trading update. In a tough trading environment, the business is doing well, implementing on strategic initiatives, strengthening our position in the radio and digital audio market. With a commitment to add value to our audiences, advertisers, and investors, we are hitting milestones that set us up for continued success. Our investment in talent to increase audiences across all audio formats is yielding positive results, growing our audiences in radio up 4% to 6.3 million listeners and podcasting up 23%. We proudly held the number one position as the broadcast network, a number one position broadcast network in four of five surveys this year, solidifying our reputation as the leading industry player.
Additionally, we achieved the distinction of being the number 1 podcast publisher for an impressive 39 consecutive periods, showcasing our ability to source and produce high-quality content. Our iHeartRadio platform has experienced a strong 12% growth in its registered user base, reaching 2.5 million users. New changes to audience measurement will see the value of this streaming audience increase over the coming years. Our regional acquisition in January 2022 is delivering to its targets despite the hampering macro-market conditions. Our live and local content strategy is a key differentiator, setting us apart in the industry. This approach has not only engaged our audience, but also resonates with local advertisers, with the local regional radio revenues performing well despite very strong comparative in 2022. We're making significant strides in our national revenue synergies target.
In the first half of 2023, we delivered AUD 2 million of the AUD 5 million synergies goal we have for this year. This follows the AUD 7 million growth we delivered in 2022 and comes against the backdrop of significantly reduced government spending in the first half. While radio remains at our core, the digital audio market continues to grow, with IAB figures pointing to a market value of AUD 52 million for the March quarter, a 13% year-on-year growth. Earlier in the year, we undertook a massive sales effort to accelerate our digital sales capability, simplifying the product lineup and implementing a key targeted client growth strategy. These efforts have led to a 37 increase, increase in revenue, and we have confidence of continued growth for the rest of the year and into next.
As a result, our low CapEx model is still on track to hit cash flow breakeven run rate by the end of 2024. Good cost management over the years has always delivered for shareholders, producing strong EBITDA margins. In a challenging market, we have worked hard to keep people and OpEx costs to near flat. This has delivered a robust 28% margin in radio operations, despite 2023 being a year of integration, with investments in key projects to deliver future efficiencies. I'm also really pleased with the progress we are making integrating the regional network, with all projects nearing completion in the coming weeks. These improvements will not only enhance our internal operations, but also see us much easier to do business with, which should positively impact future revenue growth. In March, we received the proceeds from Soprano, finalizing this non-core investment.
We made a long-term strategic investment of 14.8% in SCA, a business we know well in a sector we believe is undervalued, positioning ourselves for future value creation. We continue to implement a buyback and will continue to do so in the second half. Finally, the board has declared a fully franked interim dividend of AUD 0.035 per share, translating to an approximate 10% yield and underscoring our dedication to providing strong returns even in challenging times. There's no doubt that the market has been undeniably tough in the first half, with many in the advertising industry facing challenging headwinds. Total ARN Media revenues were back 2% to AUD 166 million on a pro forma basis, driven by significant reduction in government spending, which was back 58%.
April and May were particularly tough. We have seen improving monthly performance since then. Despite a strong focus on costs and cost out, the revenue shortfall has reduced EBITDA to AUD 36 million and EBIT to AUD 25.3 million. EPS was AUD 0.048 per share. In terms of our financial structure, we believe we are well equipped to manage through the current cycle. Our net debt stands at AUD 52 million, less than 1x. Operating cash conversion was 86%, and in this context, the AUD 0.035 interim dividend has a payout ratio of 73%, reflecting our steadfast commitment to shareholders even in challenging times. Andrew?
Thanks, Ciaran. Good morning, everyone. The financial summary slide is presented in a consistent manner to what has been presented historically, with additional information included in the appendices. Here we show the statutory reported results for the period, with profits up 97% owing to the disposal of the group's investment in Soprano. In the pro forma column, we've normalized the impacts of Soprano profit and a Hong Kong contract not retained from the 2022 financials. Group revenues were back at AUD 6.1 million, or 2% on a pro forma basis, with the current macroeconomic factors impacting consumer confidence and advertiser spend. A range of cost measures implemented at the end of Q1 restricted total cost growth to 3%, despite ongoing inflationary pressures. Considering these impacts, underlying EBITDA fell 19% to AUD 35.5 million, and underlying NPAT attributable to shareholders was back 31%.
Here, we set out the pro forma results for the ARN Group, breaking out metro, regional, and digital, with total revenues back 4%. We lost a small amount of metro share earlier in the year, but over the past 3 months, we've written revenues at or above market, and are confident we can keep this momentum going through the remainder of 2023. On strong comparatives and impacted by reduced government spend, regional revenues finished back 4%. National agency was most impacted, while local revenues, which comprise around 70% of our regional business, finished close to parity with 2022. Excluding the impact of government spend in the current and comparative periods, radio revenues would have finished down 2.5%.
We wrote a further AUD 2 million of incremental national regional revenues in the half and remain on track to deliver a further AUD 5 million of regional synergies in 2023, in addition to the AUD 7 million delivered in 2022. On the cost front, revenue-related cost growth of 12% reflects further investment in digital content, and remaining people and operating costs were managed to +1% on a net basis. Whilst we manage ARN as an integrated network, on this slide, we set out the radio and digital earnings, which demonstrate the ongoing strength of the radio business. Despite ongoing inflationary pressures, we remain very focused on costs, and a range of measures actioned in Q1 will enable us to limit total radio cost growth to +2% year-over-year. Digital revenues grew 37% in the period to AUD 8.8 million.
An in-depth review of product bundling, pricing, market collateral, sales team training, and capacity delivered improved growth in Q2, following a slow start. Podcast revenues, comprising around 50% of total revenues, delivered good growth, while streaming remains an area of focus. Total digital costs grew 12%, or AUD 1.5 million in the period, reflecting further investment in marquee third-party digital content needed to build out the slate. The resulting EBITDA loss for the period lessened by 15% to AUD 5.2 million. We continue to target a cash flow breakeven run rate by the end of 2024. On a like contract basis, Cody Outdoor performed well in the period, with revenues and earnings up 30% and 51% respectively. Through a competitive tender process, the Western Harbour Tunnel contract, which made up around half of Cody's revenues, was not retained.
Whilst a disappointing outcome for the business, with over 20 years' experience operating this contract, we understand it well and were not willing to renew on unprofitable terms. We are focused on minimizing cash flow requirements as a strategic review of options for Cody Out of Home is undertaken. Operating cash flows reduced by 31% on lower EBITDA in the period. Good cash flow conversion was maintained. Soprano proceeds were part utilized to fund the SCA share acquisition, with the remainder being used to pay down debt in the period. Annual recurring CapEx requirements remain unchanged at between AUD 8 million-10 million per annum, as we continue to work through a structured refurbishment program of certain regional offices in the coming years. After more than 20 years headquartered at Macquarie Park, we've signed a long-term lease in North Sydney and will relocate in the first quarter of 2024.
Given the capital outlay and increase to our annual rent profile, significant consideration has been put to this decision. In addition to the current office fit-out being end of life and no longer fit for purpose, the move will see us closer to key agencies and clients, and for our people, provide significantly improved amenities and access to transport. We've included the key financial impacts to assist with modeling. The balance sheet highlights manageable debt levels and 0.8 times leverage. Good tenure and access to undrawn limits remain on the facility. Today, we announced a fully franked interim dividend of AUD 0.035 per share, reflecting a 10% effective yield and a payout ratio of 73%. Finally, we confirm the resumption of our on-market buyback today.
We continue to believe the company is undervalued, and at the current valuation, the buyback is accretive and in the best interests of shareholders. Ciaran?
Thanks, Andrew. Across all formats, audio continues to strengthen as a medium. There are more people listening more often across all formats. Metro commercial radio audiences continue to grow, with an additional 300,000 people listening in 2023. For ARN, this means 4% growth for our total audience. Some of this growth is coming from increased listening opportunities afforded by digital streaming. Online streaming of radio is up 41%, 3 million hours a week in total listening hours since COVID. Further, we are seeing continued growth in Australian podcast consumption, with 43% of all people listening to podcasts monthly. ARN is outstripping the year-on-year market growth rate of 7% to grow listenership by 23%, and today, nearly 60% of podcast listeners listen to iHeart Podcasts. Importantly, though, we don't see this audience uplift coming at the expense of radio revenue.
What we are seeing is that digital audio monetization is complementary and incremental. Many of the client briefs we are responding to now have digital audio as standard on top of radio campaigns, while the growth of digital has also seen us unlock completely new revenue with digital-only agencies. The volume of digital briefs that we receive has grown about 67% year-over-year. After our most successful ratings year ever in 2022, we have continued to deliver outstanding results, achieving our highest-ever network cumulative, reaching 6.3 million listeners in metro markets. Talent is our key differentiator, because what's between songs is more important than the songs themselves. Whether in metro or regional markets, engaging audiences with strong talent will see radio continue to maintain strong relevance despite the efforts of global platforms.
We've experienced 10% growth in the key commercial demographic of 25 to 54-year-olds, and continued growth on key shows in Australia's two biggest markets, Sydney and Melbourne. KIIS 106.5 was ranked as Sydney's number 1 overall station twice, and remains Sydney's number 1 FM station, FM breakfast, FM drive. Kyle and Jackie O continue to go from strength to strength, growing their audience to 921,000 in survey 3 of this year. They consistently deliver at least 230,000 more listeners than any other breakfast show nationwide. KIIS Network Drive show with Woody has had a breakthrough year, reaching over 4 million people each week and growing the critical 25 to 54 demographic by 16%. Gold 104.3 remains Melbourne's number 1 FM station, FM breakfast, FM morning, FM afternoon, and FM drive.
While it's an iconic station, these results have largely been driven by the bold move to import Christian O'Connell into the Melbourne market. It disrupted the landscape and gave the station the momentum it needed to put an enviable gap between number one and the rest. Christian celebrates his 1,000th show today, he's doing a terrific job, and it's been the number one breakfast show in the market for 25 surveys straight. In regional markets, we are fiercely live and local, and unlike any other media operator. 79% of the population listen to radio, and 74% of people believe that radio contributes to a sense of community by broadcasting local news and community announcements. We take our position in the community incredibly seriously, and are firmly committed to our unique live and local content strategy, delivering 147 localized shows across the network.
This is more than any other media owner. Our approach has resulted in ARN taking the number 1 station ranking in 11 markets, with 4 secured this year, Bundaberg, Gold Coast, Hobart, and Bendigo. The regional integration program is nearing completion, which will deliver improved ease of trading with ARN. Specifically, moving to 1 traffic, finance, and invoice process will result in our clients having a much more seamless engagement with us. These projects are due for completion by the end of Q3. These valuable regional audience is converting to revenue opportunities as advertisers look to connect with engaged communities. We know that advertisers are increasingly paying attention to the importance of the regional market, with agency audio spend growing from 9%-15% share of total media spend over the past 10 years.
More recently, in regions, radio continues to outpace other media channels, including digital, when it comes to revenue growth. Our live and local content strategy, despite the current economic environment, has helped ARN deliver a robust regional performance. We wrote over AUD 36.5 million in local regional revenues, slightly back on last year, but off very strong comparatives in 2022. We are gaining share of national revenue in the top 8 markets regionally, and have delivered AUD 2 million of the AUD 5 million synergies nationally that we targeted this year. This solid metro and regional radio performance is underpinned by continued growth in key digital audience metrics. We've grown our registered user base, music stream starts, and podcast downloads, as well as maintaining our number 1 podcast publisher position 39 times straight.
Both in terms of audience take-up and advertising investment, digital audio is the fastest growing category within our market. For this reason, our global partnership with iHeartRadio is of critical importance. It allows us to maintain a continuous product innovation roadmap, completely free of capital expenditure. In the second half of 2023, we will focus on delivering two key initiatives. The first, we will launch iHeartRadio Playlists, where users will be able to make their own playlists. This is a key acquisition and retention driver for iHeart audiences, elevating the personalization capabilities of the platform and our ability to capture valuable first-party data that can be used by our commercial partners for audience targeting. Today, we also announced a multi-year agreement with TED Conferences to represent their network via our sales team.
The content site will bolster our existing network, adding a further 1.8 million downloads per month. As we start to see this sustained revenue growth model, our low CapEx model is on track to hit cash flow break-even rate by the end of 2024. Before moving to the trading update, I think it's important to reiterate the strength of our operational and financial position as we move through this tough market. We are growing audiences across all audio platforms, including our core and profitable business of radio. We are seeing incremental revenue opportunities in digital audio. Our unique localized content strategy is a key differentiator, and we are seeing good regional revenue performance, growing commercial share in key markets, and delivering synergy targets despite the headwinds. Local regional revenues are holding up on strong comparatives. Our balance sheet is well equipped to manage through the current cycle.
Net debt is 0.8x, 86% cash conversion, 73% dividend payout ratio, with the buyback continuing. Finally, in a short market, we are seeing an improved trading performance for Q3. Looking closely at that trading update, Q3 radio revenues are pacing in line with prior comparative periods, following above-market performance in July. Briefing activity suggests a similar trajectory into the final quarter. H2 digital audio revenues are pacing at +25% year-on-year. Total ARN people and operating costs in challenging market conditions remain on track to finish near flat year-on-year, in line with May guidance. Thank you, and I'll now open up for questions.
Certainly. Ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. Once again, if you have a question, please press star one one. One moment for our first question. Our first question comes from the line of Darren Leung from Macquarie. Your question, please?
Good morning, guys. Thanks for the opportunity. Just the first one from me. I had two questions in total, so, first one from me, just want to clarify on that trading comment. The third quarter radio revenue is pacing in line with the PCP. Is this a dollar million comment or is this a percentage growth comment? Maybe the same question for the second sentence as well.
Sorry, what? The, it's absolute dollar or percentage, is that your question?
On your trading update on slide 21.
Yeah. The, the third quarter at the moment is pacing percentage-wise, in line with the same period last year.
Okay. That, that sounds like it's pretty strong, particularly versus your peers who are calling out a softer, a softer September quarter and a, and a better December quarter. Is that largely attributed to market share?
It's probably too early to call that one, Darren, at this stage, but certainly we, we have the whole market performance for July. Don't know that the market performance obviously for, for August and September yet, but certainly the pacing that we're seeing would suggest that we'll be flat for the quarter, near flat for the quarter.
Got it. Thank you. Then the second question that I had, was just, any logic or color you can provide around the, the stake in one of your major peers, the 15% stake in Southern Cross?
Obviously, the logic, obviously, as we explained when, when we, we, we, took the shareholding on, was that, you know, we obviously have a firm believer in the sector, and we believe it is undervalued. We, we know the business well. It's, it's a good business, and I think it's a strong statement from us that, that there's future value creation for shareholders as, as Audio comes through this tough cycle. It's a long-term investment. It's a strategic investment, and we believe that, as I say, that there's value creation for shareholders in the medium term.
Got it. I might, might just sneak one more in. Any, any comments you can provide around managing key talent risk in your portfolio, please?
Well, I, I think key talent obviously is a key differency- differentiator for us. And over the years, we have obviously invested in the best talent. I think there's been a bit of noise about, about contracts i- in the papers, the last few months, and we don't see contract negotiations as an on-off exercise. We're always talking to our talents. We're always looking to see how we can work closer together, how we can support each other more, how we can maximize the, the mutual beneficial relationship. Key contracts aren't up until the end of 2024. Obviously, we, we will talk to talents every day, and we'll update the market at the appropriate time.
That makes sense. Got it. Thank you, guys.
Thank you. Once again, if you have a question at this time, please press star one one. I'm not showing any further questions from the phone lines at this time. I'd like to hand the program back to Ciaran Davis for any further remarks.
Thank you, everybody, for joining the call. We look forward to seeing you all at various stages over the next few days. Thanks a lot.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.