Good morning and welcome to ARN Media's half-year results. This morning, I'm with Michael Stephenson, Chief Operating Officer, and Alexis Poole, Chief Financial Officer, both of whom have joined and strengthened our leadership team this year. Our agenda will start with company highlights. I'll talk to 2025 being a year of reset and take you through the progress we are making. Alexis will then cover off our financial results before we close with a summary and outlook on what you can expect to see as we move through 2025 and into 2026. The key message to take away is that we are making clear progress in our ambition to build Australia's most profitable audio entertainment business. By streamlining operations, resetting for growth, and reinvesting in areas that create long-term value, we are making strong and deliberate progress towards that goal.
Firstly, let me take you through our financial performance for the first half. Revenue was $142 million, down 7% on the prior period, and impacted by a softer ad market post the federal election in April. While the first half has represented top-line challenges, we've taken decisive action and laid the groundwork for improvement. We undertook a full commercial team restructure as part of our transformation program. This refreshed team is now settled and fully active in the market with enhanced digital audio sales capability. 2024 audience challenges have impacted our commercial share in 2025, but pleasingly, we are seeing audience improvements in the first half. Our GOLD Network is outperforming the market. However, the KIIS Network has underperformed, and we are actively addressing the evolving nature of advertiser demand for KIIS and refreshing our content and commercial approach.
Our regional markets continue to deliver strong results, outperforming metro markets with improving performances as the year progresses. Operating expenditure was down 5% to $121 million, demonstrating disciplined cost management and the very early benefits of our transformation program. This will accelerate in the second half and into 2026. Underlying EBITDA was $25 million, down 14% year- on- year. However, digital audio is continuing to build momentum, contributing $1.4 million. Cash generation was very strong at $20 million, up 30%, with free cash conversion at 215%, highlighting the resilience of our operating model and our ability to generate cash even in a challenging environment. We've also made progress on deleveraging, with net debt reduced to $77.5 million, including an $8 million repayment in the half. Finally, the board has declared a fully franked interim dividend of $0.012 per share, reflecting our confidence in the business and commitment to shareholder returns.
It's important to reflect on the real progress we're making as we reset for a digital audio future, with our focus being to build a leaner, more agile organization capable of investing in the core activities of content creation, audience growth, and digital capability while delivering stronger shareholder returns. First, our transformation program is well underway. We've actioned $35 million in annualized cost savings for 2025, targeting $40 million to be delivered over three years. We're tracking ahead of our targets for people and operating expenditure in 2025. We've strengthened our leadership and digital capability. With the appointments of a new Chief Operating Officer and Chief Financial Officer and a restructure of our commercial team, we're better equipped to execute our strategy as we transition to a digitally driven content and commercial model. Third, we're seeing audience growth across our platforms.
Broadcast radio audiences are improving, and we secure top talent lineups for the GOLD Network as we commence a rollout of a national network with a lower cost base. Fourth, our digital audio segment continues to deliver. We deliver growth in revenue, margin, and EBITDA, all supported by a low CapEx model. We have maintained our dominance of podcast content, and our global partnership with iHeart is accelerating benefits across audience engagement, commercial opportunities, and data capabilities, with some exciting developments to come in H2. Finally, as we sharpen our focus on audio in Australia, we have commenced the divestment of Cody in Hong Kong, with the sale process already underway. In summary, we're taking cost out to get fit for growth. We're streamlining operations, investing in leadership and digital capabilities, expanding our audience reach, and divesting of non-core assets.
Looking at our transformational program, as I've mentioned, we're simplifying the operational structure, we're integrating enterprise-wide functions and introducing AI-led automation across key areas. This has enabled us to right-size the organization, with 240 roles removed and commenced outsourcing in areas such as commercial, technology, and finance. $35 million of the cost out target has already been actioned, delivering $20 million in annualized savings this year alone, the benefit of which we will really begin to see as we head into the end of the year and into 2026. Our transformational program is more than cost reduction. It's about reinvesting for growth. We're redirecting some savings into future focused investments across our total audio strategy, from content creation, audience growth, and digital and data capabilities. This strategic reset is starting to deliver results, positioning ARN Media for long-term growth.
Slide seven highlights a critical pillar of our strategy, investing in leadership and capability. I'm very pleased to welcome Michael Stephenson as Chief Operating Officer and Alexis Poole as Chief Financial Officer. These appointments bring deep expertise in digital transformation, commercial acumen, and financial discipline, essential for the next phase of growth. On the commercial front, we've enhanced our digital sales capability. We're building stronger commercial partnerships and focusing on branded content and creative solutions that resonate across multiple platforms. Critically, we're scaling our data, technology, and insights capabilities to meet future advertiser demands. From ad tech, MarTech experts, CDP specialists, and digital sales and content specialists, we're building capability to capture digitally led audiences, accelerate innovation, and deliver total audio revenue growth. Our audience performance in the first half of 2025 is positive.
Looking at the metro share for people 25-54, we've seen consistent growth across the past four surveys across all metro markets. Sydney remains our flagship market with number one network share and The Kyle and Jackie O Show continuing their dominance at breakfast. Our reach in Sydney is unmatched, with weekly cumulative audience of 2 million reaching 41% of the population. In Melbourne, Gold FM continues to lead, and in the most recent survey, The Kyle and Jackie O Show delivered their highest people 25-54 share for the past 12 months. Brisbane is showing its best performance in years, with KIIS FM its highest people 25-54 share since 2019. In Adelaide, Mix FM has delivered its highest people 25-54 reach in a decade, while Perth's 96 FM continues to lead across multiple day parts.
These results demonstrate the strength of our metro radio portfolio and the effectiveness of our programming and talent strategy. The Kyle and Jackie O Show continues to be one of the most powerful drivers of ARN Media's audience. They are Australia's most listened to show, ranked number one nationally. In Sydney, they have now achieved an extraordinary 52 consecutive survey wins. Their dominance extends well beyond traditional radio, leading in both podcasts, where their Catcher podcast delivers over 15 million downloads annually, and live-streamed breakfast radio. The scale of their reach is unmatched: 1.7 million weekly listeners, more than 2 million social followers, and deep engagement across multiple platforms. On the right-hand side of the slide, you can see the consistent strength of their audience performance. In Sydney, breakfast share this year in our target 25-54 has grown from 16.9% at the start of the year to 21.4%.
In Melbourne, breakfast share has grown from 5.8% to 7.9% in just six months. The launch of Kyle and Jackie O into Melbourne is a long-term growth play, with slow but steady audience growth since the show commenced broadcasting and good signs of momentum in our key 25-54 demographic. This is more than just about building ratings. It's about refreshing the content strategy, making sure the show continues to evolve, and ensuring we build a compelling advertising environment for advertisers. Our commercial focus is now about taking that refreshed content piece and converting it into advertiser engagement. The show is not just a ratings leader; it's a multi-platform powerhouse that continues to evolve with audience behavior and advertiser needs. We're working closely with partners to show that the reach, the increasing digital revenue, and the refreshed environment deliver real results.
We're also very excited about the national expansion of the GOLD Network. This initiative is a key part of our plan to drive more profitable growth by leveraging our strongest content assets across FM, DAB, and iHeart. We're expanding into key markets with a lower cost base, which positions us for margin expansion while unlocking new audience growth potential. This is a smart, scalable model that builds on our existing strengths. Importantly, this rollout is led by some of Australia's most loved and successful talent: The Christian O'Connell Show for Breakfast and Joan Zinamander for Drive. From a commercial perspective, this opens up new revenue opportunities for national advertisers with premium integration, talent-led brand partnerships, streaming through iHeart, as well as local advertiser breaks. I'm proud to share the continued growth we're seeing in our podcast business.
We're now reaching 7 million monthly listeners and generating over 24 million downloads each month. 36% of all weekly podcast listeners are tuning into ARN content, reinforcing our position as Australia's podcast leader. More Australians are listening to podcasts than ever before, and they're doing so across more devices, platforms, and genres. Commercially, we've secured exclusive partnerships with global brands, enabling us to deliver premium content and targeted advertising solutions. These partnerships are helping us to unlock new revenue streams and deepen engagement with both audiences and advertisers. As we look to our digital audio performance, the story is one of continued growth and momentum. Digital audio revenue grew strongly to $15.4 million, up 21%, with live streaming revenue almost doubling. Importantly, this is not just about top-line growth. It's about building scale and sales capability.
We now have 3 million registered signed-in users, more than 145 million podcast downloads, over 50 million hours of broadcast radio live-streamed. Engagement is also deepening, with 1.5 million active users consuming an average of 33 hours each month. What makes this even more valuable is that 30% of all digital revenue now has rich data attached, giving us sharper insights and better targeting for advertisers. That's translating into commercial traction with more than 500 active monthly digital advertisers. This growing base demonstrates the breadth of businesses now leading into digital audio as a core part of the marketing mix. On the right-hand side of this slide, you can see how scale translates into financial outcomes. We're delivering margin expansion, positive cash flow, and EBITDA has moved from negative in 2024 to positive in H1 2025, and that trajectory will continue.
While radio remains the foundation of our business, digital audio is a rapidly growing pillar that enhances our ability to reach and monetize audiences wherever they are. The opportunity is clear. As more Australians migrate their listening to digital platforms, and as advertisers follow audiences into streaming and podcasts, ARN is exceptionally well placed to capture disproportionate revenue growth. Today, 42% of our total audience is already consuming our content on digital platforms, yet digital only accounts for 10% of our current revenue profile. The clear gap between audience share and revenue contribution highlights the significant runway ahead for monetization and justifies the transformation program we are undertaking. Before passing to Alexis, and as mentioned earlier, we initiated the strategic divestment of our Hong Kong business in H1. Kodi is a well-established operator with a 27-year track record in delivering high-quality out-of-home solutions.
It has built long-standing relationships with major agency groups and blue-chip clients. It's supported by an experienced local management team and has the portfolio of long-term contracts that span residential, business, and tourist zones. Despite some tariff uncertainty in Q2, Cody revenues have performed well and have not required any cash funding to date this year. It is benefiting from a growing economy, strong export performance, and a 12% increase in tourism year to date. However, the business is non-core, and this divestment allows us to sharpen our strategic focus on total audio growth in Australia. The sale process is already underway, and we will update as necessary. Alexis.
Thank you, Ciaran, and good morning, everyone. Today, I'd like to walk you through ARN Media's performance for the first half of the financial year 2025, a period shaped by a strategic reset and targeted investment. In summary, our first half results clearly reflect the transformational benefits of our strategic initiatives: improvements in gross margin, disciplined execution of cost-out programs, and tight control over working capital and capital expenditure. Overall, all of these have contributed to a stronger foundation for longer-term growth and a continued financial improvement. In the half, we made the strategic decision to divest Cody Outdoor in Hong Kong, and Emotive Pty Limited was also sold. As a result, both businesses have been classified as discontinued operations in the financial statements. Today, my focus will be on continuing operations, our core Australian business. Revenue declined by 7% versus the prior comparative period.
Our digital audio segment delivered strong growth of 21%, partially offsetting the decline in radio. Metro declined 12% and regional declined 5%. This digital momentum reflects our strategic focus on diversifying revenue streams and aligning our growth with high-potential market segments. Our regional revenues outpaced metro as a result of our strong and resilient local presence within regional communities. On the cost front, from a statutory perspective, we delivered a 3% reduction, reflecting the early impact of our cost-out program. While these savings contributed meaningfully to our overall result, the full benefit was partially offset by the reinvestment back into the business, including investment in talent, which supports our ambition to expand audience reach and position the business for scalable long-term growth. To gain better understanding, I will take you through cost savings from an underlying perspective in the following slides.
EBITDA performance significant items was $23.1 million, which declined by $6.8 million, primarily reflecting softer revenue performance and the timing of our cost-out transformation benefits being skewed to the second half. Depreciation and amortization increased by 12%, driven by office relocations in Sydney and Darwin, as well as strategic equipment upgrades undertaken in 2024 to modernize our infrastructure. We incurred significant items totaling $4.8 million during the half, primarily linked to our business transformation initiatives. I'd like now to speak to our underlying EBITDA performance from continuing operations. As we progress through our transformation, we believe underlying EBITDA offers a more accurate reflection of our core operating performance. By excluding one-offs and non-recurring items, it provides clearer insight into the strength of our ongoing business and the impact of our strategic initiatives. We delivered $24.9 million in underlying EBITDA for the half, representing a $4 million decline.
We delivered 2 percentage points increase in gross margin, reflecting the benefits of targeted operational activities and product mix. Importantly, we have already begun to realize meaningful early benefits from our transformation program. These gains helped mitigate the impact on earnings from lower revenue, with our underlying EBITDA margin declining by just 1.4 percentage points, a clear demonstration of the resilience of our operating model and the disciplined execution of our strategic imperatives. Digital now represents 9% of our business and continues to grow in profitability. As previously highlighted, both our digital and radio segments delivered solid gross margin improvements, contributing to 2 percentage points uplift from the prior comparative period. Metro's gross margin improved year- on- year, driven by lower costs from our transformation program. Digital revenue achieved a 14 percentage point gross margin improvement.
This was supported by effective product mix management and revenue growth within our owned digital streaming portfolio. As we continue to grow our digital revenue, we anticipate further gross margin improvements to ensure margins are comparable to radio. ARN's cost base reduced by $12 million in half one. Excluding our investment in talent, we delivered a 10% reduction in underlying costs. As previously stated, last year we set an ambitious target to reduce our cost base by $40 million over three years. As part of our cost-out program, all cost lines were reviewed, resulting in savings across every expense category. Implementing a simplified operating model is a major factor in achieving transformational savings. 240 roles will have been removed by December year-end. Two-thirds of these roles were removed by June 30, and 97% of these roles will have been removed by the end of August.
This will deliver substantial savings in the second half of the year and into 2026. Together with other reductions in operating costs, profitability and leverage will significantly improve in the second half of the year. I'm pleased to report that we delivered strong progress in cash performance, driven by working capital management and CapEx investment discipline across the business. In the half, operating cash conversion increased to 96%, generating $15.8 million, driven by strong working capital management. Free cash conversion rose to 215%, generating $19.5 million cash post-payments of operating leases. A key contributor to our free cash improvement was the sale of five regional properties, four of which were leased back, allowing us to unlock capital. Our net financing costs reduced by $4.8 million. This is mainly due to a reduction in the funding requirements for Kodi Outdoor Hong Kong.
Overall, we delivered strong cash performance, generating $10.9 million in net cash after dividend payments to shareholders and improvement of $17 million compared to the prior period. This enabled us to pay- down $8 million in debt in the later part of the half, contributing to a stronger balance sheet with closing net debt of $77.5 million. As a result, we expect interest costs to continue trending downward as we maintain our focus on debt optimization. I'm also pleased to report that we continued to strengthen our balance sheet during the half, reducing net debt by $10.9 million from 2024, a 12% reduction, while maintaining robust liquidity with $15.5 million in cash and $67 million unused committed facilities. We view our $19 million investment in SCA shares as at June as a part of our liquid asset base.
When included, our net debt reduces to $58.5 million, further strengthening our financial position. We remain focused on optimizing cash, managing debt prudently, and reinvesting in the areas of the business that generate the strongest returns. Our overall leverage headroom provides us with flexibility and optionality to serve future growth opportunities with confidence. With our debt facility maturing in 2027, we have already commenced renewal discussions and expect to finalize the renewal prior to closing out the second half. While continuing to reinvest and lay the foundations for future growth during the first half of the year, we delivered a strong cash position. In line with our commitment to shareholder returns, we are pleased to announce a fully franked interim dividend of $0.012 per share, consistent with the first half of 2024, representing 66% of the four significant items.
To recap, our first half results clearly reflect the transformational benefits of our strategic initiatives: improvements in gross margins, disciplined execution of cost-out programs, and tight control over working capital and capital expenditure. These have all contributed to a stronger foundation for longer-term growth and continued financial improvement. Ciaran.
Thanks, Alexis. Before closing, I want to show you how we are building on this reset that we have undertaken in the first half of 2025. We acted quickly and decisively, simplifying our operating model, resetting our commercial structure, and actioning $35 million of a three-year $40 million cost-out program. Alongside this, we strengthened our leadership team and sharpened our digital capability, and we're progressing well with divesting non-core assets. In short, the reset is delivering a leaner, stronger, more focused business capable of accelerating growth and realizing the opportunity presented to the growth of digital audio audiences. Looking ahead to the second half, we have a number of exciting initiatives on the horizon: a significant iHeart product upgrade launching in October, the rollout of new data and ad tech capabilities, and the launch of new commercial digital products.
We're also refreshing our KIIS content and our commercial strategy to drive some share gain and continuing to drive further operational efficiency. Importantly, we'll be showcasing many of these initiatives at our 2026 upfront on October 29. This will be the first time we have held an upfront to take our story to market, showing advertisers not just our reach and audience strength, but also the new digital tools, platforms, and products that will help them connect more effectively with their consumers. While the reset has delivered softer top-line results than we would like, it has given us the solid foundations to work through the second half of the year and into 2026. Finally, to the outlook, H2 2025 revenues are currently forecasting low to mid-single-digit decline compared to the same period last year.
Commercial team reset and H1 2025 audience growth support the trajectory for improving second-half commercial performance and some share regain. H2 2025 digital audio revenue growth rates are expected to improve on H1 2025. ARN Media is on track in FY 2025 to deliver lower people and operating expenses compared to FY 2024, gross margins steadily improving, driven by targeted cost optimization efforts. The impact of the cost reduction program will accelerate in H2 2025 and FY 2026, and continued focus on working capital and CapEx investment discipline will support further reduction in net debt and continued dividend payment. Thank you. I'll now open up for questions.
Thank you. As a reminder, to ask a question, please press star one-one on your telephone and wait for your name to be announced. To withdraw your question, please press star one-one again. If you'd like to ask a question, please press star one-one. Speakers, I am showing no current questions from our phone lines, and I'd like to turn the conference back over to Ciaran Davis for any closing remarks.
Thank you, everybody. I look forward to seeing you over the next couple of days, and some of you may be on October 29th. Thanks very much for your time.
This concludes today's conference call. Thank you for your participation. You may now disconnect.