Injecting some much-needed cash into the business, Aussie sports and entertainment agency Sports Entertainment Group (ASX: SEG) has entered a non-binding agreement between its wholly owned subsidiary Sports Entertainment Network NZ (SEN NZ) and TAB New Zealand. TAB will acquire SEN NZ’s digital and audio businesses, including the SENZ brand, app and website, and its network of 28 radio stations across 29 frequencies.
Through this acquisition, SEG is set to receive $3.68 million.
The transaction is paired with a content supply partnership. SEG’s Australian business, SEN, will make all SEN programming available on SENZ frequencies. SEN NZ will continue as the commercial arm for SENZ Digital & Audio, sourcing third-party advertising revenue for the business under new ownership. SEG, SEN NZ’s parent brand, will earn commission income on advertising revenue it sources.
Sports Entertainment Group has further strengthened its connection with gambling company Entain New Zealand, a partner of TAB NZ. SEG has agreed to extend its existing commercial partnership with Entain’s Australian brands for three years.
This agreement comes at the right time, as the Company’s cash reserves hang by a thread.
SEG Chairman Craig Coleman said, “This transaction removes start-up losses from our operating performance. In FY23, our New Zealand business represented a negative $2.4 million drag on underlying EBITDA. SEG continues to focus on reducing net debt in FY24. This transaction aligns with this objective in addition to several other proposals and initiatives under consideration.”
In FY23, the Company reported a $9.3 million loss, receiving a warning from auditors to find a cash pathway within nine months if it wanted to survive. Its EBITDA fell 87.2%, from $14.8 million in FY22 to just $1.9 million in FY23. Its Commonwealth facility has all but dried out, leaving behind only about a million compared to the starting $28 million. Its cash equivalents fell from over $12 million in FY22 to $5.9 million in FY23.
SEG’s worrisome financial position made the headlines, prompting the Company to issue an official announcement addressing shareholder concerns. SEG claims to know its problem and plans to return to sound financial form. Acquisitions are part of said plan.
SEG acquired Radio Trackside’s frequencies in April 2021 to boost its viability. It has since invested in upgrading studios, including one in Auckland, secured non-racing sporting rights, formed a digital content team, and expanded its local radio content team.
TAB NZ Interim Chair Anna Stove said, “During this time, the hard work from SEG and SENZ has meant TAB NZ is acquiring a much-improved asset on top of the frequencies originally sold to SEG.”
She added, “The business has significantly expanded since April 2021 from a set of radio frequencies to a modern, multi-platform media business, thanks to the access to the resources and intellectual property of SEG. Through our strategic partnership with Entain, we are now well-placed to build on the progress made in the last two-and-a-half years, and there is an opportunity to create a one-stop shop for news, views, and information for punters in New Zealand.”
The transaction between SENZ and TAB is subject to satisfactory completion of legal agreements. The operational handover is expected to start on February 1, 2024.
Alinda is a Business Reporter for The Sentiment
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