GTN is a curious company.Given their business*, you may have the...

GTN is a curious company.
Given their business*, you may have the impression that it is highly cyclical.

Looking into more details at their results since FY 19, the reality is quite different.
Since FY 19, the company has always produced a free cash flow** of at least 10 m$ minimum every year, except in FY 20 when they still reached a decent free cash flow of 7 m$.
The cumulated last 6 years of free cash flow is quite close to today's enterprise value.

This is really interesting that the company was able to generate such a high free cash flow, even during the covid years***, when their radio business was supposed to be severely affected.
One of the possible explanation for such a high free cash flow may be that it excludes the impact of the large pre-payment**** they made to Southern Cross in 2016 to access their slots for 30 years.

I think there are mainly 2 reasons why the market ignored GTN :
- several disappointing investments (e.g. in the US or more recently drone business),
- but also low NPAT which gives the impression that the company is not very profitable.
The reality is that the NPAT gives a partial view of the company's profitability.

During the last 3 years, there was a large gap between NPAT (5.7 m$ in FY 24 and 2.6 m$ in FY 23) and the free cash flow (respectively : 15.3 m$ and 11.1 m$). This is mainly due to the difference between Capex (4.6 m$ and 5.6 m$ in FY 24 and FY 23) and depreciation, including amortisation (13.3 m$ and 12.3 m$).
This large difference is due to the amortisation of station contracts.
For example, the pre-payment of 100 m$ related to the contract with Southern Cross is amortised over the contract term, which corresponds to around 3.3 m$ per year. Some analysts estimate that the non cash impact of this contract was as high as 9.3 m$ in FY 24.

Obviously, the company was not that interesting for most investors as :
- it had not a growth profile,
- and its dividend profile was not that high.

However, the company looks now more interesting as it seems to aim to distribute almost all its free cash flow via 3 ways :
- keeping its 100 % payout policy,
- large buyback policy (up to 10 % of its capital),
- new board also explores other options to return capital to shareholders.
During H1 25, GTN had a total distribution of 5.3 m$ via dividend and share buybacks.




* offer a traffic update to radio stations, together with ads (main source of revenues for GTN)
** I always look at free cash flow excluding the impact for the change in working capital.
*** I don't know if they received government assistance during the covid years, but they showed during that time that they were able to decrease their costs significantly when necessary (- 11 % in FY 21).
**** 100 m$ pre-payment done in 2016 to have the exclusive traffic slots for a 20 year period (+ an option for another 10 years).