Seven West Media first half: Revenue share & ratings up, but profit down

• The managing director and chief executive officer of Seven West Media, Tim Worner, comments

Seven West Media has released its first half result for the six months ending December 31.

Seven’s highlights:

• Strong metro TV revenue share growth; 38.4% in 1H (36.4% in 1H18), despite softer 2Q ad market
• Group operating expenses flat including cricket costs
• Underlying EBIT of $146.8m, down 4% YoY excluding 53rd week in FY18
• Increased cost out reduction target from $20-30m to $30-40m across FY19

The managing director and chief executive officer of Seven West Media, Tim Worner, commented:

“We promised to improve our ratings and revenue share this half as we focused on the core and we have delivered, despite a softer second quarter advertising market.

“We continue to transform our operating model at pace, driving greater cost efficiencies and increasing our group cost out targets. We absorbed the new cricket costs, maintaining a flat cost base in the half.

“At the same time growth in new revenue streams is outstripping our expectations with 7plus, 7Studios and our investment portfolio all delivering strong growth.

“2018 was a truly outstanding year for our TV business. Seven was Australia’s most-watched network, and Channel 7 was Australia’s most-watched channel, both for the 12th year in succession. Even more remarkably, Network Seven achieved the highest commercial viewing share in ratings history, and led all the key demographics with our own highest ever shares of each.

“We also performed strongly in the battle for revenue, ending 2018 with the highest share of metro TV advertising, 39.2%. We expect to be number one in both ratings and revenue in the current Jan-Jun half.

“Our acquisition of the cricket rights, at a lower cost per hour than the tennis, has paid off with ratings exceeding our projections. Across summer, Seven grew its share of every key demographic throughout the day and in primetime and we scored a 40%+ share of viewing on 39 days – more than any network has ever achieved. We are now broadcasting premium sport every week of the year, and will be for years to come.

“Just over a year after launch, 7plus is surpassing our expectations and had the number one share of commercial FTA BVOD viewing in the final quarter of 2018.

“Seven Studios continues its strong upward trajectory, with EBIT on target for a seventh consecutive year of growth. Our shows are now engaging audiences around the world, with a slew of shows debuting on Netflix in the half to global acclaim.”

Financial Results

Seven West Media reports a profit after income tax of $85.8 million on total revenue of $798.9 million. Underlying net profit after tax was $91.8 million, down 7.8 per cent on the previous half year

EBITDA of $161.5 million and EBIT of $146.8 million were down 8.8 per cent and 7.9 per cent respectively versus the prior corresponding period.

Cost Management

Group operating costs (including depreciation and amortisation) of $652.1 million were effectively flat. The company has undertaken a cost out program of $135 million to $145 million across the 2017-2019 financial years with a targeted net reduction in costs of $50-60 million after factoring in the new cricket costs, content investment, AFL uplift and spectrum charge. In the period, Seven’s costs increased 2.0 per cent reflecting cricket costs with savings skewed to the second half. The West and Pacific recorded cost reductions of 9.0 per cent and 6.7 per cent respectively.

Outlook

Seven’s strategic priorities remain unchanged:

Focusing on the core, driving greater ratings and revenue share performance

Transforming the operating model and continuing to identify and extract operational efficiencies and cost savings; and

Growing new revenue streams.

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