Seven West Media releases interim financial results

James Warburton

• “Over the last six months, we have executed on a number of major strategic initiatives

Seven West Media has reported a statutory loss after income tax of $67.0 million on total revenue of $773.3 million. Underlying net profit after tax was $69.3 million, down 22.5 percent on the previous year. EBITDA of $136.6 million and EBIT of $119.7 million were down 20.1 percent and 20.8 percent respectively versus the prior corresponding period.

Seven West Media reconfirmed the strategy to transform the group into an agile, content led organisation but claimed a difficult operating environment with challenging advertising market conditions contributed to the decline in financial performance.

Seven West Media managing director and chief executive James Warburton said: “Over the last six months, we have executed on a number of major strategic initiatives, including the investment in our new content strategy for our primetime entertainment schedule which commences in April; a major re-organization and cost out plan delivering $45 million of gross savings; the divestment of Redwave; and proposed sale of Pacific Magazines.

“The ACCC’s decision on Pacific Magazines is due in April 2020. We continue to work with the ACCC to address their concerns. While management was disappointed that certain stakeholders blocked the Prime Media merger, we have secured a strategic stake of 14.9%. Working down debt remains a key priority with a number of initiatives underway.

“In Television, the Seven Network was the number one free to air network by revenue share, increasing its share 0.4% pts to 38.8% in 1H20.”

Seven’s digital offerings continue to rapidly scale, with revenue growth of 58 percent and EBIT growth of 205 percent in 1H20 compared to the prior corresponding period. In the 2019 calendar year, BVOD consumption on 7plus grew 33 percent.

The value of Seven West Ventures portfolio also grew 27 per cent to $103 million year on year.

Seven West Media reported delivered revenue of $772.4 million (excluding share of associates), down 3.2 percent on the prior period, and claimed that this was driven by ongoing weakness in the broader advertising market.

Excluding significant items, total Group costs (including depreciation and amortisation) for the 6 months to 28 December 2019 increased 0.9 percent to $653.6 million, with cost savings in The West and Pacific being offset by cost growth attributable to one-off events, investment in Seven Digital, third party productions and the consolidation of 7Beyond and Community News Group.

Excluding the consolidation of 7Beyond, Seven’s costs were broadly flat, with The West and Pacific recording cost reductions of 11.0 percent and 9.0 percent respectively.

Significant items of $165.5m before tax related to the impairment of the television license, onerous provisions and impairment of assets against content and other items.

FY20 Trading update and strategic priorities:
• Trading conditions have remained consistent with the first half
• Subject to market conditions and improved ratings, Underlying EBIT expected to be
between $165m to $175m
• Expect BVOD market to grow over 30% in FY20
• New cost-out program targeting a further $20m for execution in 2H20 for benefit in FY21
• Closure on Pacific sale
• Strategic reviews of undervalued/surplus assets following inbound enquiries

James Warburton said: “We will continue to be creative and apply entrepreneurial thinking. My mandate is to dramatically change the business which means transformative M&A opportunities are very much on the agenda.

“I believe we have the team, the platform and the strategy to transform and grow this business to increase shareholder value.”

Other news:
• Seven West Media confirmed that 7News increased its position as Australia’s most watched news service in 2019, growing viewing share in every market.
• Seven’s boasted that its AFL audience for the 2019 season increased by 3 percent and Test cricket went up 12.5%. The network also confirmed thet they were in discussions with Cricket Australia to review the Big Bash season and product moving forward.
• Seven’s claimed that is content led growth strategy will invigorate its entertainment schedule in Q4 of FY20 with several well established, and new franchises during prime time.
• Trends in Pacific Magazines remained consistent with prior periods.
• Revenue growth in the BVOD market accelerated in the July to December period, increasing 42 percent year on year.
The West launched its paywall in the period which is tracking ahead of expectations, delivered $7 million of cost savings and completed the integration of Community News Group.

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