Seven hit with $444.4m loss as new CEO James Warburton says it will go on the hunt for mergers and acquisitions

Just days after Seven West Media announced its long-serving CEO Tim Worner would be leaving the business, replaced by James Warburton, the company has reported a loss after income tax of $444.4m on total revenue of $1.55bn.

The company found $38m in cost reductions across the financial year, but still has a net debt of $564.4m.

Seven struggled in FY19 following softening ad spend and a tough media landscape

Excluding significant items, the company reported a profit after tax of $129.3m – down 7.9% on last year’s reported $140.4m. Seven claimed $611m of significant items this financial year. $415m of this was impairment of television licences, while a further $9.7m was put down to impairment of television goodwill. $37.9m was due to the impairment of The West mastheads, and across the group $22m was spent on redundancies and restructuring.

Advertising revenue across all of SWM’s assets was $1.15bn, while circulation revenue across the print and digital titles totalled $148m. That’s a slight decrease on $1.21bn and $158m for 2018.

Although it’s looking like Nine may edge ahead in the total people ratings win for the 2019 calendar year, Seven was able to claim its 13th year of ratings leadership for FY18/19, increasing revenue share to 38.8%, up 0.7 percentage points from last year.

The network was able to highlight success such as its first Summer of Cricket which saw it enjoy 39 days with a commercial free-to-air (FTA) viewing share in excess of 40% – the most in ratings history. Seven’s AFL coverage was also up 10% year-on-year. BVOD consumption on 7Plus increased by 72% and digital revenue grew 67%, according to the release on the ASX.

Seven West Media summary of FY2019 results (Click to enlarge)

In the reporting posted to the ASX, Seven flagged more cost-cutting on the horizon for its print and digital news assets, including The West Australian titles which already faced redundancies in early 2019. The report said the WA-based business would continue to “reduce its cost base in the coming year” and “implement further efficiencies across its newsroom and print centre through automation, process improvement and asset utilisation”.

For the financial year 2019, outgoing CEO Tim Worner earned a base salary of $2.49m, rising to $2.56m in total payments once other remunerations were added. In the terms of employment it states that Worner’s period of notice for terminating his contract was 12 months’ notice.

SWM’s earnings before interest, tax, depreciation and amortisation (EBITDA) was $243.6m, a 10.1% drop on 2018, and earnings before interest and taxes (EBIT) was $212.1m, down 10.0%. The business is forecasting a FY20 EBIT of $190 to $200m.

On a call to investors this morning, new CEO Warburton said the company couldn’t cost-cut its way to success, and it needed to do more to transform to become a content-led company and engage heartland Australia.

Seven West Media needs to be more entrepreneurial, he said, and be run less as a media business.

He also flagged the company would actively be on the hunt for mergers and acquisitions, although would not be drawn on which companies he’d be willing to get into bed with.

In a statement to the ASX, Warburton said: “FY19 was a tough year in the economy and advertising markets, which impacted Seven West Media’s performance.

“But we have incredibly strong assets, and our focus moving forward is to speed up the rate of transformation while exploring opportunities for growth in our core and adjacent markets.

Seven West Media overall results FY19 (Click to enlarge)

“We will revitalise our entertainment programming, creating momentum to engage heartland Australia and enrich the demographic mix, ensuring we are the most relevant and exciting offer to advertisers.

“We will sharpen our focus on being a high-performance audience and sales led organisation, and we will redefine our working practices, becoming more efficient and effective and making savings which do not impact on ratings.

“We will be a hunter and explore M&A opportunities in both traditional media and non-traditional adjacencies that are positive for our shareholders.”

The outlook for FY20 will see SWM focus on operating savings and improving its balance sheet to enable the business to work down its debt. It’s expecting metro TV advertising declines of low single digits and targeting growth in both ratings and revenue share across broadcast and BVOD.


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