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Seven posts $134.89m profit, after a 7% reduction in staff

Seven West Media appears to have turned its fortunes around, announcing a $134.89m profit to the ASX this morning, following a $745m loss last fiscal year.

Even though revenue was down slightly on last financial year – $1.62bn, compared to $1.67bn – multi-million-dollar cost-cutting exercises and a reduction in net debt helped the company.

Seven West Media had a $20m net reduction in costs in the 2018 financial year

In the 2017 financial year, Seven West Media had a net loss of $745m, however the company had $988.79m is significant items before tax. Once these were excluded, the company had a profit after tax (excluding significant items) of $166.80m.

This financial year, significant items before tax were much lower ($8.5m), so once they were excluded proft after tax appeared to be down 14.6% to $142.46m.

Underlying EBITDA (earning before interest, tax, depreciation and amortisation and excluding significant items) was also down. In the 2017 financial year, it was $306.66m. This financial year, underlying EBITDA was $270.89m.

Seven West Media’s Fy18 financials (Click to enlarge)

Seven West Media managing director and chief executive officer Tim Worner said the group’s focus on ratings, revenue and cost savings had paid off.

“Our transformation accelerated in the second half of the financial year and delivered $61m of cost savings on our initial $40m target. These savings, which included a 7% reduction in FTEs [full-time employees], more than offset the anticipated AFL uplift and spectrum charge. The transformation will continue in FY19, targeting further cost reductions in each of the three operating businesses [Seven, Pacific Magazines and its Western Australian publishing operations] and will deliver a $10-20 million net group cost reduction, including cricket,” he said.

The financial performance of Seven’s television operations (Click to enlarge)

Worner earned a base salary of $2.441m this financial year. Once incentives and non-monetary benefits were added to the mix, this climbed to $2.892m.

Worner said the Seven Network had delivered a record-breaking ratings performance in 2018, which combined with the new cricket broadcasting deal and its ongoing partnership with the AFL, bodes well for the current financial year.

Seven’s television operations, according to Worner, are in good shape.

“Having the number one network, channel and multi-channel is particularly advantageous as we are now operating in a growing market,” he said. “The FTA [free-to-air] metro market has delivered its second consecutive half of growth, with the sector benefiting from industry initiatives to promote the effectiveness and ROI that only TV delivers. We expect growth to continue in the 2019 financial year.”

Seven also announced it is extending its program supply arrangement with Prime Media Group. The deal came into effect at the start of the 2019 financial year and runs for five yeas.

Seven said the refreshed deal recognises current market terms and reflects Seven’s ongoing investment in content and sporting rights.

CEO of Prime Ian Audsley recognised Seven’s large investments and said Prime was willing to pay to keep the deal going.

“Seven has made substantial up-front investments in key sports rights and uniquely Australian content to drive audience performance in an increasingly competitive environment. We recognise that these investments form the cornerstone to Prime’s leading position in regional television. Accordingly, we have increased our contribution to these investments and we are delighted to further extend our relationships with Seven.”

Seven’s publishing assets are also on the right track, Worner said.

Pacific Magazines’ financial performance (Click to enlarge)

“Our publishing assets are outperforming in their respective categories, while undertaking significant restructuring. The results are clear, Pacific’s EBIT [earnings before interest and tax] up 170% on last year and The West driving improved trends with a refreshed sales strategy,” he said.

Alluding to cuts and changes within the business, Worner said Seven was learning to be a “more learn and agile” operation.

The West’s FY18 performance (Click to enlarge)

“We are executing our strategy at great pace, maintaining our focus on the core to continue to drive a stronger performance in ratings and revenue, while transforming the business to be more lean and agile,” he said.

“Growing our studios buisness, digital assets and investment proftolio underpins growth across the business.

“We are very well placed to meet the challenges, and capitalise on the opportunities ahead of us, and forecast 2019 EBIT growth of 5 to 10%.”

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