Seven West Media EBITDA and profit slide in first half of FY19

Seven West Media has reported a decline in earnings and profit for the first half of fiscal year 2019, despite revenue gains.

Earnings before interest, tax, depreciation and amortisation (EBITA) fell 8.8% to $161.5m for the six months to 2018, down from last year’s $176.8m.

Worner said the business had met its promises for higher ratings and a higher revenue share in television

Net profit after tax is down from $99.6m to $85.8m, a fall of 13.9%. But that’s despite a revenue increase of 1.5%, to $797.4m for the first half, and a relatively flat cost-base, despite obtaining the cricket rights.

A fall in advertising revenue across all of Seven West Media’s assets, including its television business, West Australian Newspapers and Pacific Magazines, has been attributed to overall declines in TV advertising, pressure in digital advertising and publishing advertising.

For the first half of FY19, advertising revenue from television was $515.9m, down from $528.7m the year prior. The West and Pacific Magazines have seen declines in revenue from advertising and circulation year on year.

The West’s advertising revenue for the first half was $52.8m, down from last year’s $59.7m, while circulation was $28.7m, down from $30.4m.

Pacific Magazines’ advertising revenue was $18.9m, down from last year’s $21.6m. Circulation fell to $45m from $49.2m the year prior.

As a result, total advertising spend fell from $614.9m in the first half of 2018, to $595.158m. Circulation revenue for Seven West Media has fallen from $79.6m to $73.7m.

Seven West Media noted the 5% decrease in metropolitan television advertising spend, as reported in Think TV’s KPMG data, as a reason for the declines.

Managing director and CEO of Seven West Media, Tim Worner, said the business had delivered on its promise of revenue and ratings improvements, despite a “softer” second quarter advertising market.

Seven West Media’s results for H1, FY19

“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,” Worner said.

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

“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.”

A look at Seven West Media’s operating costs over the last few years

Group net debt was reduced by $121m year on year to $589m.

Seven West Media’s focus will be driving high ratings and revenue share, as well as identifying new operational efficiencies, cost savings, and revenue streams.

Last year, Seven West Media cited an FY19 cost reduction target of $125m, up from the previously announced $105m. Today, Seven said cost savings, which seek to generate $50-60m net group cost savings including the cricket impact, AFL uplift and spectrum charges, would be ‘skewed’ to second half. To date, redundancy and employee entitlements cost the business $12.6m, a 43.2% to the previous corresponding period.

In the first half, The West and Pacific recorded cost reductions of 9% and 6.7% respectively.

Pacific will look at further cost reductions in second half of this year. The publisher, which prints titles including New Idea and Who, saw EBIT fall to $4m. West Australian Newspapers also has a $10m cost out program underway. Total revenue for the first half and EBIT fell 9.8% and 16.6% respectively.

Dividends remain temporarily suspended.


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