Seven withdraws earnings guidance, citing COVID-19 and falling advertising market
Seven West Media is the latest ASX-listed company to remove its earnings guidance for the 2020 financial year.
In a statement to the Australian Securities Exchange (ASX) this morning, Seven said “the escalating uncertainty relating to COVID-19, a material fall in advertising market activity, and the suspension or postponement of productions and events” combined to mean the organisation no longer had visibility over future advertising bookings.
Seven’s year is not going to plan
In reporting its financial results for the half year to 31 December, 2019, Seven had said it expects underlying EBIT (earnings before interest and tax) to be between $165m and $175m. This was predicated on market conditions remaining stable and the TV network improving its ratings.
It also said it expected the BVOD (broadcast video on demand) market to grow 30% across the entire financial year. The network was anticipating it could accelerate the BVOD growth through the Olympics, however the International Olympic Committee is now in talks to move the date to 2021.
Seven had been anticipating Tokyo 2020 would secure large BVOD audiences
This morning, Seven acknowledged its events and broadcasting line-up is not what it thought it was going to be just last month.
“The AFL has announced the suspension of all games until the end of May 2020. While the International Olympic Committee’s (IOC) current position is that Tokyo 2020 is scheduled to proceed, the IOC has stated they are exploring a postponement scenario and the Australian Olympic Committee (AOC) and other national bodies have been more definite about a date change. There is no decision as at the date of this release, but one is expected shortly,” Seven said.
“Such postponements are likely to result in rights payments by SWM being pushed back to reflect the revised scheduling; any adjustments remain subject to negotiation. However, postponements may also incur cancellation costs from underlying suppliers.”
The network also noted local productions are facing challenges with travel restrictions and COVID-19 issues.
In concluding its statement, Seven attempted to assure the market it has plans and contingencies in place to weather the storm.
“Our teams are working tirelessly to deliver on commitments,” it said, adding, “SWM has contingency measures in place to respond to such challenges. Over the last two weeks, the company has initiated its business contingency plans, establishing remote working for the majority of staff, to ensure the safety and wellbeing of its employees and minimal disruption to operations.
“Despite these challenging conditions, the company remains focused on executing its key strategic priorities outlined in its interim financial results, including transforming the business and working down debt ahead of scheduled maturities in November 2021 and 2022.”
Nine and Ooh Media have also withdrawn their guidance, while both Ooh Media and Southern Cross Austereo (SCA) are in trading halts at time of publication.
Still don’t understand why 7 gave away their streaming service. I’m sure 9’s very happy with Stan’s performance – and the revenue.
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I bet Seven are happy they can blame their bad programming decisions and pre-virus bad ratings on Covid-19.
Nine on the other hand, have been doing really well with TV ratings.
I hope OzTam keep Seven to their ratings commitments for 2020. They should perform in these conditions regardless
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.This is one big step down from which the SWM recovery will be minimal. The issue remains that Australia will follow the blended mix of UK and NZ FTA television structures. A central Government set of services (BBC, TVNZ/Radio NZ, and ABC/SBS here), taking core audiences and in the case of NZ, revenues too. And one main private sector operator. in the UK: ITV, with Channel 4 and 5 marginal sized operators, but not in NZ where TV3 cannot even be sold. So, with three networks here it looks like NEC is the ITV with, ultimately, impregnable positions in news, through talk radio, FTA and the two key metro capital city newspapers. Add Stan, and they cover all the bases that a domestic media company can cover. So, between TEN and SWM who is going to last -TEN as a low cost (who needs $160m pa spent on news budgets?), and run as a division rather than a corporation in Australia. So SWM will be the long-term loss maker?
Why, because it is owned by a non-media family who never had the people skills and streetwise to place SWM into the current NEC position. Since 1996 when ACE raided the SWM register, SWM has had 9 CEO’s in 24 years. Bob Campbell, Gary Rice as a step in, Chris Chapman, Julian Mountier, Maureen Plasvic, Stokes himself, David Leckie, Tim Worner and now James Warburton. And they couldn’t even look gift horses in the mouth – Fairfax, and Stan.
So, what happens next? Well a recapitalization is required, FTA revenues do not comeback, and we move to a UK and NZ ratings postilion where one network cluster of channels takes 60-65% of ratings and revenues leaving TEN and SWM to live in the 30-35% share.
Its nearly over for SWM unless the Stokes can find a sucker buyer
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