More or less proves that Kerry Stokes needs to step in and clean out every single department at Seven and get some new talents and directors into the business.
It’s any wonder that they’re failing when they’ve cleaned out most of the talented staff and producers working in other departments but keep the same elephants in the room in Angus Ross and Craig McPherson. They should’ve been given the boot first.
The problem is Warburton/Seven can’t just keep cost-cutting their way out of the financial hole they find themselves in. There’s only so much ‘fat’ that can be trimmed, programs that can be axed, people who (unfortunately) be made redundant, etc before reality sets in (ie; the network is ultimately going to have to be sold) and that moment is quickly approaching for Seven
Seven West Media financial results for half year ended 28 December 2019
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Advertising market conditions challenging with metro FTA TV -7.0% in the half versus a total advertising market decline of -8.5%
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#1 metro TV revenue share, up 0.4% pts to 38.8% share in 1H20 (38.4% incld. BVOD)
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Group revenue declined 3.2% driven by weaker advertising markets
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Underlying Group EBIT of $119.7m, down 20.8% YoY
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Digital EBIT growth of 205% compared to 1H19
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Significant items of $165.6m before tax, relating to impairments and onerous contracts
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Net debt of $541.5m representing 2.4x net debt to EBITDA (including proceeds from Redwave divestment)
Seven West Media Limited (ASX:SWM) reports 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 per cent on the previous year. EBITDA of $136.6 million and EBIT of $119.7 million were down 20.1 per cent and 20.8 per cent respectively versus the prior corresponding period.
Seven West Media’s strategy to transform the group into an agile, content led organisation continues at pace, but in the face of a difficult operating environment with challenging advertising market conditions.
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 were 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.
7NEWS increased its leadership position as Australia’s most watched news service in 2019, growing viewing share in every market. Seven’s coverage of the most watched Winter and Summer sports in AFL and Cricket continues to be strong, with the AFL audience for the 2019 season increasing by 3 per cent and Test cricket up 12.5%. We are already in discussions with Cricket Australia to review the Big Bash season and product moving forward.
Seven’s content led growth strategy will invigorate its entertainment schedule in Q4 of FY20, bringing several well established, and new and exciting franchises to prime time viewing.
Seven’s digital offerings continue to rapidly scale, with revenue growth of 58 per cent 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 per cent. Revenue growth in the BVOD market accelerated in the July to December period, increasing 42 per cent 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. Trends in Pacific Magazines remained consistent with prior periods.
The value of Seven West Ventures portfolio grew 27 per cent to $103 million year on year.
Results
The group delivered revenue of $772.4 million (excluding share of associates), down 3.2 per cent on the prior period, 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 per cent 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 per cent and 9.0 per cent 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.
Outlook and priorities
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 Seven West Media Managing Director and Chief Executive 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.”
The majority of this is asset impairments (including the licences) which is non-cash
Interestingly Cricket for FY21 to 24 is now considered an onerous contract
Also in today’s Seven West presentation, confirmation of the Redwave WA radio sale. Transaction date December 31 2019 for $28m.
SCA the buyer, as announced the same time as the failed Prime / Seven merger last year. SCA now controlling the Spirit and RED FM networks and 6EL Spirit Bunbury to be divested.
Looking at the ASX just now (2:25pm AEDT), SWM’s share price fell to a new low of 20c!! 
That’s not much higher than Prime Media Group’s current share price of 15.5c.
That is as bad as the share price of Fairfax before the company announced a merger with Nine.
Or Network Ten before it was delisted in 2017 prior to the CBS takeover?
When comparing, you should be looking at market capitalisation, not share price on its own. (Share price x shares on issue)
At the same situation and administrations were called for Ten prior to its acquisition by CBS in June 2017.
Wonder if Comcast buys SWM and The West Australian becomes independently owned again? Tough times for SWM.
Seven Studios and shares in Airtasker and lender SocietyOne could be sold, the SMH is reporting. Here:
So I think it could mean other assets including Red Live and stakes in HealthEngine, Huddle Insurance and Starts at 60 may be sold if Seven needs the cash?
If Seven Studios is sold then Seven won’t have any in-house production apart from news, Sunrise, The Morning Show, The Daily Edition, and sport.
SWM’s shares closed at 20.5c today.
I disagree about the situation - Ten were reliant on major shareholder backed funding guarantees (that were ultimately withdrawn).
Not uncommon, 10 and 9 don’t produce a lot of content outside of News & Current Affairs either.
I’d go further it’s an abomination for the network that will destroy it all because they bowed down to News Corp by not doing the ODI’s …
One word: IDIOTS.
Selling Seven Studios will mean production of Home and Away will be outsourced for the very first time. Will this affect the production quality?
I think SWM should keep Seven Studios and make it semi autonomous arm of the group, similar to ITV Studios in UK or ABC Studios, CBS Studios and Universal Television in America. It means it can produce shows for other networks and streaming services.
Not necessarily, I don’t see why any reason Seven couldn’t bring that in-house under a different arm as a part of the condition of sale. Though, based on recent events re possibly network censorship of that very program it may not be such a bad idea for production to move to a 3rd party.
And they’re already doing that - the Packed to the Rafters reboot was sold to Amazon Prime Video.
I believe they are already doing that.
It’s probably doing greater harm to Cricket Australia then Seven at the moment - however it is irrelevant to it being onerous though
for those playing at home, I quote from the good book AASB137:
Seven say this relates to the Cricket (as I pointed out above), the Olympics and some legacy US content deals because; Ad revenues are down, the cost to broadcast is increasing, US ratings are down