Seven West Media

Seven West Half Year Financial Results

Executing plan in a challenging market

Summary of 1H FY24

  • #1 national total TV network: audience and revenue share

  • Audience growth underpinning revenue share gain of 1.7 points to 41%

  • Total TV market declined 9% in the period. Q2 market softer than expected

  • Costs in line with expectations; expect 2H24 costs 4% lower ($20-25m) than 2H23

  • Positive industry progress on regulatory reform and measurement

  • Monitoring industry consolidation after ARN Media investment

  • Group revenue of $775 million, down 5% year-on-year

  • EBITDA of $124 million, down 40% year-on-year

  • Net cash flow before temporary and capital items of $69 million, down 61%

  • Debt facilities refinanced (four years)

Overview

Seven West Media Limited (ASX: SWM) today reported group revenue of $775 million, a decline of 5% on the previous corresponding period. Earnings before interest, tax, depreciation, and amortisation (EBITDA) were $124 million, which was down 40% versus the previous corresponding period. Statutory net profit after tax was $54 million, while underlying net profit after tax (excluding significant items) of $63 million represented a decline of 49% on the previous corresponding period.

SWM Managing Director and Chief Executive Officer, James Warburton, said: “SWM successfully executed on our strategy during the period to deliver consistent and engaging content to drive audience growth and revenue share across the total TV market. Despite this progress and our disciplined management of costs, our financial performance reflects the weakness in advertising markets, particularly as the second quarter progressed.

“We continue to believe in the power of television and firmly believe that the total TV industry is set to regain market share. Total TV is now growing, and Seven is leading that growth. Our view that audiences will be attracted to quality and consistent content across news, entertainment and sport is evidenced by the growth in our linear and BVOD audiences for the half year, including a linear increase of 2.2% and a 35% increase in minutes on 7plus.

“We have grown audience in total people and have grown in four of the seven months so far in FY24. Our linear audience growth has been underpinned by the calendar year-on-year growth in our key tentpole programs SAS Australia, Farmer Wants A Wife, Dancing With The Stars and My Kitchen Rules. Our major sports have also delivered, with the AFL Grand Final growing audience a remarkable 22%, and both Test cricket and BBL growing audiences on the 2022-23 summer.

“Our BVOD audience growth has been driven by both live and library content. The FIFA Women’s World Cup 2023™ delivered extraordinary numbers on 7plus and our tentpole programs saw a 36% increase in live minutes watched year-on-year. We are also seeing good growth in our news, with an 18% increase in live viewership on 7plus year-on-year. Our NBCUniversal content now accounts for 16% of our total BVOD minutes and is attracting new younger female audiences as expected when we made this investment.

“Thanks to our audience growth, we were able to record a total TV revenue share of 41%, achieving the number one position in the market, an increase of 1.7 points on the previous corresponding period. Our share growth was achieved across each month of the half and partially offset the 9.1% decline in the total TV advertising market during the period. We gained share in metropolitan and BVOD markets and remained in line in our regional markets.

“We see a significant opportunity to grow our digital earnings with the recent launch of VOZ finally pushing TV audience measurement into a comparable position versus other media channels. We are also excited by the game changing addition of digital rights for the AFL and cricket later this calendar year; together, they will add an estimated four billion minutes of content a year to 7plus and allow us to capture an estimated 45% revenue share.

“West Australian Newspapers once again delivered a solid result, with strong growth in digital audiences and the launch of new digital products resulting in 4.4 million unique monthly audience, up 18.5% in the past year. Revenue increased, largely attributable to new commercial print opportunities, albeit with higher costs.

“We continue to be disciplined on our cost outlook. Costs for the half were in line with our expectation, with the majority of our FY24 content investment weighted to the first half. We are well progressed on implementing our $60 million cost initiative program and are on track to deliver $25 million this year. We expect FY24 cost growth to be limited to 1-2%. We will, however, revisit the current cost initiatives program if advertising markets remain weak for the remainder of the year and will act decisively to meet such challenges.

“Our investment in ARN Media Limited in November 2023 was a meaningful step to position our business to deliver commercial partnership and collaboration with the market leading radio business in Australia and we continue to monitor industry consolidation.”

Results

The group reported revenue of $775 million, down 5% on the previous corresponding period. The revenue decline primarily reflects a weaker advertising market, with a year-on-year

decline of 9.1% in the total TV market (metropolitan, regional and BVOD). However, this was partially offset by the 1.7 share point growth in total TV market share to 41%.

Net debt of $257 million was up slightly from $249 million as of 30 June 2023. Reported net leverage (net debt/EBITDA) is 1.3x; however, when adjusting for the $67 million invested in the purchase of ARN Media Limited securities, the underlying leverage is 1.0x.

During the half year, the group repurchased $4 million of shares under its on-market buy- back program. The Board has determined that the dividend will remain on hold given prevailing market conditions.

Financial year results Half year ended 31 Dec Half year ended 31 Dec
2023 2022
EBITDA $124m $205m
EBIT $106m $185m
Underlying NPAT $63m $123m
EPS excluding significant items 4.1 cents 8.0 cents
Statutory Profit before tax $79m $156m
Statutory Profit after tax $54m $115m
Basic EPS 3.5 cents 7.4 cents
Diluted EPS 3.5 cents 7.3 cents
Reconciliation to statutory results:
EBIT $106m $185m
Net finance costs ($19m) ($17m)
Profit before tax excluding significant items $87m $168m
Significant Items ($8m) ($12m)
Statutory Profit before income tax $79m $156m

Further details are contained in SWM’s investor presentation lodged with the ASX today. The company will be hosting a webcast for a presentation of the results at 9:00am AEDT, Tuesday, 13 February.

Outlook and priorities

Trading update:

Second half total TV market and share expectations:

Q3 market decline rate moderating: currently pacing better than 1H FY24 (Q3 FY23 market down 11%). BVOD market expected to maintain double-digit growth

  • Limited visibility into Q4; expecting further moderation in decline vs Q3 FY24

  • Seven growing total TV share; full year forecast maintained at > 40%

  • Second half costs are expected to be 4% ($20-25m) lower than 2H23.

Mr Warburton said: “We have delivered on the commitments we have made, driving our content strategy to deliver strong operational results across the metrics that we can control, delivering audience growth and total TV market share growth.

“We have also demonstrated financial discipline as we closely manage our costs while investing for the future. Our investment in 7plus and the new Phoenix trading platform will drive user experience, converged audience trading and drive yield.

“We are well capitalised, have growing audiences and revenue share, and have significant upside for growth as we pursue our digital future.”

This release has been authorised to be given to ASX by the Board of Seven West Media Limited.

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Also see

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With the CFO coming in as CEO, I expect 7 to be slashed to the bone this year. We’ve already seen the start of it with The Latest shifting. And I think it’s all to do with getting the balance sheet in order for a merger, likely ARN. They don’t have the cash for a buyout and have too much debt to merge now.

Err yeah newsflash James

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Could sports rights be next on the cost-cutting agenda for 7 or do you see them relying more on Foxtel resources for broadcasts?

Cricket and AFL are well locked into the end of the decade.

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News report - apparently Seven is predicting that streaming numbers will increase :thinking:

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https://x.com/markdistef/status/1757254043406340579?s=46

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SWM shares made a small comeback in late trade, but still closed the day at 24 cents, down 10.9% or 4 cents from yesterday.

Since 12 months ago, the company’s share price had dropped by 43%.

Little wonder, the results are pretty bad and the forecasts don’t look like they’ll make any significant improvement in the next half.

Really makes you wonder whether dropping close to $70m for a slice of ARN was a smart decision

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Rights are locked in but expect coverage/commentary to be scaled back where possible

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Rights have and can be on sold when / if needed.

Nothing is guaranteed.

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Well given 7 promoted that they were the only commentary team at the ground for every game (they produce) during the AFL season last year in their promos, I don’t think they will want Fox to use their own words against them, especially with Fox being able to use their own commentary team from 2025.

But I can see with the cricket & afl, 7 hiring less high profile commentators etc if they need money to be saved

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Yes but 7 wouldn’t want to lose the main winter & summer sport that they have for the next 7yrs. Cost cutting would have to be from other sections

Agreed, but nothing is ever really locked in is it?

From The Australian (via Mediaweek):

With net debt to earnings before interest, tax, depreciation and amortisation at 1.3 times, or one times before acquiring a stake in ARN Media, could now be the right time for billionaire Kerry Stokes to privatise his media empire?

If the market value falls further, the reality is that the Stokes family could buy the publisher of Western Australian newspapers and free-to-air broadcaster and run it for cashflow.

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Mad Paws secures $5.25 million strategic investment from Seven West Media

Mad Paws Holdings Limited (Mad Paws or the Company) announces a strategic investment by one of Australia’s leading media companies, Seven West Media (ASX: SWM) (SWM or Seven), to further accelerate growth for Australia’s leading pet eco system over the next 12 to 24 months.

Highlights

  • Strategic investment of up to $9.25 million from Seven, with $5.25 million in tranche 1 and an option for a further $4.0 million in media in tranche 2

  • Tranche 1 of $1.25 million in cash and the equivalent of $4 million in advertising

  • Transformational opportunity to build awareness for Mad Paws group through SWM’s network which has a combined reach of more than 19 million Australians

SWM has agreed to make a strategic investment of $5.25 million in Mad Paws via a share placement, giving it a 10.8% stake in the company, with both companies perfectly aligned to drive future growth. The investment is priced at $0.12 per share, representing a premium to the last traded price.

Payment for the $5.25 million investment will be split between $1.25 million in cash and the equivalent of $4 million in advertising across Seven’s television, publishing and digital media assets, which have a combined reach of more than 19 million Australians a month. The cash funds from the strategic investment will be deployed to develop advertising and creative content as well as fast track Mad Paws progression to a single platform.

As part of the strategic investment, Mad Paws will work with Seven to utilise its extensive media reach for a concerted brand advertising campaign to accelerate the growth of Mad Paws in the Australian market.

The Company will issue 43.75 million new fully paid ordinary shares in the Company in connection with the strategic investment on Monday, 19 February 2024 under Mad Paws’ existing placement capacity under ASX Listing Rule 7.1. The shares will be subject to a 12-month escrow upon issue subject to customary exceptions, including the ability to transfer the shares to affiliates and accept an offer under a takeover bid, a merger by way of a scheme of arrangement or company buy-back.

Justus Hammer, Co-Founder & CEO commented: “We are excited about the strategic investment from Seven which reflects the strong market position Mad Paws has and quality of business the team has built. With over 6m households now having at least one pet, Seven’s reach presents the perfect platform for taking Mad Paws’ growth to the next level. With Seven we will be able to reach a large national audience and position Mad Paws as the leading pet eco system in Australia.“

SWM Chief Financial Officer, and Managing Director and CEO elect, Jeff Howard, said*: “Mad Paws has built a high-quality digital eco-system over the past three years and is now in a strong position to consolidate and grow its brand via national brand marketing.*

We know brand awareness is critical for driving trust and demand for a digital marketplace business. We look forward to working with the Mad Paws team to help them become a household name across Australia.”

Additionally to the initial $5.25 million investment, Mad Paws has a 24-month discretionary option to acquire further advertising placements from SWM to the value of $4 million. If exercised by Mad Paws, the purchase will be settled through the issue of a second tranche of ordinary shares to SWM at an issue price equal to Mad Paws’ 30 day VWAP at the exercise date, capped at a minimum issue price of $0.12 and a maximum issue price of $0.25 , and conditional on the receipt of requisite shareholder approvals. In the event the 30 day VWAP is below $0.10 exercise of the option is also subject to Seven’s prior approval. If exercised, further details about the potential share issue and any required shareholder approvals will be provided to the market at the relevant time.

Mad Paws operates Australia’s leading online pet ecosystem, connecting pet owners with an ecosystem of highquality services and products. The Mad Paws pet ecosystem supports over 300,000 active pet owners, facilitating over 400,000 transactions last year, driven by the rapid growth in pet ownership and increased spending on pets in this $30 billion Australian pet market.

This doesn’t seem like a strategic investment :thinking:

Seven will now be pushing for more changes to ratings to boost the reach of broadcast TV with pets to be counted as well. :wink:

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