Big Result For SEV

By Glenn Dyer | More Articles by Glenn Dyer

It's been a big year for Seven network and its 42% owner, Kerry Stokes.

Record earnings, record ad share, record ratings performance and the prospect of more to come, despite the possible multi-million dollar cost of the controversial C7 case.

And of course, there was also the sale of 50% of the Seven TV Network and Pacific Magazines to the KKR group of the US which has left Seven holding around $2.6 billion in cash.

And the company yesterday put in place an on market share buyback scheme that could see up to10% of the company's shares bought back, at a time and price of its choosing.

It's there to inject stability into the share price.

The shares will not be necessarily bought every day and shareholders are not being made an offer for 10% of their holdings.

But you can be assured that Kerry Stokes will tighten his hold on the Seven Network if he follows form and doesn't accept the buyback offer.

Stokes has not participated in any previous capital management moves from the company, preferring to hold onto his stake and allow his control over Seven rise.

After yesterday's profit announcement (excluding the confusion caused by the accounting of the KKR deal), few shareholders will want to sell.

Seven said net profit after significant items was $1.622 billion for 2007, up from $107.7 million, but that reflected the formation last year of a joint venture media company Seven Media Group with private equity firm Kohlberg Kravis Roberts & Co.

Excluding these and other significant items (mainly a $76 million profit on the sale of Telstra Dome), net profit was up 62% to $174.48 million.

Seven shares jumped 25c in a falling market to $11.24 on the buyback news, but then eased to close 21c higher at $11.34.

Seven has also bought a 17.1% stake in West Australian newspapers but that was started before the KKR stake was finalised.

Seven made a $50 million provision for legal costs related to its unsuccessful C7 law case. That is only an estimate and is for the eventuality that it has to pay the costs of other parties. Seven won't decide on an appeal until early October.

The company says it is still considering its options on the lawsuit and whether it will appeal the court's decision.

Seven also released figures to enable a comparison to be made between the operational performance of its TV and magazine businesses on the 2007 year and with 2006.

Seven said that its media businesses' indicative twelve months EBIT jumped 52.3% to $326.6 million: that's from magazines and the Seven Network.

Seven said the television business EBITDA rose 31.7% to $337.6 million on revenues of $1,118.9 million across the financial year, with earnings before interest and taxation up 35%.

Indicative revenues of $1.1 billion were up 13.8%. Seven's magazines publishing business up 29.3% in indicative EBITDA over the past twelve months, with indicative EBIT of $36.4 million – up 40.5% on revenues of $263.1 million, up 9.4%.

Broadcast television revenues surged 14%: a strong performance in an overall television advertising market up 2.2% across the past twelve months.

Seven said its television costs (excluding selling costs) increased by 10% – in line with market guidance provided by Seven and reflect the company's acquisition of broadcast television rights to the Australian Football League and the V8 Supercar Championship. The costs excluding these one offs were up around 3% (in line with CPI).

Seven's magazines publishing business, Pacific Magazines, delivered EBITDA of $44.5 million, up 29% on the previous twelve months, and EBIT of $36.4 million, a climb of 41 per cent, reflecting the company's continuing development of its portfolio of magazines. Pacific Magazines recorded a 9.3 per cent increase in total revenues – $263.1 million – with advertising revenues up 9.7% and circulation revenues up 3.2%.

Seven's share of the television market for January-June this year is 39.2%, up from 36.4% in the corresponding half last year. Across the past twelve months, Seven delivered a 37.5% share of the television advertising market – up from a 34.5% share across July 2005 – June 2006.

Seven delivered an operating margin of 30%.

Directors have declared a final dividend of 17.0 cents per share, taking to 29.0 cents per share the total dividend paid to shareholders this financial year. This is up 1.5 cents per share, or 9.5%, on the final dividend paid to shareholders in the previous financial year.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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