For the second time in three years, Seven West Media has slashed asset values on its balance sheet as it attempts to adjust to the rapid pace of change in the media.
Seven yesterday revealed more than $900 million in asset write downs and a near $750 million loss for the 2016-17 financial year – the second huge loss triggered by asset write-downs in three years.
The latest loss and write-downs take the total value of the cuts to more than $3 billion as the company’s board and biggest shareholders adjust to the changed media landscape since Seven West Media was formed in 2011 (at Stokes instigation) in a merger valued at $4.1 billion.
At yesterday’s close (Thursday) the company’s value of $1.19 billion and the annual report shows that net assets have been slashed to just $418 million from $1.252 million a year ago.
And there is no improvement in sight with the company forecasting a 5% fall in group earnings before interest and tax for the year to June 2018. While that is not as negative as the forecast last year of a 15% to 20% fall, it indicates that legacy media in this country remains under rising pressure to maintain revenues and earnings.
The write-down has been driven by the collapse in the company’s share prices (which drove the slump in Ten’s balance sheet values for years). Seven’s most recent high was $1.2150 a share in June of last year. Since then they have plunged 34% to a low of 65 cents, and closed yesterday at 79 cents (they fell 3% in a market that rose overall).
That saw the Seven West Media board take an axe to the value of its key media assets, slashing their value by nearly $989 billion, most of which was taken in the June half year after a smaller, $83 million group of write downs was revealed in February for the six months to December.
At the same time the group’s operating and underlying profits fell by nigh on 20% – as the company forecast earlier in the year as revenues dropped by nearly 4%.
Seven reported a statutory net loss of $745.0 million for the year ended 24 June 2017. This compares to the previous year statutory net profit of $184.3 million and underlying profit after income tax, excluding significant items net of tax was $166.8 million on total revenues of $1,679 billion and earnings before interest, tax, depreciation and amortisation fell to $306.7 million, down from $363.5 million in the corresponding period with EBIT of $261.4 million.
It’s the second time in three years that red ink has stained the Seven balance sheet. Back in 2014-15 the company reported a loss of $1.89 billion thanks to asset write downs of $2.07 billion – which were also in the value of the TV, newspaper and magazine assets.
Seven said in this morning’s statement that the cut in “the carrying value of the television assets represented the largest proportion of these write downs. Softer free to air market conditions and a revision in growth assumptions for the market outlook have impacted the carrying value of the television licence and certain sports rights. In the prior period, FY16, significant items of $32.9 million related to restructuring costs.” The detailed results support the cuts. The TV business saw a 1.7% rise in total revenues to $1.281 billion, with TV ad revenues up 0.8% to $1.062 billion, in a market were total ad spend was off almost 4%.
And yet earnings before interest and tax in the TV division dropped 14.4% to just on $250 million. Pacific Magazines was a disaster zone – revenues plunged 28% to just $40 million and earnings before interest and tax slid more than 60% to just $3.5 million. Another year like that and the magazine business could die.
And in newspapers in Perth revenues slumped 4.8% to $217 million, but earnings before interest and tax fell 33% to $26 million. That result includes the Sunday Times in Perth which became a Seven asset last November.
Seven shares fell to 77 cents yesterday, down 2.5%.
