Seven West Media shares crashed yesterday losing 10% to 50 cents at one stage and nudging the all-time low of 49.5 cents after a weak first half result and a weaker trading outlook for the rest of the financial year.
In fact, the company has increased its cost-cutting targets as growth in the TV and other ad markets disappeared in the six months to December and the outlook for the rest of the year to June has been wound back from growth, driven by the NSW and Federal election campaigns, to a fall.
Seven now expects a “low single digital” fall in the TV ad market for the full year (first half TV ad revenues were down by nearly 5% after a very weak December quarter).
Seven West Media shares ended at 52 cents, down 8% after hitting the day’s low of 50 cents.
There was no dividend again for shareholders in Seven West Media (including Kerry Stokes who owns 41% through Seven Group Holdings) for the half year to December as the company looks for more cost cuts this half and will sack more employees.
Ad revenues slid across the board as did subscription revenues for its papers and magazines as the ad market underperformed the company’s expectations.
At last November’s annual meeting, CEO, Tim Worner said the ad market was looking better:
“(T)he first quarter was flat with a softer September and October partly due to a pullback in spend from banking and insurance given the royal commission as well as government spend. Off the back of that successful Cricket take up we expect Seven’s metro FTA revenue share to grow in the second quarter and first half. The market performance in the second half is expected to be stronger driven by increased ad spend from a number of sectors including election money,” he told the meeting.
Now the outlook for the current half has been wound back completely. Mr. Worner said in yesterday’s statement that Seven expects an “Improved second half trend, but (we) expect low single-digit decline in metro TV ad market for the financial year,” meaning another weak six months.
Mr. Worner told the AGM in November that the company had upgraded its net cost saving targets for 2018-19 from $10-20 million to $20-30 million. That is now “$30-40m net group savings in FY19,” according to Mr. Worner in yesterday’s statement.
And a modest rise in earnings was forecast at the November meeting: “We reiterate our guidance issued at our FY18 financial year result for underlying EBIT in FY19 to grow by 5-10% on the prior period,” Mr. Worner said told shareholders.
But yesterday that he cut that profit forecast to the less definitive “targeting underlying FY19 Group EBIT growth of 0-5%.” In other words, earnings may grow by $7 million or so, or not at all. And any growth will be because of the stepped-up pace of cost cuts to the new higher amount.
Dividends were suspended a year ago to allow the company to concentrate on paying down debt – still high, but down on six months ago.
Seven said yesterday “group net debt was cut $121 million to $589 million” from $717 million at the end of December 2017. Gross debt at the end of 2018 was still a high $688 million against $770 million at the end of 2017.
The company yesterday reported another fall in earnings for a six month period.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 8.8% to $161.5 million for the six months to 2018, down from last year’s $176.8 million.
After-tax net profit (including significant items of $8.6 million, nil a year earlier dropped from $99.6 million to $85.8 million. That was a fall of nearly 14% (around 6% excluding the one-off items). Total revenue rose 1.5%, to $797.4 million for the first half, and a relatively flat cost-base, despite obtaining the cricket rights. Seven posted a 7.8 percent underlying net profit after tax decline to $91.8 million compared to the same six months a year before.