Seven West Media first half results: Profit of $140.3m on total revenues of $892.9m

Seven West Media CEO Tim Worner wants “decade of dominance” after ninth year of TV leadership

Seven West Media this morning released its interim financial results for half year ended 26 December 2015.

Chief executive officer Tim Worner started a results presentation noting the network had completed its ninth year of dominance in ratings and revenue. He then told shareholders and analysts Seven was planning for a decade of dominance with such a good start to the 2016 TV ratings year.

Worner said there was more people watching My Kitchen Rules this year than there was last year.

He also noted that with the launch of the Racing.com stream yesterday, Seven was now streaming all its channels, something no other channel has come close to matching.

Highlights from the results presentation:

•  Seven builds on leadership in audience delivery in television.
•  Seven delivers another market leading advertising revenue share in television across the first half of the financial year. Publishing businesses out-perform peers in a challenging market.
•  Market-leading strong margins delivered across all key media businesses with operating cash flow before interest and tax of more than $186.7 million.
•  Seven West Media delivers an underlying net profit of $140.3 million on total revenues of $892.9 million across first six months of the current financial year.
•  Tight and disciplined cost management focus maintained – with total costs down 4.0 per cent in the period.
•  The company has maintained EBIT guidance issued at its annual general meeting last November.

Profit before significant items, net finance costs and tax (EBIT) is $185.9 million. Profit before significant items, net finance costs, tax, depreciation and amortisation (EBITDA) is $229.3 million.

Overview

Commenting, CEO and managing director of Seven West Media, Tim Worner, said: “Today’s result in an extraordinarily competitive and rapidly changing market is positive. We are delivering leadership in broadcast television, and our digital and publishing businesses continue to deliver market-leading margins.
“Our company’s focus is clear: driving home our leadership in content creation and to use the strengths of our media businesses to drive better outcomes for our audiences and our advertisers on digital platforms. We are building and transforming our businesses, managing our costs, focusing on our core strength of content creation and rapidly expanding our presence across all communications devices.
“Our objective is leadership in content and leadership in delivery across our media platforms. Our focus is firmly on the delivery of results for our shareholders. We will continue to invest in our content and our businesses. We will continue to be rigorous in our cost management. We will also accelerate our moves into new forms of delivery to audiences building on the success of our live streaming, our PLUS7 presence and our Presto partnership with Foxtel.”

Outlook

Management earnings guidance for the 2016 financial year remains in line with the company’s annual general meeting commentary. Management forecasts growth in the television advertising market to be relatively flat year-on-year. The publishing advertising market is expected to continue in line with current trends. Programme sales and third party productions are expected to deliver double digit growth. The company has issued guidance for the group’s 2016 financial year percentage change in EBIT to be at the lower end of guidance down approximately 10 per cent on the prior year.

Business Performance

Broadcast Television

Seven delivered EBIT of $185.4 million on revenues of $662.9 million. EBIT margin is 28.0 per cent and EBITDA margin is 29.8 per cent.
Seven continues to lead the market in television advertising revenue share in a tough advertising market. The latest industry figures put Seven’s share of the advertising revenue market at 38.5 per cent for the July- December half year and 39.0 per cent across the 2015 calendar year (Source: Free TV (KPMG) Industry Revenue Share Numbers).
More Australians watch Seven than any other television network. Seven was the most-watched network for total viewers across the 2015 television year and is delivering a strong performance across the opening weeks of the 2016 television year.
Seven’s cost management in the first six months reflects the tight cost control while continuing its significant investment in Australian programming.
The network is delivering a strong performance across its digital broadcast platform of Seven, 7TWO and 7mate. Seven will soon launch a new channel: 7flix. The network is expanding its presence in media, driving its leadership in the creation of content and delivering that content anywhere, anytime to the biggest audiences. The company is expanding its presence beyond its digital broadcast channels across an array of platforms, including live-streaming of its broadcast channels to any connected device. Seven has also secured a major presence in subscription video on demand through its Presto joint venture with Foxtel.
Seven is now creating more content than at any time in its history and is expanding its presence in international content production with the formation of two new international production companies: 7Wonder and 7Beyond. These two new businesses underline a key part of its strategy for today and in the future: the expansion of the company’s leadership in the production of content.

Online and Digital Media

Seven West Media is increasingly a ‘content and audience’ business. Digital content engagement is at the centre of our value proposition. The company is committed to accelerating its digital growth by investing in bringing our content faster to market whether via AVOD, SVOD, TVOD and live, that will drive shareholder value.
Yahoo7 remains a key platform in the company’s digital strategy with scale audiences in online and mobile and progress across the second and third screens. Demand for online video continues to grow rapidly with more than 96.8 million videos streamed over the past six months, up 39.4 per cent on the previous first half, and an increase of 34.4 per cent in PLUS7 episodes streamed for the six months to December.
Yahoo7 delivered total revenue of $50 million and an EBITDA margin of 39.3 per cent. This is based on 100 per cent of the business. Seven West Media’s share in Yahoo7 is 50 per cent.
Seven’s launch of the live-streaming of its broadcast channels –Seven, 7TWO and 7mate – is garnering impressive results with Melbourne Cup Day delivering 488,000 streams and the Australian Open building 67 per cent on last year to deliver 7.4 million streams.
Presto has recorded significant subscriber growth, with subscriptions climbing 210 per cent in the first half of this financial year.

Newspaper Publishing

The West Australian and regional newspapers delivered EBITDA of $34.7 million and EBIT of $24 million on revenues of $121.4 million. EBITDA margin is 28.6 per cent. EBIT margin is 19.8 per cent.
The company continues to manage its newspaper business in a challenging environment with costs down 8.3 per cent over the prior corresponding period, helping to offset the 9.3 per cent decline in circulation revenues to $28.6 million and the 14.8 per cent decline in advertising revenue to $78.0 million compared to the prior corresponding period. Excluding depreciation and amortisation costs, cost reduction for the year is 9.2 per cent.
The West Australian has maintained its position as one of the strongest performing newspapers in the country. According to recent publishing figures, The West Australian is the most-read newspaper in Western Australia. The West Australian reaches an average weekday readership of 583,000 people per day (Source: Emma conducted by Ipsos MediaCT for the rolling 12 months ending December 2015). The West’s online audience is now more than 500,000 and social audience is up 30 per cent year-on-year.
The West is expanding its level of engagement with its audiences, with an increasing level of integration with Channel Seven Perth and the launch of a new integrated newsroom with Seven and the implementation of a new multi-media editorial publishing platform which will further advance The West’s digital delivery of its content.

Magazines Publishing

Seven West Media’s magazine publishing business, Pacific Magazines, has delivered a positive performance in a challenging market – with EBIT of $7.3 million on revenues of $106 million. EBITDA margin is 7.6 per cent. EBIT margin is 6.9 per cent. The company delivered a 3.3 per cent decrease in costs to $98.7 million.
Circulation revenue of $67.1 million is down 5.4 per cent on the corresponding period. Total advertising revenue of $32.8 million is down 15.5 per cent on the corresponding period.
The company’s share of consumer magazine market advertising revenue is 30.7 per cent (Source: SMI). Pacific Magazines is the only magazine publishing business building advertising revenue share. The company delivered an overall circulation share of 36.0 per cent (Source: ABC based on 15 audited titles) and readership share of 30.0 per cent (Source: emma conducted by Ipsos MediaCT based on 17 audited titles).
The company is continuing its digital transformation – a commitment which is seeing a 68 per cent increase in social and digital audiences to 12.9 million Australians.
Source: Seven West Media

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