On Wednesday, Seven West Media (SWM) was forced to recognise the sharp slide in its share price and worsening in the outlook for broadcast TV and by writing down the value of its TV licences.
It also cut the value of its newspapers and magazines as well, a situation by the too high value of the assets in the 2011 creation of Seven West Media – the Seven TV licences, the magazines in Pacific Magazines and the newspapers and other assets in West Australian Newspapers.
Too much value was place don the assets of the latter and the value of the TV licences and magazines in Seven were undermined by weak revenues, falling audiences and readers (it is the second write down in the vaue of the magazine assets in 18 months).
In fact it can be argued that the Kerry Stokes-chaired media company has had a mammoth clean up, or been forced to do so by the weak prospects for broadcast TV and print media, which has been reflected in the collapse in the company’s share price in the past year. At the time it was formed in 2011 from the merger of Seven network and West Australian newspapers, Seven West Media had a value of $4.1 billion. At the close last night, the company’s value of $1.46 billion. The huge asset write-downs (or impairments) merely reflects part of the $2.7 billion slide in value.
The share price has fallen from $2.16 early in 2014 to a low last month of $1.21, before bouncing back to last night’s close of $1.45, up 2.1% on the day.
SWM, SVW 1Y – Value destruction at Seven
In its statement, Seven West said “the impairment is an accounting adjustment that reflects a reassessment of the market outlook for growth” and the “$1.148 million of total impairment is non-cash in nature.”…The impairments related to "significant items relating to predominantly the impairment of goodwill, carrying values of the company’s publishing businesses, impairment of equity accounted investments, recognition of onerous television programme contracts and redundancy and restructure costs.”
Included in the impairments were: $960.9 million written off from the value of TV goodwill, $65.7 million from the value of newspapers and magazines goodwill, $38.4 million, impairment of the value of newspaper mastheads and magazine licences; impairment of “equity accounted investees” of $26.5 million and “restructure costs and onerous costs”.
After tax profit was $137.5m (excluding the significant items) down 8.4% from the first half of 2013-14 The loss after tax and significant items was $993.6 million.
Directors declared an interim dividend of 6 cents a share and will maintain the full year figure at 12 cents a share (subject to there being no disasters).
Seven Group Holdings is due to report its interim results next week and will have to write down the value of its Seven stake, and probably the value of its Caterpillar franchises in Australia and China, according to some analysts.
