Prime Media Group, a major regional TV group, saw its shares slide more than 7% to 31 cents at the close yesterday in the wake of an earnings downgrade for the year to June 30. At one stage the shares were down 10% at 30 cents, a decade low.
Prime joined Nine in warning that it is looking at lower sales and profits for the financial year after ad revenues sank in the March quarter.
The company is 14.9% owned by Seven West Media and broadcasts Seven programs into regional Australia.
It said it has seen a decline in revenues for the quarter in northern NSW, southern NSW and regional Victoria amounting to 7.4%. This was worse than a wider market decline of 6.8%.
As a result, Prime expects its annual net profit after tax for the current financial year to fall to between $23 million and $24.5 million, a drop of almost a third on last year’s $33.4 million.
That’s despite the network broadcasting Seven’s high rating programs such as My Kitchen Rules, Downton Abbey, Seven Year Switch, Home and Away and Seven’s improving News.
In the announcement to the ASX, Prime CEO Ian Audsley suggested media agencies had been failing to back the company, despite Seven having the Olympic rights and performing better than its rivals.
“The national agency revenue result is disappointing, particularly in an Olympic year in which Prime has grown its audience to a 41.8% share and delivered a market-leading 41.6 point revenue share. Olympic-related forward bookings have been encouraging; however, overall national advertising campaigns in regional markets remain challenged,” Mr Audsley said.
Audsley warned that the looming election had added to uncertainties while consumer sentiment had contributed to a short term market, and that “Current forward bookings suggest there will be no material improvement".
The warning from Prime should focus attention on the media sector – Seven has so far not provided an update, leading investors to believe it is still trading on budget and guidance. Southern Cross, the Ten regional affiliate, will also be watched closely after Ten reports its interim results later this morning.
