Kerry Stokes’ Seven West Media’s chances of surviving have taken a turn for the better with a solid improvement in the troubled media company’s financial position in the six months to December.
The improvement came as the company swung to a first-half profit and announced it had struck a $30 million-a-year deal with Google for its news content.
The Google announcement did not reveal the monetary value of the deal but industry sources claim it will be worth more than $30 million a year.
News Showcase is a newly launched product available through Google’s news app. Google pays publishers for certain behind-the-paywall articles that then appear on the platform.
Seven’s deal was the first formally announced. Website and newsletter, Crikey also revealed yesterday that had already struck a deal with Google.
News of the deal plus the clear improvement in the company’s financial position saw the company’s shares hit a 21 month high of 52 cents. They closed at 50 cents, up 6.4%.
The interim result revealed that the deepening list in the balance sheet has been halted and is being reversed as the company’s cost cutting and asset sales have seen its finances improve noticeably.
That has seen it move into a net assets position as of Monday, February 15) with a big debt repayment that has helped eliminate a net liabilities position at the end of the 2019-20 financial year.
More deep cost cutting, asset sales a slight upturn in ad spending and 2020 AFL broadcast contract (which helped boost December half ratings) saw Seven West’s earnings return, but there’s no interim dividend for shareholders, led by Stokes’ Seven Group Holdings.
The company’s interim financial results, released Monday morning, revealed that the net liabilities position at the end of the 2019-20 financial year (June 27) of $236.1 million, had improved to a net liability position of $114.9 million at December 26.
But the financial report also revealed in the fine print that the company repaid $150 million of its $750 million drawn down debt today (February 15), reducing the mount owning to $600 million.
Barring no other problems and the improving financial performance, Seven’s financial position currently is now net assets of $35 million, and forecast to continue rising with the company confident that after identifying $170 million in cost cuts (and implementing many of them), it has found another $30 million to be added to the total.
There’s also cash from the 18.4% stake in AirTasker to be released in the forthcoming float after selling off real estate, its production and distribution businesses here and offshore and getting rid of staff.
The debt repayment has reduced the amount Seven has to find in 2022 to repay to its banks, led by the ANZ, to $600 million (from $750 million) – two tranches of $300 million each, one on July of next year and the final in December. That’s a slightly more manageable task and the company has much of its cash pile still on hand.
Net debt (that’s drawn debt minus cash on hand) at the end of the period was $328.9 million. That has been lifted by that $150 million repayment and Seven says there are further repayments to come.
But it also means there will not be any dividends for shareholders until 2023 at the earliest.
Seven reported Earnings Before Interest and Tax (EBIT) (and before significant items) of $151.7 million, up 29& on the figure for the six months to December 2019 (pre-Covid). Underlying net profit after tax (excluding significant items) was $86.6 million, an increase of 26.5% on the previous year.
Revenue fell 9.9% to $644 million. It was down 6.7% in the Seven TV business but with intense cost cutting earnings before interest and tax rose 29% to $140.5 million. Seven Plus and 7News delivered strong revenue gains off small bases in the previous period but West Australian newspapers remain a headache. Revenue fell 14.4% but a 24% hack into costs improved the bottom line.
