A third solid interim result for one of the companies controlled by Kerry Stokes and his key company Seven Group Holdings.
Monday it was Beach Energy (30% owned by Seven Group) and Boral (70% owned) that surprised with better-than-expected results and on Tuesday it was the turn of Seven West Media (40% controlled) to do better than expected and lift full year earnings guidance for the 12 months to June 30.
Seven West Media reported earnings before interest, tax, depreciation and amortisation of $215.3 million for the half year, up 31%.
Underlying net profit after tax (excluding significant items) was $128.7 million, up 48% on the previous year. Earnings before interest and tax of $203.5 million were up 34% year on year.
Revenue jumped 27% to $819.5 million for the half (usually the strongest for a TV and media company) driven by a recovery in the advertising market and online video service, 7Plus. The December half included the one-off boost from Tokyo 2020 Olympics, which delivered solid television ratings for the network.
Such has been the improvement that Seven is now hinting at some sort of reward for non-Stokes shareholders who have suffered from no returns since 2017.
Seven West said it was reviewing capital management options to enhance shareholder value as it upgraded full year earnings forecasts for a second time.
Despite all that good news, the market sent the shares down to 69 cents, a fall of 6.7% which is not how the results from Beach and Boral were received.
Seven now expects earnings of between $315 million to $325 million, including a second half contribution of $10 million from regional broadcaster Prime, which it acquired late last year.
Back at the AGM in November, CEO James Warburton told shareholders “the revenue growth and cost savings give us confidence that we will exceed analysts’ consensus forecast for FY22 EBITDA of approximately $260 million by between 7% and 10%, excluding any benefits from Prime.”
That would have put earnings around $286 million at the top of the range given before any prime contribution. Strip out the $10 million from Prime and earnings from existing operations will be around $305 to $315 million – a jump of well over 20% at the peak of the range from the 2020-21 figure of $260 million.
“We are now in the final phase of our three-year strategy, with key milestones achieved, and we see significantly more potential for the business,” CEO Warburton said in Tuesday’s statement.
“The Prime acquisition is the first step in unlocking our unrivalled ability to target the national total television market. Momentum is strong and the outlook for the markets we operate in remains robust.
“We will provide an investor update later in the year on the next phase of our strategy,“ he said. That’s when the shape of any capital management move will be revealed – an interim dividend or return of capital?
Seven said the the TV advertising market “was very strong throughout the year.”
“For the six months to 31 December, the markets were up 13% in metropolitan, 7.2% in regional and 58% in BVOD (Broadcast Video On Demand).
SWM outperformed the market growth in every segment. In the metropolitan market, our 40.3% share was in line with our forecast, the company claimed.
“After growing 144% this half to $76 million, Seven Digital is on track to deliver EBITDA of more than $130 million for the full year, or approximately 40% of group EBITDA. The transformation of the digital side of our business has been dramatic, with a step change in the sophistication of our platforms, our data and how we monetise these audiences.
This half also marked the first contribution from the digital platforms payments for our news content.
“WAN continues to execute its strategy of holding the line on print, reducing costs and turbo- charging the digital and subscription side of its business. Revenue growth in digital more than offset print decline in the period.
Underlying EBITDA grew 65% in the period after excluding one-off benefits for JobKeeper and PING grants in the prior period.
“Seven West Ventures has strong momentum, completing six investments in the period, including four new companies with large addressable markets. The investments are predominantly via media for equity which can be supercharged by SWM’s assets. The portfolio value increased 56% to $87 million in the period,” the company said.
Seven Group Holdings reports its interim on February 22.
