Seven West (SWM) shares dropped more than 18% yesterday, wiping out more than half this year’s gains after the company surprised with a forecast a big drop in earnings for the coming financial year because of still-soft advertising market and the costs of broadcasting the Olympics and the start of the new AFL broadcast.
Kerry Stokes’ company reported a 0.9% fall in full-year underlying profit to $207.3 million, with revenue for the 12-months to June 25 dropping 2.8% to $1.72 billion.
Earnings before interest and tax fell 10.7% to $318.1 million, and Seven West warned that is set to drop again in the year ahead. Nine Entertainment (NEC) shares fell more than 14% to 93 cents, while Ten shares fell 0.8% to $1.12 (or 11.2 cents before the share consolidation earlier this year). Nine shares touched an all time low of 91 cents in trading.
“Impacted by the combination of softer market conditions and increased content costs from the Olympics and AFL, underlying group EBIT (earnings before interest and tax) is expected to be down 15 to 20 per cent in the coming year," Seven West said in a statement on Tuesday. At the 20% loss, group EBIT for 2016-17 could be as low as $255 million.
The surprise forecast sent Seven West Media shares down by more than 15% before they fell further in afternoon trading to end down 18.3% 13% at 84.5 cents.
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Net profit after tax was $184.3 million, compared to a $1.89 billion loss for the previous year when Seven West recorded write downs of more than $2.1 billion – mostly related to its Seven Network TV assets, its newspaper and magazine mastheads.
The only significant item recorded for 2015-16 was a $32.9 million charge for restructure costs and onerous contracts, while net debt was fell 2.3% to $716 million.
Seven West said its Olympics coverage – on broadcast TV, online and mobile – should at least help boost audience numbers for the year ahead (but really for the next two and a bit weeks).
"We are also a premium content company and increasingly a digital and mobile delivery company. We are transforming our businesses while continuing to deliver market-leading performances,” directors said yesterday.
Dividend for the year is 8 cents a share after an unchanged final payout of four cents a share.
The Seven TV network had pre tax earnings of $292 million on revenues of $1.3 billion after cutting costs by 1.6%.
The West Australian newspaper was again hit by the slowing economy in Western Australia and falling print ad levels generally. Its pre tax earnings dropped 24% to $39 million, and revenues fell 12.4% to $229 million.
Pacific Magazines reported earnings of $9 million, more than 50% lower than the $22.01 million in 2014-15. Yahoo7 saw revenues of $92 million, of which SWM can claim 50%.
