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Seven Media Wobbles Future Looks Bleak, ACCC Key

The pressure that free to air networks are facing has been revealed with Seven West Media is reporting a $67m loss on a total revenue of $773.3m for the first half of the 2019/2020 financial year.

Revenue from advertising was down $24M dropping to $491.7m from $515.9m on the same half a year earlier.

Its shares were down more than 15 per cent to a record low of 22 cents at lunchtime on Tuesday, valuing the company around $338.4m. That’s well below its debt pile of $541.5m.

A major contributor to this slump was a move by retailers a traditional heavy buyer of TV running into the peak Christmas New Year period to online marketing over TV. The combination of Black Friday online marketing coupled with Cyber Monday saw retailers inject millions into social media and online market a move that is set to continue according to Harvey Norman and Bing Lee executives.

Profits at the big TV Company dropped 22.5%.

The TV network has a net debt of $541.5m and has recently implemented a $45m cost out programme for the second half of the year and FY21.

Not helping was the fact that the entire free-to-air (FTA) TV market down 7.0% in the half, and a total advertising market decline of 8.5% due in part to retailers spending elsewhere.

The company isn’t paying dividends to shareholders and is still punting on the sale of Pacific Magazines sale and a merger with Prime later this year.

CEO James Warburton is confident Seven can rally in the latter half of the 2020 financial year however the network is at the mercy of the ACCC who at this stage are being tipped to reject the Bauer Pacific deal.

“Over the last six months, we have executed on a number of major strategic initiatives, including the investment in our new content strategy for our primetime entertainment schedule which commences in April; a major reorganisation and cost out plan delivering $45m of gross savings; the divestment of Redwave; and proposed sale of Pacific Magazines,” he told the Australian Stock Exchange (ASX).

“The ACCC’s decision on Pacific Magazines is due in April 2020. We continue to work with the ACCC to address their concerns. While management were disappointed that certain stakeholders blocked the Prime Media merger, we have secured a strategic stake of 14.9%. Working down debt remains a key priority with a number of initiatives underway.”

In television, the network is reporting to be the number one FTA by revenue share for the first half, increasing to 38.8%. Seven is thought to currently be in trouble due to the failing ratings of My Kitchen Rules which may impact its end of year result.

Seven championed its sports offering in the results, reporting the AFL audience for 2019 increased 3% and the test cricket audience by 12.5%. On the flip side, the Big Bash League suffered from low ratings across the summer. Seven noted it is “in discussions with Cricket Australia to review the Big Bash season and product moving forward”.

Promising a big fourth quarter for FY20, Seven said it will bring “several well established, and new and exciting franchises to prime time viewing”. Still on the slate for the network are Big Brother, Farmer Wants a Wife, Holey Moley and Plate of Origin. The network championed a “tentpole investment to launch in Q4 targeting 25-54” in the results.

Earnings before interest and tax declined 25.1% to $108.9m for the Seven business.

Seven’s broadcast video on demand (BVOD) platform 7Plus grew 33% in consumption and 42% in revenue year-on-year, the ASX report said.

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