Australia's Seven West Swings to Full-Year Loss, Will Look for Deals

Kerry Stokes, James Warburton - Publicity - H 2019
Courtesy of Seven West Media

New CEO James Warburton would not rule out a tie-up with other media groups, including News Corp., saying the company would look at possible mergers and streaming partnerships as part of its transformation.

Australia’s Seven West Media, the parent company of top-rated broadcaster Seven Network, will look at possible mergers and partnerships with such rivals as News Corp. to transform itself, new CEO James Warburton said Tuesday as the company swung to a full-year loss amid writedowns of the value of its TV licenses and newspaper assets. 

The company posted a full fiscal-year loss of $301 million (AUS$444 million) due to having to write down the value of its TV licenses and newspaper assets. The company had recorded a AUS$133.7 million profit in the year-ago period.

Revenue for the financial year ended June 30 fell 4 percent to $1.06 billion, while underlying net profit after tax fell 7.9 percent to $87.7 million. Pre-tax earnings of $144 million were down 10 percent. 

Auditor KPMG said the value of Seven’s TV licenses was written down as "the level of growth in advertising revenue for commercial television networks continues to be challenged by changes in consumer habits." It added: "The ongoing disruption creates uncertainty in the key estimates used in the television license value."

Warburton, who was installed on Friday after the surprise resignation of Tim Worner, said the company was now eyeing mergers and acquisitions. “We will be a hunter and explore M&A opportunities in both traditional media and non-traditional adjacencies that are positive for our shareholders,” he said. He would not rule out a tie-up with other media groups, including News Corp., and told local media that he has approached a variety of media businesses regarding partnerships on streaming media. 

Seven’s results were announced on the same day that Disney said it would launch its Disney+ streaming service in Australia in November, bringing the number of SVOD services in the market to nine. 

“Fiscal year '19 was a tough year in the economy and advertising markets, which impacted Seven West Media’s performance,” Warburton said in the earnings report. “But we have incredibly strong assets, and our focus moving forward is to speed up the rate of transformation while exploring opportunities for growth in our core and adjacent markets.”

While Seven finished the Australian 2018 broadcast year as the top-rated TV network, that position has been challenged by rival Nine Entertainment in recent weeks. And industry observers say Seven’s programming mix skews to older, less profitable demographics. Seven’s losses came despite the network finishing the year with an increased and market-leading 40.3 percent share of commercial TV revenues.

Warburton on Tuesday promised to “revitalize our entertainment programming, creating momentum to engage heartland Australia and enrich the demographic mix, ensuring we are the most relevant and exciting offer to advertisers." He also vowed his team would look to reduce costs: "We will sharpen our focus on being a high-performance audience and sales-led organization, and we will redefine our working practices, becoming more efficient and effective and making savings, which do not impact on ratings."