‘We will be number one’: Seven boss determined to dominate TV sector by end of year

Seven West Media boss James Warburton has expressed confidence the broadcaster’s television network will be crowned number one in ratings by the end of the year after the company returned to profitability following a period of steep financial losses.

The Kerry Stokes-controlled media company swung to a net profit of $318 million from a $163.3 million loss the previous year, with revenue rising 3.5 per cent to $1.3 billion. However, shares in the company tumbled 7.8 per cent to close at 47.5 cents amid investor unease about a forecast rise in costs.

Seven West Media chairman Kerry Stokes, left, with chief executive James Warburton.Credit: James Alcock

Seven’s underlying earnings (before interest, tax, depreciation and amortisation) were $253.9 million, at the upper end of guidance outlined in June. The company’s net debt, which has been closely watched by analysts, fell to $240 million.

Seven’s biggest business, its free-to-air television network, recently achieved record-breaking ratings for its telecast of the Tokyo Olympics. That has fed into strong viewership for its flagship shows such as The Voice, which Mr Warburton said has put the network on track to achieve its first annual ratings win since 2018.

“No matter how you want to cut it - a calendar year, survey year, Easter included, Easter out - at the end of the day, we’ve won 19 of 33 weeks and if you look at a whole survey year - 15 of 25 weeks,” Mr Warburton said. “We are number one, and we will be number one. We are very confident that we will win the year.”

Seven has not won the annual TV ratings battle since 2018 (Nine Network, which is owned by the same company as this masthead, ended its 12-year winning streak in 2019).

Spheria Asset Management portfolio manager Matthew Booker, who holds shares of Seven, described the result as a “lazarus recovery” for the company. He said the share price fall was due to its forecast that costs would rise in the current financial year to above $1.1 billion, but he was not concerned about it.

“A big chunk of that is one off,” Mr Booker said. “It will be more than offset by the Olympics and the market share improvements. The balance sheet in a good shape which puts them in good stead to make acquisitions or return capital to shareholders,” he said.

The result was bolstered by an improvement in television advertising industry revenue and recently secured content deals from Facebook and Google under the government’s new media bargaining laws.

Mr Warburton also revealed the media company, which owns a metropolitan television network and newspaper assets in Western Australia, is about to invest in three new digital start-ups as he looks to find new ways to make money. Seven is also looking to refinance its debt before the end of the year.

Tokyo 2020 Olympics still a $50 million loss

While the Olympics were a major ratings success for Seven, Mr Warburton revealed the company still lost $50 million on the event. For this reason, he said the company would be disciplined in any negotiations to secure more sports rights, including for future Olympic Games and for the NRL, which is currently talking to broadcasters.

“The notion that we’re going to go and blow our brains out is ridiculous. We’re going to make measured decisions around what the content delivers,” he said. “The Olympics were a $50 million loss and the Tokyo games were the first time since 2008 when the Olympics were in our timezone. And the east coast of Australia was in lockdown.

“That sounds like I’m taking away from the unbelievable job that our sport department, digital operations, and sales team can do. I’m not taking away at all, it was incredibly innovative. But the next two games are in an unfriendly timezone and the major action comes in the middle of the night.”

Morningstar analyst Brian Han said he was not concerned about the rise in costs. “A ‘content-led’ strategy requires investment in content – sustainable improvement in ratings and revenue share don’t usually come out of thin air,” he said.

Seven to “lead industry consolidation”

Seven will now turn its focus to refinancing its debt before Mr Warburton makes another attempt to acquire a regional television operator.

Mr Warburton previously tried to buy Seven’s regional affiliate partner, Prime Media Group, but the plans were thwarted by shareholders Bruce Gordon and Antony Catalano.

”Of course it makes sense to become a national television network,” Mr Warburton said. ”We’ve now got a range of options in the regional sector...We’ve got about 20 months left on our affiliation agreement, and now we’ve got options in terms of what we could do from a regional perspective and we plan to execute that. Step one is to refinance and then put ourselves in a position where we can lead the [industry] consolidation.“

Mr Han said any M&A activity depends on price.

“It depends on what the asset is, how much it diversifies Seven away from its own structurally challenged businesses, and what price it pays,” he said.

A dividend will not be paid to shareholders for FY21. Mr Warburton made $7.6 million in the last financial year when considering share price growth, deferred performance rights and cash payments.

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