Seven West Media slashes dividend as profit crumbles on Yahoo7 writedown

Seven shares have slumped after the firm posted a 91pc dive in profit and as its CEO addressed the Harrison affair.

Seven West Media CEO Tim Worner. (AAP Image/David Moir)

Shares in Seven West Media are in free fall this morning as the company revealed a 91 per cent plunge in profit and as its chief Tim Worner publicly addressed the ongoing furore over his affair with a former employee.

Mr Worner opened up Seven’s results this morning by addressing his tryst with former Seven executive assistant Amber Harrison saying he didn’t want to give any more oxygen to the issue.

“Over the past two months much has been written and discussed concerning the ongoing claims of a former employee,” Mr Worner said.

“I have apologised for what did happen and we don’t wish to give any more oxygen to things that did not happen. The company has made a number of public statements on the matter and will continue to keep the market informed.”

Seven’s shares (SWM) slumped by as much as 7.1 per cent this morning to 72.5 c - their lowest point since December 9 - as the the company slashed its dividend in half after posting a dramatic profit decline of 91 per cent to $12.4 million. At the close of trade, shares were down 6 per cent to 74 cents.

The media company also announced that it had sold out of online ventures and wrote down the value of its Yahoo7 joint venture

Shares in Seven are currently down 5.8 per cent.

SWM’s bottom line for the six months to 24 December 2016 took a beating as its recorded $83.3m in one-off impairments from the sale of the Australian News Channel, Presto (its online streaming joint venture with Foxtel), and Pacific Magazine’s youth titles.

The media company also wrote down its investment in Yahoo7 which has suffered form an accelerated shift from premium display to programmatic advertising and the loss of a service contract in the period.

“Management is undertaking measures to improve profitability,” SWM said.

Excluding those items, Seven West Media’s underlying net profit came in at $95.7 million which was down 31.8 per cent on the previous half-year profit after tax of $140.3 million.

While revenue at SWM increased 1 per cent to $903.3m, earnings before interest, tax, depreciation and amortisation also took a big dive, falling 25.5 per cent to $170.8 million.

The calamitous results have forced the SWM board to slash the company’s dividend in half to 2c per share.

SWM is holding a media conference this morning to discuss the results. The company will also front the media for the first time since clearing its chief executive Tim Worner of wrongdoing over his sex scandal with former employee Amber Harrison.

SWM this week placed an injunction on Ms Harrison from divulging details of that affair or releasing confidential material to the public. It’s expected SWM chairman Kerry Stokes will make a statement on the matter this morning.

SWM’s profit suffered as its group operating costs climbed 10.1 per cent in the half to $756.6m as a result of the Olympics.

While the group’s newspapers delivered cost reductions of 3.9 per cent and Pacific magazines has embarked on a major cost restructure which has seen it reduce headcount by 20 per cent, Seven’s television costs surged 16.4 per cent due to the Olympics.

Seven remains the largest cost on SWM’s books, accounting for $555.9m or 74 per cent of the group’s total cost base. The West accounts for 13 per cent ($93.6m) of its cost base while Pacific takes up about 12 per cent ($90.6m).

Despite the high costs of running channel Seven, the network continues to lead the market in television advertising revenue share based on KPMG Free TV data, delivering a 40.8 per cent share for the 6 months to 31 December 2016.

“We are delivering leadership across our media platforms. We are delivering on a successful strategy that provides us with a clear, continuous and sustainable plan for growth to 2020 and beyond,” Seven West Media chief executive Tim Worner said in a statement.

“We will continue to build our businesses, manage our costs, grow our content production capacity, and deliver that content wherever the audience wants to consume it and wherever we can monetise it. Much has been done on driving greater efficiencies across all aspects of our business and we will continue to focus on further enhancing our operating margins.”

SWM said that while the advertising market has remained soft, the company has undertaken further cost out initiatives.

The company now expects group costs to be lower year on year including the uplift cost of the AFL rights but excluding Olympics and 3rd party commissions.

“The company has retained its guidance for the television advertising market to be down low single digits, however management has been encouraged to see growth in February and March for the first time since 2014 and the market beginning to trade longer,” the company said.

As outlined at the company’s annual general meeting, Seven West Media expects full-year underlying EBIT to be down approximately 20 per cent.