Kerry Stokes stands by Tim Worner at Seven

Media mogul Kerry Stokes has stood by Seven West Media chief executive Tim Worner as Seven posted plunging profits.

Seven West Media chairman Kerry Stokes. Picture: Jane Dempster

Media mogul Kerry Stokes has stood by Seven West Media chief executive Tim Worner and backed the company’s corporate governance record as it posted plunging profits, halved its dividend and signalled more earnings pain in the year ahead.

Seven West Media yesterday slashed its dividend in half to 2c per share after booking big losses on asset sales and a massive writedown on the value of its Yahoo7 digital business.

First-half profits crashed 91 per cent to $12.4 million for the six months to December 24.

The bulk of Seven’s poor result was attributed to $83.3m of one-off impairments, which included a $75.5m writedown in Yahoo7 and $7.8m worth of losses from the closure of Presto (its online video streaming joint venture with Foxtel), the sale of Sky News and the closure of some Pacific Magazines youth titles.

Even with one-off costs stripped out, Seven’s net profit was still down 30 per cent at $146m, compared with $205m in the same period a year ago.

Earnings before interest, tax, depreciation and amortisation fell 25.5 per cent to $170.8m.

Seven signalled that earnings pain infecting its operations would continue for the remainder of this financial year as the company flagged a 20 per cent reduction in EBIT for its full-year results.

The poor set of financial results sent shares in Seven West Media into freefall yesterday, falling as much as 7.7 per cent before recovering slightly by the end of trade to 73.5c, down 5.8 per cent on the day.

Seven now has a market capitalisation of $1.1 billion, less than that of regional TV and radio broadcaster Southern Cross Media, which yesterday closed at $1.45 a share for a market cap of $1.12bn.

Despite the disappointing results, Seven’s operating performance was relegated to a sideshow yesterday as media questions to Mr Stokes and Mr Worner centred on the CEO’s alleged sex and drug scandal with former executive assistant Amber Harrison.

Mr Stokes staunchly defended Mr Worner over his role in the ­affair, saying his penance had been paid and that no further board reviews into the incident or Seven’s corporate governance would take place.

“The board will have no further inquiries. We are disappointed that we were forced to make such a serious investigation into such irrelevant allegations, which had no substance at all,” Mr Stokes said.

“Tim Worner himself continues to enjoy the full confidence of the board as our CEO because he is doing an outstanding job.”

Yesterday’s half-year results revealed the group’s revenue was the only key financial metric to post positive ground, with a 1 per cent increase to $903.3m.

But that small revenue gain was easily wiped out by the company’s rising cost base, which jumped 10.1 per cent to $756.6m.

Seven’s television business posted a revenue gain of 5.4 per cent to $698.9m.

But it was also responsible for the largest increase in the company’s cost base with a 16.4 per cent increase to $555.9m due mainly to its coverage of the Olympics.

The Seven TV business remains the largest cost on SWM’s books, accounting for 74 per cent of the group’s cost base, while The West, which publishes The West Australian, accounts for 13 per cent ($93.6m) and Pacific Magazines about 12 per cent ($90.6m).

Mr Worner said the company was making ground on removing unnecessary costs from the ­business.

Excluding the impact of its Olympics coverage last year, Seven’s expense base dropped 3.8 per cent.

“There is a new-found close collaboration and understanding across our industry that we all need to think differently and deepen the extent of our cost-sharing programs in areas which do not impact the ability for us to vigorously compete,” Mr Worner said. “We now have programs in place to reduce costs on captioning, news links, transmission towers, and the news helicopters JV is working well.

‘‘Work is ongoing on the next phase of this cost sharing.”

Despite the high costs of running Channel 7, Mr Worner was upbeat about the network’s ­dominant position in the TV landscape.

The network has continued to lead the market in advertising revenue share based on KPMG Free TV data, delivering a 40.8 per cent share for the six months to December 31.

“The scoreboard is clear, No 1 television business, in every cat­egory, ratings, revenue, and profitability, No 1 digital publisher, No 1 live streaming and catch-up TV app, the clear result of our moves into the rapidly growing digital video advertising market,” Mr Worner said.

“No other media company in Australia can show those unparalleled statistics.”

The company also noted that while the advertising market remained soft, it is expecting a slight lift after better than expected ad placement in February and March flows through.

“The metro television advertising market is forecast to be down to low single digits for the ­financial year but I would add it has been encouraging to see growth in February and now March,” Mr Worner said.

“That’s the first time we’ve seen growth outside of the Olympics since 2014 and also for the first time in several years we are seeing the market get longer.”

Analysts described Seven’s result as “weak” but expected.

Analysts at Macquarie said Seven’s second half should show signs of improvement given better than forecast TV ad market trends and the absence of Olympics-associated costs.

“The key risk for Seven remains defending the high benchmark it has set itself in prior periods with respect to ratings and revenue market share,” they said.

“Some positives exist for the second half, particularly if TV ad markets can stabilise or return to growth, although this needs to be considered in the context of ongoing structural challenges for print and TV markets, and stubborn TV cost trends.”