Seven shares jump on ad, digital growth

Shares in Kerry Stokes’s Seven West Media jumped 20pc after it flagged earnings would beat forecasts thanks to an ad rebound.

Seven says the advertising rebound has been particularly noticeable on streaming services. Picture: AAP

Shares in Seven West Media, owner of the Seven Network and a stable of newspapers in West Australia, have leapt more than 20 per cent after it announced it is on track to exceed earnings consensus following strong advertising growth in the fourth quarter.

In a statement to the ASX the Kerry Stokes-backed group said its underlying earnings before interest, tax, depreciation and amortisation for the 2021 financial year would be between $250m and $255m, including temporary benefits.

It compares to analyst consensus of $235m-$245m, the group said.

The news sent Seven shares soaring 23.75 per cent to close at 49.5c, an improvement of more than 300 per cent year to date.

The result was driven by a “strong rebound” in advertising revenue compared to last year, when ad bookings plummeted amid the Covid-19 pandemic, particularly in the streaming category – broadcast video on demand (BVOD.)

“Seven’s advertising revenue including BVOD is estimated to grow more than 45 per cent in the quarter,” the group said.

“Early indications suggest ongoing positive momentum into the September quarter.”

BVOD consumption through the company’s 7plus platform has helped underpin this growth, with registered users lifting 62 per cent year to date, compared to market growth of 50.7 per cent.

The group said 7plus secured a 37.2 per cent revenue share in the 10 months to April 2021, a 5.8 per cent increase on the previous corresponding period.

Digital earnings grew strongly and are now expected to contribute more than $60m to EBITDA, up 130 per cent year-on-year.

Seven West Media CEO James Warburton pictured with Seven West media boss Kerry Stokes. Picture: Nikki Short

It is expected that digital earnings will more than double in the 2022 financial year, with the company inking a partnership with Facebook and Google in May that is expected to start contributing to digital revenue in that year.

The group said it had been tackling company debt, with net debt at the end of the financial year predicted to be between $240m and $250m, lower than earlier predictions of $270m-$280m.

In May the group said $45m in proceeds from the IPO of Airtasker was used to pay down debt, with $195m of debt retirement paid down in the four months to May.

The group said cost control would remain an ongoing focus, with costs expected to come in line with guidance at the lower end of the range.

“Underlying inflation in the business is running at 1-2 per cent per annum, although there will be incremental costs from Olympic Games Tokyo 2020 and the Ashes Test series in the 2022 financial year, as well as a full survey year of content compared to Covid-impacted 2020.

At its half year results in February Seven West Media said it anticipated annual operating expenses would come in at the lower end of analyst estimates of $1.03bn to $1.05bn.