Seven West Media launches $75m buyback to halt share price slump

Seven West Media has become the latest media company to embark on a share buyback.

Seven chairman Kerry Stokes.

Seven West Media has become the latest media company to embark on a buyback, saying it will hand back up to $75 million to shareholders in a bid to arrest an alarming slump in its share price.

The move underscores a growing belief that investors have oversold Seven’s stock, and television stocks more broadly, amid concerns about the impact of audience and advertising market fragmentation.

With new advertising data showing that Seven has continued to maintain its leadership position in the free-to-air television market despite stiff competition from Nine and a stronger Ten, the buyback shows the company believes its share price does not reflect the underlying value.

Investors welcomed the announcement by the company’s chief executive, Tim Worner, sending shares up 6.47 per cent, or 4.5c to close at 74c.

The Kerry Stokes-controlled company operates the top commercial network Channel Seven, Pacific Magazines, digital media assets including a joint venture with tech giant Yahoo, and publishes The West Australian newspaper.

Seven has seen investors wipe more than a $1 billion from its stockmarket value in the past 12 months amid tepid conditions in the advertising market and the emergence of a growing crop of media-streaming services such as Netflix.

It joins Nine Entertainment, Fairfax Media and News Corp, publisher of The Australian, whose boards have all signed off on stock buybacks this year.

It came after Seven committed to higher annual payments to the Australian Football League from 2017 — a 50 per cent uplift under the terms of the new $900m, six-year deal. Should Seven fully complete the proposed scheme over the next 12 months, its leverage ratio or debt to earnings before interest, taxes, depreciation and amortisation — a key measure of company health — is likely to reach 2.1 at the end of the fiscal year.

Mr Worner said he trusted shareholders would see the buyback as a mark of confidence. “We have seen volatile trading in Seven West Media shares and we are of the view that this company is extremely well-placed to build on its leadership,” he said. “The on-market buyback at attractive levels will create value for the remaining shareholders.

“We are well-placed. Our earnings outlook and guidance remains unchanged. Today’s announcement of a share buyback will create value for all shareholders while still allowing us the flexibility to continue to invest in new revenue streams which we can establish using the promotional power of our existing media assets.”

Seven reported a net loss of $1.89bn for the year ended June 27, compared with last year’s profit of $149.2m. The result was weighed down by hefty exceptional items including $2.12bn worth of writedowns.

Most of the impairment charges related to TV goodwill recognised as part of the West Australian Newspapers-Seven West Media merger in 2011. On an underlying basis, excluding significant items, Seven logged a full-year net profit of $209.1m, which was a 12 per cent decline on last year’s $236.2m result.