Seven West Media: Earnings cut in half as COVID-19 impacts advertising revenue

One of Australia’s largest commercial media companies says COVID-19 has wreaked havoc on advertising revenue and cut its earnings in half.

Seven West Media’s earnings have been slashed in half as the ongoing coronavirus pandemic wreaks havoc on the industry’s ability to generate revenue from advertising.

The major commercial media group backed by Kerry Stokes flagged Australia’s advertising market had been severely impacted from the economic downturn sparked by COVID-19, with conditions remaining highly volatile and unpredictable for the first quarter of the current financial year.

For the financial year ending June 30, the company’s statutory net loss after tax was $162.1 million, half the $324.3 million loss incurred in the previous financial year.

Seven West’s earnings before interest and tax were down 53.6 per cent over the period to $98.7 million, driven by heavy falls in the free-to-air TV market.

It was down 14.1 per cent for the financial year, with the fourth quarter experiencing a plunge of 33.7 per cent.

The weakened advertising market caused Seven West’s revenue from continuing operations to fall 14 per cent over the financial year to $1.2 billion.

Seven West Media boss Kerry Stokes with CEO James Warburton, who says the company has made ‘progress’ on its ‘transformation plan'. Picture Nikki Short

Seven West chief executive James Warburton said despite the pandemic inducing the worst advertising market conditions on record, the company had accelerated its three year cost-reduction strategy.

“We have made material progress on our transformation plan despite the challenges that

COVID-19 has thrown at us,” he said.

“We have significant operating leverage with our lower cost base to provide greater upside on market recovery and drive significant value for our shareholders.”

Significant items worth $352 million relating to impairment charges, which reduced the value of its assets, prompted the group to incur a before-tax loss of $293.9 million.

Mr Warburton noted further asset sales and divestment would occur to assist in bringing down Seven’s net debt position of $398 million.

Despite retaining a high amount of debt, the company was able to action $170 million in gross cost cuts that included the renegotiation of its AFL agreement.

“In addition, we benefited from an incremental $51 million of temporary savings to respond to the sudden impact of COVID-19,” Mr Warburton said.

Around $150 million of the cost savings is attributed to the sale of its Pacific Magazines business and The West Australian headquarters in Perth.

The company said it was unable to provide earnings guidance for the 2021 financial year.