ANALYSIS: James Warburton’s strategy in the first three months at Seven West Media

Chris Pash
By Chris Pash | 14 November 2019
 
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James Warburton has done a lot in the three months since he was made CEO of Seven West Media, all of it aimed at ending advertiser and investor apathy.

His moves have been “fast and furious,” according to analysts at Morningstar. 

They include an all paper, non-cash merger with regional TV affiliate Prime Media, the sale of radio stations in Western Australia for $28 million and a deal to sell Pacific Magazines to publisher Bauer for $40 million.

This is all part of Warburton strategy to refresh Seven's TV content while restructuring, getting rid of duplicate roles and building a leaner, more agile team.

And he’s doing this as the free to air television advertising market takes a dive.

At Seven West’s AGM, shareholders were told that the full year earnings forecast was now expected to be at the lower end of previous guidance of between $190 million to 210 million.

“Amidst the carnage in the advertising market and Seven's long history of missing guidance, we view this latest update as commendable and it highlights the efforts being expended on the cost and efficiency fronts,” writes Brian Han, senior equity analyst at Morningstar.

Seven West Media shares closed Wednesday at $0.425, down 3.41%. Morningstar’s fair value estimate is $0.60.

“Investor confidence with Seven remains fragile, not helped by the current uncertainties in the wider advertising market,” says Han in a note to clients.

“However, significant changes are afoot, and their potential benefits are worth waiting for.”

Warburton gave shareholders an update, saying his strategy has three key pillars: content led growth, transformation and addressing capital structure and balance sheet.

Areas of focus:

  • Simplifying the organisation to be a content led company focussed on growth.
  • Revitalising and refreshing entertainment programming, creating momentum to engage heartland Australia and enriching the demographic mix.

“We will run our business with some more entrepreneurial thinking, some hunger for possible deals and run it less as a traditional media business,” he says.

“Whilst we have a responsibility to run our cost base as efficiently as possible, we can’t cost cut our way to success.

“We need to consider our capital structure and balance sheet and focus on working down our debt.”

And he reiterated his role as a hunter, to explore explore M&A opportunities in both traditional and non-traditional media.

A slide from the AGM presentation:

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Last financial year was a tough one for Seven and the soft advertising conditions have continued into 2020.

Seven West posted a statutory loss of $444.48 million for the year to June as the media group wrote down the value of its television licences. The result compared to a profit of $133.67 million in 2018.

“The market remains short and difficult to predict but we expect further softness in the second quarter,” Warburton told shareholders this week.

Seven is now forecasting the metropolitan television market to be down mid single digits for the financial year.

“We are making bold changes and we are moving at pace, all with a focus on strengthening our business and growing value for you, our shareholders,” he says.

Wharburton's moves:

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