Seven West Media, faced with weakness in the advertising market, is prepared to squeeze costs “as hard as we possibly can” if necessary.
The media group reported a steep drop in net profit after tax, down 52% to $54.46 million for the half year to December.
The result was lower than market forecasts.
Financial services group Morningstar cut its fair value estimate on Seven West Media by 27% to 40 cents a share. The company’s shares closed down almost 11% yesterday to 24.5 cents each.
Director Brian Han says the continuing weak TV advertising market is showing “no apparent signs of improvement” despite management's “perennial reassurance” that the rate of decline is "moderating."
“Management is flexing the lever primarily within its control, namely, costs,” writes Han in a note to clients.
The total TV market has been softer than expected, down 11% in 2023 and 9% in the half year to December
In response, Seven is holding costs down. This financial year Seven will keep costs at 2% growth. Savings of $20 million to 25 million are expected in the six months to June.
While advertising spend for free-to-air advertising is still sliding, the rate of decline is easing, according to market observers.
Analysts at wealth managers Evans and Partners forecast a 3% fall in the total TV market in the six months to June.
And Seven says the market decline is "moderating" in the current quarter, pacing better than the December half.
“We feel pretty good about q4 (June quarter),” CEO James Warburton told analysts.
Warburton says there seems to be a “pretty big lineup” of categories, particularly around automotive, banking and finance, restarting their markets following a slow down.
“I think any form of positivity in the market will bring money back to our sector,” he says.
“We're always the first to go. And the first to come back.”
He says VOZ, the total TV measurement standard, is another positive.
“We had this massive spike through COVID and then we had almost a 20% decline over two years,” Warburton says.
“And now the top two networks, we represent 80% of linear and 85% of digital and will be 90% to 95% of those relative markets. We are growing audiences and that is really good for advertisers that obviously look for return on investment.”
A slide from Seven's results analysts' briefing, showing the market fall in total TV advertising spend:
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