Seven shares up as cost-cutting continues

Seven West Media shares surged on Wednesday after the media group said this financial year would mark the bottom in terms of earnings performance and it unleashed another round of cost cutting as it merges corporate services across the group.

Seven West also joined the media trend of trying to reduce its reliance on advertising revenue by attempting to "monetise" its relationship with its audience. This will involving the company introducing transaction services, and explore other opportunities in sectors such as lifestyle, health and travel.

Rohan Lund, Seven West's chief operating officer, said under the five-year plan the group would move away from the role of a traditional media company - which reaches mass audiences to sell advertising - to that of an "audience company" that will commercialise its audience and content. One venture announced on Wednesday was a partnership with Telstra and HealthEngine, an online consumer health marketplace. Other examples Seven West cited include fashion magazine readers being able to buy the dress that interests them rather than the publication just acting as a billboard.

Seven West owns the market-leading Seven Network, Pacific Magazines and The West Australian newspaper, and half the online venture Yahoo!7.

Seven West chief executive Don Voelte told analysts that net profit for the group for the year ending June 30 would be "a few million dollars down from last year's net profit of $227 million" with underlying earnings down 2 to 4 per cent.

"But even if advertising doesn't alter its present trends, we believe that financial year 2013 was the worst of it for our company on a net profit basis after tax," he said.

Seven West says the ad market is still "short" but showing signs of improvement.

Shares rose as much as 16 per cent to a high of $2.42 on Wednesday, before closing 10 per cent higher at $2.30.

But in the present environment, cost cutting also remains a priority.

"There will be more costs to come out, that's part of the new reality," Mr Lund said, "but also need to reset the model for growth."

News Ltd also announced a new digital subscription service for its largest circulation daily papers, the Herald Sun and The Daily Telegraph. Unregistered readers will have access to five free articles a week, registered readers will get access to 15, with full digital subscribers paying $4 a week for complete access across all digital platforms.