Seven West sinks to loss on ad woes, magazine cuts

SEVEN West Media has reported a $109 million loss for the December half-year after writing down its magazines and online venture with Yahoo! by $261 million.

SEVEN West Media has reported a $109 million loss for the December half-year after writing down its magazines and online venture with Yahoo! by $261 million. But it was the media group's subdued advertising outlook that led the stock to drop as much as 12 per cent after the announcement on Wednesday.

The company signalled that further cost-cutting, rather than top-line growth, is the focus, with chief executive Don Voelte saying the overall advertising market "continues to be difficult", with the wider advertising market expected to "trend below" the previous year in the short term.

Television, which provides more than 72 per cent of group earnings before interest and tax (EBIT), is expected to experience "flat to single-digit growth" while no change is expected to the declines experienced in the magazine and newspaper sectors.

Seven West owns the Seven Network, The West Australian newspaper, magazine publisher Pacific Magazines and is a joint-venture partner in Yahoo!7.

"The advertising market continues to be soft and short," said Mr Voelte, which was "reflective of a general lack of consumer confidence".

While Seven's underlying earnings beat the company's guidance from its AGM in November last year - which coincided with a more than doubling of the share price - many analysts were looking for signs of an advertising market recovery to justify further share price gains.

"Advertising markets remain tough and management says they are not seeing any short-term improvement. This will be the biggest impediment to positive short-term share price movement," said Paterson Securities analyst Graeme Carson, who downgraded the stock from "buy" to "hold".

Before the result, Deustche Bank's Vikas Gour said Seven West was well positioned to benefit from an advertising market recovery given its market leadership in TV and magazine publishing. Every percentage point change in television ad growth added about $10 million in EBITDA.

Seven said earnings before significant items, interest and tax in the first half came in at $259.3 million, above company guidance of $250 million, but 16 per cent below the previous December half. Revenue across the group fell 3.4 per cent to $978 million.

Meanwhile, expenses rose 2.5 per cent to $732.3 million, largely due to the new AFL broadcast contract boosting programming costs.

Seven said it took a $195.2 million impairment charge on the carrying value of its magazine mastheads, licences and goodwill, a $60.2 million charge against Yahoo!7 - relating to its group buying business, Spreets - and booked redundancy and restructuring costs of $5.3 million.

Shares closed 7 per cent lower, down 18¢ to $2.34, on Wednesday.

The company reduced its net debt to $1.26 billion over the period after raising $432 million from investors last year.

It declared an interim dividend of 6¢ a share, fully franked.

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