Seven's shares slide on ad gloom

SEVEN WEST MEDIA 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 caused the stock to fall as much as 12 per cent after its announcement on Wednesday.

SEVEN WEST MEDIA 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 caused the stock to fall as much as 12 per cent after its announcement on Wednesday.

The company signalled that further cost cutting, rather than top-line growth, was the focus. Its chief executive, Don Voelte, said the overall advertising market "continues to be difficult", with the wider 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, is expected to experience "flat to single-digit growth" while no change is expected to declines 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 on Yahoo!7.

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

This month, News Corp blamed its underperforming Australian business for an earnings downgrade.

While Seven's underlying earnings beat the company's guidance from its annual meeting in November - which coincided with a more than doubling of the share price - many analysts were looking for signs of an advertising 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 a Paterson Securities analyst, Graeme Carson, who downgraded the stock to a "hold".

Before the result, Deutsche Bank's Vikas Gour said Seven West was well positioned to benefit from an ad market recovery, given its market leadership in television and magazine publishing. Every 1 per cent change in TV ad growth added about $10 million in earnings before interest tax, depreciation and amortisation.

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.

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.

Its shares closed 7 per cent lower at $2.34 on Wednesday.

It declared an interim dividend of 6ยข per share, fully-franked.

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