Seven West Media jumps on earnings growth

Seven West Media soared almost 24% on Thursday after the group announced that it expects annual underlying earnings to almost double in FY21, helped by a strong rebound in fourth-quarter advertising revenue.

SWM reported that trading conditions in the fourth quarter of FY21 have been positive, with a strong rebound in advertising revenue compared to last year. Seven’s advertising revenue including Broadcast Video on Demand (BVOD) is estimated to grow more than 45% in the quarter. In addition, early indications suggest ongoing positive momentum into the September quarter.

The result comes as welcome news. As the start of the 2021 calendar year was the Seven Network’s riskiest period in the schedule, with two new unknown formats which had mixed success. Since April, Seven has been increasing its television audience share year-on-year across key demographics.

BVOD consumption continues to grow strongly, with 62% growth in registered users on 7plus year-to-date, compared to market growth of 50.7%. 7plus has secured a 37.2% revenue share in the 10 months to April 2021, a 5.8 percentage point increase on the previous corresponding period.

Digital earnings also continue to grow strongly, with Seven digital expected to contribute earnings before interest, tax, depreciation and amortisation of more than $60 million in FY21, up 130% year-on-year. Digital earnings are expected to more than double in FY22.

Cost control remains an ongoing focus for SWM, with costs expected to come in line with guidance at the lower end of the range. Underlying inflation in the business is running at 1- 2% per annum, although there will be incremental costs from Olympic Games Tokyo 2020 and the Ashes Test series in FY22, as well as a full survey year of content compared to COVID-impacted 2020.

The group now expects underlying EBITDA to be between $250 million and $255 million in FY21 including the temporary benefits outlined in the first-half results, compared to analyst consensus of $235-$245 million.

Significant work has also been undertaken in FY21 to improve the company’s balance sheet. Net debt at the end of FY21 is expected to be between $240-$250 million.