Seven West Media (ASX: SWM) has beaten its guidance reporting a profit after tax (excluding significant items) of $225 million on the back of $1.87 billion in revenues.
The underlying profit result was effectively flat on the prior year, however on a per share basis diluted earnings per share fell from 26.7 cents per share (cps) to 19.8 cps due to a $440 million capital raising undertaken by the company in July 2012. The full year results were also tarnished by $295 million in impairments – primarily to the magazine business, which saw statutory profits falls to a net loss of $70 million.
The Seven Network continues to impress. The division secured 40.4% of advertising revenue share in television over the 2013 financial year and bragging rights as the most-watched television network — helped along by programming including the AFL, Australian Open Tennis, "My Kitchen Rules" and "The X Factor". Overall television revenue was flat but when compared with newspaper and magazine revenues, which declined by 13% and 10.8% respectively, it was the stand-out division.
The board declared a fully franked final dividend of 6 cps taking dividends for the full 2013 year to 12 cps.
Fairfax Media (ASX: FXJ) also reported this week and like Seven West the newspaper giant was forced to write down the value of its assets. On an underlying basis earnings fell 37.7% to $128 million or 5.4 cents on a per share basis. The good news for Fairfax shareholders is that the firm has so far achieved $193 million in annualised cost savings with an aim of reaching $311 million by June 2015. Net debt is also now down to $154 million from $760 million a year earlier.
Also in the media space, Southern Cross Media (ASX: SXL), which has radio and television interests reported revenues decline of 5.4% this week. These declines coupled with increased costs led to a 9.3% decline in underlying net profit after tax to $90.8 million, 12.9 cents per share on a per share basis.
Foolish takeaway
Industry-wide market conditions faced by media companies have certainly been challenging. Over the year to June the metropolitan television advertising market declined by 2.2%, while the newspaper and magazine advertising markets declined by a whopping 19.6% and 19.8% respectively. For investors, valuation of Seven West Media or Fairfax and to a lesser extent Southern Cross Media requires an accurate analysis of the degree of structural versus cyclical decline remaining.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
