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Results in: Seven West Media back to black amid hints of merger

Seven West Media Ltd (ASX: SWM) has announced it recorded a profit after tax of $134.9 million for FY 2018. The FY 2018 result follows an after tax loss of $745 million recorded by the media company for FY 2017 and sees Seven return to the status of a profitable company. But dividends will be suspended – a blow to shareholders which may also be seen as a sign that Seven West has big plans for the future.

While Seven West Media’s return to profit-making territory can been seen as a positive, it should be noted that the profit comes as revenue declines. Seven West recorded revenue of $1.62 billion for FY 2018, down 3.2% on the previous year’s figure of $1.67 billion. As such, Seven West’s latest results should be viewed in context. Part of that context involves taking into consideration Seven West’s $1 billion in write-downs last year. With that in mind, Seven West’s FY 2018 profit represents a drop from the company’s FY 2017 result of about 14%. And, with the company’s revenue continuing to fall, as it has done for years, it seems there is little to celebrate with Seven West’s results. But it’s not all doom and gloom.

With talk of mergers in the wake of relaxed media laws, media companies have become interesting again. The Nine Entertainment Co Holdings Ltd (ASX: NEC) and Fairfax Media Limited (ASX: FXJ) merger plans have triggered interest from investors and arguably benefitted Fairfax shareholders who have enjoyed steady gains since the announcement. Now it seems that a Seven West merger or acquisition may be back on the cards as the company withholds its dividend payments.

“The dividend has been temporarily suspended with a focus on prudent capital management and balance sheet flexibility post relaxation in media ownership legislation,” Seven West stated.

Seven West last year played down talk of a merger with Prime Media Group Limited (ASX: PRT) . But that could now be an option.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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