The Seven West Media Ltd (ASX: SWM) share price has been slammed today, down by 16.54% at the time of writing to $0.22.
The freefall has been triggered by the media company's disappointing earnings release for the half year ending 31 December 2019, which Seven West has put down to a difficult operating environment with challenging advertising market conditions.
Decline in revenues and profits
Seven West Media reported total revenue of $773.3 million and a statutory loss after income tax of $67.0 million, while underlying net profit after tax (NPAT) was down 22.5% on the previous year to $69.3 million.
Excluding share of associates, Seven West Media recorded revenue of $772.4 million, which is down 3.2% on the prior period. Ongoing weakness in the broader advertising market was reported by the group to be the key driver for this fall.
Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at a disappointing $136.6 million, down 20.1% on the prior corresponding period and EBIT also dropped, coming in at $119.7 million, down by 20.8%.
Increasing cost base weighing on growth
Excluding significant items, Seven West reported its costs for the 6 months increased by 0.9% to $653.6 million. Cost savings in The West and Pacific were offset by cost growth attributable to a number of one-off events. They were also offset by investment in Seven Digital, third party productions and the consolidation of 7Beyond and Community News Group. However, if the consolidation of 7Beyond is excluded, then Seven's costs came in as broadly flat.
Major strategic initiatives
Seven West Media commented that it has executed on a number of major strategic initiatives over the past 6 months, including investing in a new content strategy for its prime time entertainment schedule. It revealed that this new schedule is due to commence in April 2020.
The group is also embarking on a major reorganisation and cost out plan, targeting $45 million of gross savings. It is also divesting its Redwave division and has proposed the sale of its Pacific Magazines division.
FY20 outlook
Seven West Media commented that it will continue to execute on its strategy to transform the group into a leaner, content-led organisation.
The group reported that trading conditions in FY20 have so far remained consistent with the first half. Underlying EBIT is anticipated to be between $165 million to $175 million, however this range is subject to market conditions and improved ratings.
Seven West Media also anticipates that its broadcaster video on demand (BVOD) market will grow over 30% in FY20.
