Seven West (ASX:SWM) share price heads south despite soaring earnings

Positive half-year results have done little for the media conglomerate's shares today…

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Key points

  • Seven West share price slumps on half-year results
  • Revenues and earnings increased on prior corresponding period
  • Full-year EBITDA guidance upgraded

The Seven West Media Ltd (ASX: SWM) share price is sinking after a strong start to today's session. It's currently down 5.41% at 70 cents, having shot up 5.4% to 78 cents at market open.

Seven West shares closed yesterday at 74 cents.

It comes after the ASX media conglomerate released its financial results for the half-year ending 25 December (H1 FY22). Below we take a look at the highlights.

Seven West share price falls despite strong results

  • Group revenue of $819.5 million, up 27.2% on the prior corresponding period
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) of $215.3 million, up from $164.9 million in H1 FY21.
  • Underlying net profit after taxes (NPAT) of $128.7 million, up from $87.1 million year-on-year
  • Underlying earnings per share (EPS) of 8.4 cents, up from 5.7 cents in the prior corresponding half-year.

What else happened during the half-year?

The Seven West share price is slipping despite the company reporting it took the No. 1 spot in broadcast television. Additionally, 7plus was first in broadcaster video on demand (BVOD).

The TV advertising market was described as "robust", with a 13% year-on-year increase in metropolitan TV advertising, a 7.2% increase in regional advertising, and BVOD advertising increasing by 58%.

Driven by strong digital growth in the metropolitan TV advertising market and the growth of 7plus, net debt during the half-year was cut by $212.4 million to $116.7 million as at 25 December.

Regarding the group's Seven West Ventures, Seven West Media's CEO James Warburton said:

Seven West Ventures has strong momentum, completing six investments in the period, including four new companies with large addressable markets. The investments are predominantly via media for equity which can be supercharged by SWM's assets. The portfolio value increased 56% to $87 million in the period.

What did management say?

Commenting on the half-year results, Warburton said:

This result reflects the successful execution of our strategy over the past 30 months… We have completed the acquisition of the assets of Prime Media Group, which unlocks an unrivalled opportunity for the business to capture a greater share of the $3.8 billion total television market.

The balance sheet has been significantly strengthened over the past 18 months, with leverage now at 0.9x net debt/EBITDA on a pro-forma basis after the acquisition of Prime. The Board will assess capital management options during the second half to further enhance shareholder value.

We had an amazing start to the financial year with the Olympic Games Tokyo 2020, which was the biggest television and streaming event in Australian history.

What's next?

The Seven West share price is struggling despite the company upgrading its full-year group EBITDA guidance to $315 million-$325 million (including $10 million second-half contribution from Prime).

Management noted that the strong performance of the television and BVOD advertising markets witnessed in the first half are continuing into the second half-year.

Seven West share price snapshot

The Seven West share price has gained 44% over the past 12 months. That compares to a gain of 5% posted by the S&P/ASX 200 Index (ASX: XJO).

So far in 2022, Seven West shares are up almost 12%.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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