2019-10-22 09:39:001970-01-01 00:00:00

Seven’s Earnings Warning

On May 21, Australian’ largest diversified media business, Seven West Media (SWM), had issued a warning that earnings will fall by almost 11% this financial year.

The free-to-air television broadcaster blamed the revised financial year guidance on the “soft conditions and short market experienced across the advertising sector, and the economic uncertainty surrounding the Federal Election.” SWM was forced to increase its cost-cutting program for 2019 from $30 million to around $40 million.

The company expected underlying Group EBIT for this financial year is to be between $210 million to $220 million compared to $235.6 million in the prior year. The forecast was below the $230 million, which are some analysts were expecting. Consequently, the share price dropped by 1% to $0.50 around yesterday.

Seven West Media

Listed on the ASX, Seven West Media Limited has a leading market presence in broadcast television, newspaper publishing, radio, magazine publishing and online media. The company owns the Seven Network which is Australia’s largest commercial television network. The company is home to many of Australia’s leading media businesses including Seven, 7TWO and 7mate and some of the biggest content brands such as My Kitchen Rules and Australian Football League.

Last year, Seven acquired broadcasting rights for crickets at a $1.2 billion deal. Seven’s recent sale of its 50% stake in Yahoo7 marked “a huge milestone in the transformation of Seven”, according to the company. The launch of 7NEWS.com.au in April aligned with the company’s strategy; which was evident when the website had reached “larger daily online news audiences than when inside Yahoo7”. Likewise, several other websites owned by SWM were reaching record daily audience. In the long form content, SWM experienced a 51% annual increase in its audience, revenue growth was 49% across their product compared to last year.

Seven continued to increase its product offering and built its presence in the domestic and global markets. With a focus on exponential digital growth, SWM plans to penetrate the global market to prepare for the Tokyo 2020 Olympic.

Weak advertising sector

Seven already had a rocky start to 2019 with share price plummeting to as low as $0.48 in April. During its peak in 2018, the share price was trading as high as $1.06.

The downfall was largely attributed to the political instability and the outcome of the banking Royal Commission. After the Royal Commission, it became apparent that the revelation was a wake-up call to many of the banks and insurance. The result saw internal restructure in many financial institutions and as a result, numerous had cut back on the advertisement.

Several analysts believed the advertising market to be highly sensitive to changes in economic growth. SWM’s profit warning came after the Australian media company, Macquarie Media, also announced its shortfall in earnings forecasts. The expected EBITDA fell to $27-29 million against the previous forecast of $29-32 million. Furthermore, media giants Nine Entertainment Co. and Australian News Channel jointly cancelled their 24-hour business channel, Your Money, due to lack of advertisers.

The rise of streaming services such as Netflix, Stan and Amazon Prime is becoming a real threat to the existing media businesses. Relying mainly on advertising revenue, those companies will be under lots of earnings pressure as revenues are gradually been sucked dry by some of the prominent streaming services.

In the wake of the recent events, the weakened economy and market challenges meant that many television giants are under lots of financial challenges.  These are becoming a worrying sign for the broader media industry.

Election aggravates falling earnings

The recent election was an indicative of the increasing uncertainty in the Australian economy. According to media analyst John Murray, he mentioned that large advertisers like banks and private health insurers were holding back in the media, given the policy shift proposed under the Labor. As a result, the falling advertising market hurt Seven’s revenue, as well as other companies in the same industry.

The media industry in the future

Digital technology will become a safe haven in the next generation. To become the dominant player in the media industry, the business needs to leverage the opportunities provided by modern tools and focus its strategies on digital growth. The proliferation of new technology will continue to drive costs down. It is important that digital technologies are utilised to the fullest extent to ensure the business does not fall behind in the market.

Amidst the rise of online streaming services, more audience will be attracted to the service. More and more audience will opt out of traditional streaming services on television as digital technologies advances in the future. Existing media businesses adopting traditional media channels will need to find ways to face pressuring challenges; focus on cheaper and wider-reaching alternative such as the transition towards the digital world.


By Jack Lee

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information provided. KOSEC is intended to provide general information only. Please be aware that investing involves the risk of capital loss. This message is confidential and may be privileged. It is intended only for the use of the addressee named above. If you are not the intended recipient, any unauthorised dissemination, distribution or copying is illegal. We do not guarantee the security or completeness of information hereby transmitted and are not liable in either respect or in respect of any delay. Nothing in this message is intended as an offer or solicitation for the purchase or sale of any financial instrument. Any market prices or data, unless specifically verified and identified as such, are not warranted as to completeness or accuracy. Kodari Securities Pty Ltd (KOSEC) is a Corporate Authorised Representative (No. 399 556) of Longhou Capital Markets (AFSL No. 292464) which is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC wishes to disclose that KOSEC and its staff may hold stock they recommend in their own portfolios and that any decision to purchase recommended stock should be done so after the purchaser has made their own inquires as to the suitability to their own requirements. Click here to view our FSG.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.



KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.


Latest TV Commercial