Seven West Media has told investors a subdued TV market and flat advertising in publishing will push earnings before interest and tax (EBIT) towards the lower end of guidance, but that it's focused on a three-pronged approach for transformation, including diversification.
The company's previous guidance for the 2016 full year was minus 5-10% underlying EBIT but with consideration to the current conditions, Seven has said it now expects it to be at the lower end of that figure.
However, Seven West Media managing director and CEO, Tim Worner, pointed to the company’s trident approach to transformation, as its way of dealing with a disrupted market.
“One: expand our ownership of content,” Worner said. “Two: maintain our leadership and grow our audience with leading positions in video, mobile and data.
“And three: diversify and increase our earning through strategic acquisitions, through building new businesses beyond television and publishing and by driving greater efficiencies through our existing activity.
“Transformation takes time. It is critical for us as a business to evolve and improve returns for shareholders.”
On the final point of the strategy, Worner wouldn't be drawn on where exactly Seven would be focusing its diversification efforts beyond indicating they would be in media and adjacent industries.
Seven West Media chair, Kerry Stokes, said while the industry is undergoing disruption “nothing drives an audience the way broadcast television does”.
“The fact of the matter is the world has changed, but the fact it's changed doesn't mean that everything else is dead,” Stokes said.
“There are different opportunities, different ways of looking at things. We believe network TV commands the stronger viewer loyalty and we believe newspapers are sticky – people still look at the ads in the newspaper for specific things.
“Using those to drive new business adjacent to those areas of activity is the challenge for us in the future.”
Stokes pointed to Seven's recent joint venture, racing.com, as an example of this move into additional diversification, as it looks to grow its partnerships in horse-racing.
Worner said creation is at the heart of what Seven does.
“We deliver huge audiences, but at our core is our content,” Worner said. “We are now creating more content than at any time in our history – that is both domestically and in international content production, with the formation of two new production companies, 7Wonder and 7Beyond.
“These two businesses confirm our strategy: originate and therefore own and control a growing library of content we can distribute anywhere.”
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