Seven West Media, which is preparing to cut cost to meet a weaker television advertising market, has revealed is still liked by market analysts and has identified "robust" sectors still spending up on advertising.
The media group reported flat revenue and a dip in profits for the half year to December with early indications suggesting the television market may fall mid to high single digits in the half year to June.
The company has identified $15 million to $20 million cost savings to offset market conditions. And dividends are on hold.
"The market is short so we have limited visibility ... (we're) being conservative ... cautious," CEO James Warburton said when briefing market analysts.
Warburton told the ASX: "Despite some of the negative economic commentary, the market has been relatively robust, with growing demand from our core advertisers."
Digital media growth is slowing across the board following a surge in media revenue as the global economy came out of a trough.
A slide from Warburton's presentation to analysts, showing retail is still a big contributor to advertising strength:
Market analysts still like Seven's prospects.
A key part of Warburton's transformation of Seven is digital.
Dgital earnings have soared from $3 million in the first half of the 2019 financial year to $80 million. Digital now accounts for about 40% of group earnings
Brian Han, equities director at Morningstar, says Seven is well prepared for a slump after the pandemic pump.
He described Seven West result as "commendable" when compared to a pandemic-fuelled 31% bump a year ago.
"However, the advertising cycle is turning, triggering another cost-cutting move," Han told clients in a note.
"Unfortunately, the AUD 15 million to AUD 20 million savings identified will just be enough to offset half the incremental costs from the recent NBCUniversal content agreement.
"Additional sales from the deal, as with all other Seven's TV revenue, are now hostage to the softening advertising market and operating costs to general inflation."
Warburton is upbeat: “The content foundations are set, we are in a strong financial position and we are capitalising on the digital transformation of Seven West Media.
"We are confident we are well positioned for the future.
“We will continue to build a more diversified media organisation to reduce risk and to grow; remain focused on being audience led and digital first, powered by data and tech; and step up our focus on monetising total TV audiences, that is, across broadcast and digital.”
Another slide from the briefing of analysts:
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