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Seven West shares drop on earnings warning

Business

Seven West shares dropped more than 15 per cent after the company forecast a big drop in earnings for the year ahead because of a still-softer advertising market and the cost of broadcasting the Olympics.

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Kerry Stokes’ Seven West Media reported a 0.9 per cent fall in full-year underlying profit to $207.3 million, with revenue for the 12 months to June 25 declining 2.8 per cent to $1.72 billion.

Earnings before interest and tax fell 10.7 per cent to $318.1 million, and Seven West said that was set to drop again in the year ahead.

“Impacted by the combination of softer market conditions and increased content costs from the Olympics and AFL, underlying group EBIT (earnings before interest and tax) is expected to be down 15 to 20 per cent in the coming year,” the company said in a statement today.

Seven West Media shares dropped as much as 15.5 per cent before recovering slightly to 90 cents at 1030 AEST. That’s still down 13.5 cents, or 13.04 per cent on Monday’s close.

Net profit was $184.3 million, compared to a $1.89 billion loss for the previous year when Seven West recorded writedowns of more than $2 billion – mostly related to its Seven Network TV assets.

The only significant item recorded for FY16 was a $32.9 million charge for restructure costs and onerous contracts, while net debt was down 2.3 per cent to $716 million – about a 40 per cent reduction since FY13.

Chief executive Tim Worner lauded the cut to television broadcast licences announced by the Government in May’s budget, but said further reductions would be needed for Australian broadcasters to compete with international rivals.

Worner said Seven had already enjoyed a “decade of dominance” over its free-to-air rivals and said Olympic coverage should help boost audience numbers and provide a platform for Seven to launch new shows, as it did with its long-running Border Force show after the 2004 Athens Games.

SEVEN WEST’S FY16 FIGURES:

-AAP

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