Seven West Media (SWM) has increased its cost-cutting target by $25 million over the next two financial years and suspended its dividend despite posting a big profit rise for the first half of FY18.
In a statement to shareholders this morning, SWM chief executive Tim Worner announced the group would increase its cost reduction target from $105 million to $125 million over the next two financial years.
“The pace of our transformation is accelerating, as we adapt our model to a leaner, more agile company,” he said.
“The transformation of the group will also be marked by our headquarters moving to our existing premises, Media City, in Eveleigh in Sydney this year.
“We are all looking forward to bringing our Sydney teams together in our new modern workspace that will foster even greater collaboration.”
Worner said SWM has also temporarily suspended its dividend to “to retain flexibility post-relaxation in media ownership legislation.”
The group posted a profit of $100.7 million for the first half of FY18 – up significantly from its $12.4 million effort in the previous corresponding period – while its revenue was down more than 10 per cent to $811.3 million.
SWM’s expenses before interest, taxes, depreciation and amortisation rose 3.5 per cent to $176.8 million in the six months to 31 December 2017.
Worner noted that the return to growth in the free-to-air advertising market has been encouraging.
“With this momentum continuing in the second half, we now expect the TV market to grow in the 2018 financial year,” he said.
“We are confident in our new 2018 content schedule, which has already delivered a strong start to the ratings season.”
SWM also announced today it has extended its regional TV affiliation agreement with Southern Cross Austereo (SCA) for Tasmania, Darwin, Spencer Gulf, Broken Hill, central and eastern Australia, and Mt Isa.
The agreement will see SCA continue to broadcast Seven’s metropolitan free-to-air TV content in its existing zones from 1 July 2018 for three years, with an option for each party to extend for a further fourth year.
In those licenced areas, SCA will broadcast Seven’s premium Australian and international content including My Kitchen Rules, House Rules, The Good Doctor and Fox products Modern Family and The Simpsons, as well as the AFL.
SCA will continue to produce its daily local news bulletin, which is reflected in the affiliation agreement.
The radio network will pay Seven an affiliation fee of 50 per cent of its TV revenue.
Worner said the contract extension is a “great outcome” for Seven and SCA.
“We are confident that, together, we will continue our very successful and longstanding relationship and offer a premium viewing experience for audiences and a unique platform for advertisers,” he said.
SCA chief executive Grant Blackley said he was excited that it was continuing its long-term agreement with Seven.