The Seven West Media Ltd (ASX: SWM) share price is one to watch after a profitable first half of the year led by greater cost reduction.
The post Why the Seven West (ASX:SWM) share price is on watch appeared first on The Motley Fool Australia. –
Why is the Seven West share price on watch?
Shares in the Aussie media group will be on watch after it reported a significant interim earnings increase.
Seven West booked $644.2 million of revenue for the half-year ended 31 December 2020 (1H 2021), down 9.8% from the prior corresponding period (pcp). Net profit after tax of $116.4 million bounced back from last year’s $48.6 million net loss.
Seven West reported underlying group earnings before interest, tax, depreciation and amortisation (EBITDA) up 24.4% to $165.7 million. Group EBIT climbed 29.0% to $152 million, with underlying earnings per share (EPS) of 5.6 cents.
The Seven West share price is one to watch in early trade as investors process the latest earnings result. The media group slashed operating costs by 18% to $480 million, excluding depreciation and amortisation.
The board decided not to pay a dividend as Seven West continues to focus on debt reduction. The group reported total borrowings of $740.6 million with net debt of $328.9 million (excluding lease liabilities). Seven West’s closing net assets stood at -$114.9 million compared to -$122.9 million in December 2019.
Seven West Media Managing Director and CEO James Warburton said the group achieved “several major milestones”.
The company continues to embark on its transformation journey with a pivot towards digital content. Thanks to strong user numbers, seven’s Broadcast Video on Demand (BVOD) revenue jumped 73% year on year.
What lies ahead in FY2021 for Seven West?
The Seven West share price will also be worth watching after today’s outlook and strategic priorities update.
Seven sees television advertising markets as “buoyant” after a solid Q2 FY2021. Early bookings indicate Q3 revenue for its Seven business could be 7% to 10% ahead of Q3 FY2020.
Management is expecting annual operating expenses at the bottom of the $1.03 billion to $1.05 billion analyst range. One-off cost events associated in FY2022 relating to both Olympics are expected to be offset by higher revenue.
Mr Warburton said Seven is well-positioned for the recovery in the advertising market after COVID-19. A reshuffling of content and greater focus on cost control has helped boost the bottom line in 1H FY2021. Seven West is forecasting an incremental $30 million cash saving as it hones in on “onerous” sports contracts.
The Seven West price has surged 30.6% higher in 2021 and reached a new 52-week high of 50 cents during intraday trading on Friday.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.