Seven's share price slips as advertising market hit by banking royal commission
The share price of Seven slipped after the Australian free-to-air broadcaster said that it expected growth of 0 to 5 per cent in its underlying 2019 earnings (before interest and tax), compared with a forecast of 5 to 10 per cent growth last year.
Tim Worner, Seven West Media’s chief executive, argued that a decline in the advertising market had been expected by most observers, but Seven’s share price nevertheless fell by 8 per cent to $0.52 ($0.37).
Seven this morning reported a decline of 7.8 per cent in underlying net profit after tax to A$91.8 million in its half-year results, compared with the same period a year earlier. Overall revenues were down 1.5 per cent to A$798.9 million.
Worner said that the costs of cricket rights were absorbed and the cost base was flat over the six-month period at $652.1 million (including depreciation and amortisation).
Last month, Seven Network and pay-TV’s Foxtel claimed success for their live coverage of the national cricket team’s home test series against India, despite the hosts’ defeat and a lower overall audience than previous high-profile tours.
The test series was the first to be shown live by Seven and Foxtel under a six-year rights contract for Australian cricket worth A$1.18 billion.
The deal brought to an end the long-running exclusive coverage of Australia home matches on free-to-air outlet Nine Network.
Worner said this morning: “I think [the weak advertising market] is probably a confluence of factors, but definitely the banks and insurance have gone missing due to the royal commission. But we are seeing the first signs of them coming back - in at least some cases there’s going to be a pretty stark need for brand rebuilding.
“When you get the level of political instability that we’ve had, there’s a sort of inevitable erosion of confidence and probably we’re seeing a little bit of that as well.”
A royal commission report into the banking sector in Australia has caused turmoil, with commissioner Kenneth Hayne speaking of “the pursuit of short term profit at the expense of basic standards of honesty.”