Seven West Media – the publisher of The West Australian and Perth’s The Sunday Times – has lifted its projected cost reductions by $20 million to a total of $125 million over the next two years, and suspended its dividend, despite a 5 per cent increase in revenue.
The moves will enable Seven West to pay down debt, as well as giving it the flexibility to take part in media consolidation, if opportunities arise, following the relaxing of ownership laws last year.
Seven West reduced its costs by 13.8 per cent to $652 million in the six months to December 31 compared with the previous corresponding period, which included higher sports rights costs and the Rio Olympics.
It will continue the cost reduction program this year. At least $25 million in staff cuts will be delivered in the TV arm of the business in fiscal 2018, and a further $10 million of cost savings, including staff cuts, is planned for The West Australian.
The company delivered a net profit of $100.7 million for the first half, and intends to reduce its debt from $710.8 million to $650 million by June 30.
Seven West chief executive Tim Worner related the suspended dividend directly to possible media consolidation. Mr Worner said the measure was a temporary “prudent capital management step to retain flexibility post relaxation in media ownership legislation”.
In publishing, The West’s revenue declined 2.4 per cent to $105.9 million while EBIT fell 28 per cent to $10.7 million. Operating costs increased 1.7 per cent in the period due to the inclusion of a full six months of costs for The Sunday Times and PerthNow, which it acquired from News Corp Australia in November, 2016.
The company said The West’s costs, excluding The Sunday Times, were down 5.4 per cent year-on-year with greater savings targeted in the second half. The Sunday Times continues to perform well and has now generated 100 per cent payback on acquisition price in just over 12 months, it said. In addition, management recently lifted the cover price, which will provide a revenue benefit in the second half.