Seven's slippery slope

With print media sales sliding and TV revenues facing low single digit growth, Seven will need to run hard just to stand still

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published February 20, 2013 1:58 pm AEDT

Shares in media company, Seven West Media (ASX: SWM) have fallen after the company posted a $109 million loss for the first half of the year, thanks to one-off charges totalling $255 million. In afternoon trade, shares are currently down more than 6%.

Seven West owns the Seven Network free-to-air TV station as well as the West Australian newspaper, magazine publisher Pacific Magazines and has a joint venture with US company Yahoo! in the Yahoo!7 website.

The company wrote down the value of its carrying values of the magazine business, its investment in Yahoo!7 and incurred redundancy and restructuring costs.

Net profit after tax and before one-off charges fell 12.7% to $142 million, and the company declared a 6 cent full franked interim dividend. Operating cash flow jumped compared to the previous period to $240 million, from $170 million.

Seven's broadcast television division continues to lead the market in TV ad revenue, with an estimated 40% of the total market. Nine Entertainment holds a 38% share, while Ten Network Holdings (ASX: TEN) continues to see its market share fall, dropping to 21.6%.

Seven West expects flat to low single digit growth in TV advertising, but faces major structural issues in its print media divisions, with newspaper revenues falling 15% and magazines sliding 11% compared to the previous year – issues that are also faced by Fairfax Media (ASX: FXJ) and APN News and Media (ASX: APN).

Foolish takeaway

With $3.66 billion of intangible assets on its balance sheet, $1.5 billion of debt, low TV revenue growth, and facing structural issues in its newspaper and magazine divisions, Foolish investors might want to watch this one from the safety of the sofa.

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Fairfax Media.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.