Seven West Media’s (ASX: SWM) $135.8 million net profit for fiscal 2018 marks a return to profitability for the media company, from a $744 million loss a year earlier.

Though annual revenue declined to $1.62 billion, from $1.67 in 2017, "its profits didn't fall as badly as we had feared," says Brian Han, Morningstar's senior equity analyst.

"It's a good result, the best set of numbers I've seen from Seven West Media in several years," he added.

Annual underlying earnings fell 9.9 per cent to $235.6 million – at the upper end of its $220 million to $240 million guidance range – and Australia’s largest integrated media company has now forecast five to 10 per cent underlying earnings growth for its 2018/19 financial year.

While noting the moderate revenue loss for 2018, Han anticipates earnings growth to rise into positive figures into fiscal 2019: "Which is quite a feat for a media company in today's environment, especially for Channel Seven".

Seven Network Pacific Magazines and Yahoo7 are part of Seven West Media

Seven was in the headlines for all the wrong reasons during the 2016-2017 financial year, as a legal dispute between its chief executive Tim Worner and a former employee played out in public.

During the same period, the company was hit by weak advertising revenue and a heavy write-off in the carrying value of its television licences.

According to Han, they've achieved this much-improved result by cutting costs, and also because the television advertising market is recovering.

A dividend was not announced, having been suspended in February this year – which is another reason for the substantial balance sheet improvement, says Han.

Seven West Media's Worner says the company maintained a "single-minded focus" on improving its core business with ratings, revenue and cost savings the priority.

"Our transformation accelerated in the second half of the financial year and delivered $61 million of cost savings on our initial $40 million target."

The group - which consists of Seven Network, Pacific Magazines and Yahoo7 - said its cost cutting program is on target to deliver net group cost savings between $10 million and 20 million into 2019.

Despite the improved bottom-line, Seven management says its dividend remains suspended to give it financial flexibility.

Seven West shares were down around 5.5 cents, or 5.2 per cent, to $1.03 at midday today.

Seven West returns to profit

- Net profit of $135.8m vs $744m net loss year ago
- Revenue down 3.2pct to $1.62b
- No final dividend vs two cents dividend last year

 

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Glenn Freeman is senior editor, Morningstar Australia

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