The Seven West Media Ltd (ASX: SWM) share price is up around 10% after giving a trading update.
Seven West’s strong trading update
The TV media business said that trading conditions in the fourth quarter of FY21 have been positive, with a strong rebound in advertising revenue compared to last year. Seven’s advertising revenue, including broadcaster video on demand (BVOD), is estimated to grow by by more than 45% in the quarter.
There are also early indications of ongoing positive momentum into the September quarter.
The company said that the start of the 2021 calendar year was the Seven Network’s riskiest period in the schedule with two new unknown formats which had mixed success. Since April, Seven has been increasing its television audience share year on year across key demographics.
Seven has won 12 of the 24 weeks in total people so far in 2021, and is on track to win a 13th week. For the ratings year, Seven has won seven out of 16 weeks so far and is on track to win an eighth week.
The Seven sales team has delivered “#1 linear TV revenue share” in April. The company is highly confident in Seven’s schedule for the next six months, with proven and successful formats and Olympic Games Tokyo 2020 and the Ashes Test series.
BVOD consumption continues to grow strongly, with 62% growth in registered users on 7plus in the year to date, compared to market growth of 50.7%. 7plus has secured a 37.2% revenue share in the 10 months to April 2021, a 5.8 percentage point (5.8%) increase on the previous corresponding period.
Digital earnings continue to grow strongly, with Seven digital expected to contribute EBITDA (EBITDA explained) of more than $60 million in FY21, up 130% year on year. Digital earnings are expected to more than double in FY22.
Seven continues to be focused on controlling costs, with costs expected to come in at the lower end of the range. Underlying inflation is running at 1% to 2%, though the Olympics and Ashes are expected to add some extra costs, as well as a full survey year of content compared to the COVID-impacted 2020.
Guidance
Seven is now expecting underlying EBITDA to be between $250 million and $255 million in FY21, compared to analyst consensus of $235 million to $245 million. Net debt is expected to be between $240 million to $250 million.
Summary thoughts on Seven West and the share price
People were predicting the end of broadcast companies a few years ago. But that hasn’t happened and now they’re making good profits. I’m not sure if Seven is a buy after the rebound over the last year. It could prove to be cyclical over the medium term, which might open up an opportunity.
ASX growth shares could also be ones to consider.