Banks have given the loss-making Seven West Media empire controlled by Perth billionaire Kerry Stokes an extra seven months to pay back $450m in borrowings as the group battles an advertising slump triggered by the coronavirus crisis.
As Seven West on Tuesday declared a loss after tax of $162m, its second loss in as many years, chief executive James Warburton pledged to turn the company around by both selling off assets, including the studio that produces soapie Home & Away, and revitalising TV programming that he said had become “stale and stagnant” under predecessor Tim Worner.
New ideas touted by Warburton, who took over a year ago after Worner quit following an affair with a staff member, include the return to air of reality show Big Brother, which first aired in Australia in 2001.
Warburton said that when he took over, Seven was already under pressure due to the media industry’s wider problems.
“It was a traditional business, run the old way, and it faced significant challenges,” he said.
“While our content spine remained solid, we were losing our ratings dominance due to a stale and stagnant prime time entertainment offering that was failing,” he said.
“We shut our doors to the external production community and we were introverted in our search for new and fresh ideas.”
He said he was a year in to a three-year plan to revitalise the broadcaster.
“The seeds have been sown, they are starting to bear fruit,” he said.
Advertising revenue plunged at both Seven’s free-to-air TV network and its newspaper division, WAN, which publishes the West Australian and regional papers in WA.
Revenue at the TV network tumbled 15%, to just over $1bn, while revenue at WAN slumped 10%, to $167m.
Also driving the loss were swingeing writedowns to the value of sports rights and TV licenses, of $262m, plus an allowance for onerous contracts of $136.9m, mainly related to cricket broadcasting.
The company benefited from $13.6m in jobkeeper payments, and chief financial officer Jeff Howard said it would book a similar payment in the current financial year.
It has also cut staff and renegotiated its AFL contract.
Warburton said the money reaped from asset sales will be used to reduce the company’s debt, which is primarily made up of $750m owed to a syndicate of banks.
The banks have given Seven West some much-needed breathing room by extending a $450m repayment that was due in December next year until July 2022 and loosening restrictive covenants over the loan until the end of this year so that the company can deal with the fallout from the Covid-19 pandemic.
Assets for sale include Seven Studios, which makes Home & Away, as well as a 50% stake in a joint venture with Nine, TX Australia, that owns TV transmission towers, and a bundle of shareholdings in tech ventures.
As of the end of June, when its financial accounts for the year were ruled off, Seven owed a total of $750m to the banking syndicate, plus another $11m separately owed to the ANZ.
The remainder of the syndicated loan is due in December 2022.
Its new arrangement with the banks will come at a steep cost in increased interest payments. Under the old deal, Seven last year paid interest at a rate of about 2%; under the new agreement, this will rise to more than 4.5%.
Underlining Seven’s difficult financial situation, the company revealed that at the end of the financial year it owed $236m more to creditors than it owned in assets.
Despite the net liability position, Seven’s directors said the accounts were prepared on the basis the company was a going concern and was able to meet its debt covenants until at least August next year because the TV ad market would recover from Covid and it was planning to sell assets and transform the company.
Source: The Guardian