Seven Network 1st-Half Profit Rises 9% on Asset Sale (Update4)
Feb. 25 (Bloomberg) -- Seven Network Ltd., Australia's second-ranking television broadcaster, said first-half profit rose 9.3 percent, helped by a one-time gain from the sale of shares in a mobile phone retailer.
Net income for the six months to Dec. 31 increased to A$59.3 million ($47 million) from A$54.3 million a year ago, the Sydney- based company said to the Australian Stock Exchange today. The one-time gains of A$16 million included proceeds from the sale of B Digital Ltd. Sales rose to A$679.8 million from A$665.9 million.
Seven's shares have gained 18 percent this year as Chief Executive David Leckie focuses on reversing last year's rating slide. The network has overtaken Publishing & Broadcasting Ltd.'s Nine Network to become the top-rated broadcaster in the first weeks of 2005 with new shows such as ``Lost'' and ``Desperate Housewives.'' TV costs will rise as much as 7 percent this year.
Expenses rise ``because of work they're undertaking to enhance their television business,'' said Angus Gluskie, who manages $392 million at White Funds Management in Sydney and owns Seven shares. ``It's a planned cost increase designed to produce benefits, and at this stage we can certainly see that coming through.''
Star Dancing
Profit excluding one-time gains and after interest paid on convertible bonds slid 43 percent to A$31.8 million, short of the A$36 million median analyst forecast in a Bloomberg News survey. Full-year profit will be below last year's, Seven said, repeating a Nov. forecast. It didn't provide a forecast beyond the year ending June 30.
The shares fell 8 cents, or 1 percent, to A$7.59 as of 1:58 p.m. in Sydney.
At Seven's television business, earnings before interest and tax dropped 22 percent to A$87 million in the half as the company spent money to produce and market new programs such as celebrity show ``Dancing with the Stars.'' Expenses surged 22 percent to A$390 million, mainly on costs related to Seven's coverage of the Athens Olympics Games in August.
Seven's TV audience share declined to 24.9 percent from 25.6 percent in 2004 as shows such as Paris Hilton's ``Simple Life'' failed to attract viewers. Nine led ratings for a fourth year with 29.9 percent of viewers, and Ten Network Holdings Ltd. boosted its ratings to 23.8 percent from 23.2 percent, helped by talent quest ``Australian Idol,'' the year's most-popular show.
``We are pleased with our ratings performance so far but we know our competitors will be even more driven to hold our progress and we're making sure that we're prepared for their counterattack,'' Leckie said in a media briefing today.
`Men's Health'
Advertising revenue at Channel Seven rose 9 percent in the first half as media companies benefit from increased demand, with the nation's consumer confidence at its highest in more than ten years and the unemployment rate at a 28-year low. Seven also attracted advertisers with its Olympics coverage.
``If we didn't have the Olympics, it could have really damaged us,'' Leckie said.
Advertising sales in the television industry will rise 5 percent to 7 percent this year, Leckie said.
Profit at the Pacific Magazines division, which publishes ``Marie Claire'' and ``Men's Health,'' more than doubled to A$14 million, boosted by advertising and Seven's acquisition of Murdoch Magazines.
The business has a 22.2 percent readership share in the Australian market, up from 20.8 percent last year, Seven said, citing figures by Roy Morgan Research.
Court Case
Seven's court proceedings to seek damages from pay- television company Foxtel Management Pty and others for the failure of its C7 pay-television sports channel will begin in July, two months later than planned, and run for the rest of the year, the company said.
Seven alleges it lost between A$700 million and A$1 billion because its rivals colluded to win control of football television rights for Australia's biggest pay-TV network, leading to the collapse Seven's C7 sports channel in 2002. The company had A$12 million in legal costs in the first-half.
The company may buy back its convertible bonds before June 30 because of the introduction of international accounting standards, saying it was too early to say how much it would pay.
Seven is controlled by Kerry Stokes, who owns 43 percent of the company. The company will pay a dividend of 8 cents a share, unchanged from last year.
To contact the reporter on this story:
Miriam Steffens in Sydney at msteffens1@bloomberg.net
To contact the editor responsible for this story:
Peter Vercoe pvercoe@bloomberg.net
Last Updated: February 24, 2005 22:00 EST
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