Seven West Media Limited

Merger with Prime Media Group Limited to Generate Significant Synergies: Seven West Media Limited (ASX: SWM) operates in free to air television broadcasting, newspaper and magazine publishing and online and radio broadcasting. As a part of strategic initiatives, the company is in the process of merging with Prime Media Group Limited, which is expected to generate significant business synergies. Post-merger, the group is expected to have cost synergies of ~11 million through the unlocking of regional ad revenue.
In the meanwhile, On 9 December 2019, SWM informed that Prime Media Group Limited (ASX: PRT) that it intends to pay a fully franked special dividend of A$0.03 per share, payable on 6 January 2020. Earlier, the two companies announced a merger program where each shareholder of Prime Media will be allotted 0.4582 SWM’s shares. 
Business Updates

(a) Recently, the company entered in binding agreement to divest SWM’s consumer magazines business for a cash consideration of $40 million and to divest Western Australian radio assets (Redwave) to Southern Cross Media for a cash consideration of $28 million.

(b) With this merger, the company will emerge as Australia’s leading wholly-owned commercial premium broadcast, video and news network reaching over 90% of Australians each month.

(c) The company looks at a simplified operating model and leadership structure to reduce duplicity in the role and transform into a more agile company.

Update on Q1FY20 Operational Performance: SWM declared its FY20 business highlights, wherein the company reported that the market share of the company stood at ~39% in the face of prevailing sector-specific challenges.

FY19 Operational Highlights for the Period ended 29 June 2019: SWM declared its FY19 financial reports, wherein the company reported revenue and other income at $1,556.43 million in FY19 as compared to $1,621.09 million in FY18 on YoY basis. The company reported a net loss of $444.448 million in FY19 against a profit of $132.788 million over FY18 on account of impairment expenses of $477.972 million in FY19 on YoY basis. The business reported current assets of $562.542 million, including cash and cash equivalent of $90.455 million. SWM’s digital EBIT reached $15.1 million with revenue, up 67% on y-o-y basis.


FY19 Income Statement Highlights (Source: Company Reports)

Guidance: The market remains uncertain, making it difficult to predict, while SWM expects further softness in the second quarter of FY20. The Management is expecting the metropolitan television market to be down mid-single digits for FY20. As per the FY20 guidance, the company expects underlying EBIT in between $190 million to $200 million, including the impact of AASB 16, which is at the lower end of the Management guidance. The company is further focusing on reviving its entertainment programming by creating momentum to engage heartland Australia. Looking for the most relevant and exciting offer to advertisers and exploring a meaningful streaming partnership play, the company maintain its focus to lower its debt and improve balance sheet flexibility. Finally, the company looks forward to focus on being an audience and sales led organization.

Stock Update:The stock of SWM is quoting at $0.370 with a market capitalization of $557.97 million. The 52-week trading range of the stock stood at $0.350 to $0.705. The stock has delivered negative returns of 8.64% and 22.92% in the last three-months and six-months, respectively.

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