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Seven West warns of Olympic earnings hit

AAP logoAAP 1/08/2016 Stuart Condie

Olympic Games broadcaster Seven West Media has flagged a hit to earnings next year courtesy of the cost of screening the Games and a limp advertising market.

Three days out from the opening of the Games in Rio, Brazil, Seven West Media suffered a plunge in its share price after forecasting a big drop in earnings for 2016/17, even as the group unveiled a slim profit for the year just ended.

Seven West shares dropped almost 20 per cent and dragged down other media stocks in their wake after the owner of the Seven TV network and The West Australian newspaper posted its full-year results.

The company predicted the TV ad market will remain flat, or decline by single digits and said, combined with the broadcast of the Olympics and AFL, that was expected to hit 2016/17 pre-tax earnings by 15 to 20 per cent.

predicted that costs excluding the Olympics will rise in line with inflation.

"Revenue's declining and costs are rising; that's never a good outcome," Citi Global Markets equities sales director Karen Jorritsma said.

"The market's usually pretty good at picking quickly the good news stories and there's none," Ms Jorritsma said.

Shares in the Kerry Stokes-led media company fell 19 cents, or 18.4 per cent, to 84.5 cents and took other media stocks with them: Nine Entertainment followed its rival, shedding 15.21 per cent, while Ten Network lost 3.76 per cent.

"The comments they made around the TV ad market being soft is not helpful to all the other names," Ms Jorritsma said.

"They're showing no growth in the TV ad market and the guidance they gave is fairly bearish as well."

Chief executive Tim Worner insisted the Olympics - which Seven will broadcast on TV and across its online channels - will benefit Seven by building an audience to which the company can introduce new shows.

Citing rights to the AFL finals, the Melbourne Cup, the Australian Open and the Commonwealth Games, Mr Worner said Seven had "the greatest line-up of huge live sporting events that we, or indeed any network, has had in history".

Earnings from The West newspaper division dropped 24.3 per cent to $39.2 million, with daily circulation declining from 157,000 in the previous year to 145,000.

EBIT at the Pacific magazine publishing unit fell 55.6 per cent to $9.0 million.

Overall underlying profit for the 12 months to June 25 fell 0.9 per cent to $207.3 million, with EBIT falling 10.7 per cent to $318.1 million.

Net profit was $184.3 million, compared to a $1.89 billion loss for the previous year when it recorded writedowns of more than $2 billion - mostly related to its Seven Network TV assets.

SEVEN WEST'S FY16 FIGURES

* Net profit $184.3m vs $1.89b loss

* Underlying profit down 0.9pct to $207.3m

* Revenue down 2.8pct to $1.72b

* Final dividend unchanged at 4.0 cents, fully franked

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