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Edited Transcript of SWM.AX earnings conference call or presentation 20-Aug-19 12:00am GMT

Full Year 2019 Seven West Media Ltd Earnings Call

OSBORNE PARK, PERTH Sep 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Seven West Media Ltd earnings conference call or presentation Tuesday, August 20, 2019 at 12:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* James R. Warburton

Seven West Media Limited - MD, CEO & Director

* Warwick Lynch

Seven West Media Limited - CFO

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Conference Call Participants

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* Brian Han

Morningstar Inc., Research Division - Senior Equity Analyst

* Entcho Raykovski

Crédit Suisse AG, Research Division - Research Analyst

* Eric Choi

UBS Investment Bank, Research Division - Director and Australian Telco and Media Lead Analyst

* Jay Shyam

Macquarie Research - Analyst

* Kane Hannan

Goldman Sachs Group Inc., Research Division - Research Analyst

* Lucy Huang

BofA Merrill Lynch, Research Division - Analyst

* Andrew White;The Australian;Associate Editor

* Peter Ryan;Australian Broadcasting Corporation;Reporter

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Seven Network Full Year 2019 Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Mr. James Warburton. Thank you. Please go ahead.

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [2]

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Well, good morning, and welcome to the Full Year Financial Results for Seven West Media for 2019. I'm James Warburton, the Managing Director and Chief Executive Officer of Seven West Media. Joining me on the call today is Warwick Lynch, our Chief Financial Officer. I'm absolutely delighted to be here today, to be back in the media industry that I love and enjoy and at the company where my previous stint of 8 years were some of the most enjoyable and rewarding of my career.

I'd also like to thank the Seven West Media Board for the opportunity to lead the phase -- the next phase of the company's transformation. I'd like to acknowledge the fantastic contribution Tim Worner made to the company over his 26 years. And as the speaker said, we'll take questions at the end of the presentation.

Page 2 is our customary disclaimer and on our agenda on Page 3, just a couple of comments. First, I've been back with the company now for 5 days. So today's presentation will focus on the headlines and the financial results themselves. Then I'll give you some immediate observations and some areas of focus for the business moving forward.

On Slide 4, if we look at the highlights and, really, an overview of our business performance over the last year. You can see that underlying EBIT was down 7.5% to $212 million. We have reported $574 million of significant items net of tax, which predominantly reflects the impairment of the carrying value of our television licenses and newspaper mastheads. This is a result of incorporating recent softer advertising conditions and external market forecast into our impairment testing.

We've achieved cost savings of $38 million, and group net debt have been cut to $564 million. We generated $72 million of cash flow over the year and refinanced our debt facilities to 2021, 2022.

I'll now hand you over to Warwick Lynch, our CFO, who will take you through more details on the financials.

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Warwick Lynch, Seven West Media Limited - CFO [3]

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Thanks, James, and good morning, everyone.

Slide 5 shows the income statement for the full year. As a result of softer ad market conditions, we have adjusted out the carrying values of our licenses and mastheads. This has predominantly driven the significant items of $611 million before tax. Total group revenue of $1.56 billion decreased by 4% for the year. Group operating costs decreased by 3% to $1.35 billion.

During the year, transformation initiatives delivered net cost reductions of $38 million. The group delivered EBIT of $212.1 million, a decline of 10%. The prior period included a 53rd week, which provided a $6 million benefit. On a like-for-like basis, EBIT was down 7.5%.

Finance cost of $34.7 million decreased by 1.7% on a comparable basis. Netting that, FY '18 financial results have been restated following the adoption of new accounting standard, AASB 9 from 1 July.

Tax expense is $10.8 million, impacted by significant items. The underlying rate on profit, excluding significant items, is 27.1% and underlying tax expense of $48 million. Underlying net profit after tax of $129.3 million was 7.9% lower than the same period last year before adjusting for the additional week. On a like-for-like basis, underlying net profit after tax declined by approximately 5%.

On Slide 6, we have the statutory group financial results and a reconciliation from underlying EBIT. Seven West Media reported a statutory after-tax loss of $444.4 million and basic earnings per share loss of $0.295. Excluding significant items, earnings per share was $0.086. The Board has determined that it'd be, again, prudent to retain the suspension of the dividend, reflecting focus on capital management and increasing balance sheet strength and flexibility.

Moving to Slide 7. Significant items for the year of $611 million before tax. This amount was driven by the write-down of the television licenses, newspaper mastheads, goodwill and other intangibles of $478 million but also included redundancy and onerous contract provisions, fixed assets, loss on sale of investment and unamortized borrowing costs following the refinance of our debt facilities. Onerous contracts provided were $21 million, which relate to U.S. content rights in outer years FY '24 and '25. An overview of the timing of the onerous contracts by year, including new and existing provisions, is outlined in the graph on this slide. Net of tax, significant items totaled $573.7 million.

Moving to Slide 8. Seven West Media recorded operating cash flow of $151.5 million for the year. The working capital outflow relates to an Olympic rights payment, investment in programming, a change in spectrum, payment terms which are now paid in advance and onerous contract provision.

Redundancy and employee payments were $15.3 million and relate to the transformation programs being implemented across our businesses. Net tax payments of $15.2 million were lower than the prior year and reflect the timing and tax effect of sports rights contract.

CapEx is $40.6 million, including the Sydney building consolidation. CapEx for the FY '20 year is forecast to be in our normal $30 million to $40 million range. Net debt for the year was $564 million, down 10% compared to a year ago. Free cash flow generation during the period was $72.2 million. The group's leverage ratio is 2.3x EBITDA, and interest coverage 8.5x.

We refinanced our debt facilities during the year with the expiry of 2 tranches now out to December 2021 and December 2022, respectively. We will continue to focus on improving the strength of our balance sheet and working down our debt in the year ahead.

Moving on, Slide 9 provides an overview of the performance for each of our businesses. Seven revenue, including Digital and Studios, decreased by 2.9% to $1.25 billion. Our revenue share gain was offset by a soft advertising market, leading to a decline in broadcast revenue which outweighed revenue growth in Seven Studios and Digital. Cost decreased by 1.8% to $1 billion, reflecting transformation initiatives. Total Seven EBIT of $202.4 million was 6.3% below the prior year, which included that extra week. On a like-for-like basis, EBIT declined by 3.6%.

Publishing revenue declined by 8.3% to $315.2 million. WAN revenues decreased by 9% to $185.8 million, and Pacific revenue declined by 7% to $129.4 million.

Total publishing costs decreased by 7.3% to $280.1 million as management continues to deliver on transformation target. That's over $20 million for the combined business. Publishing EBIT for the year was $23 million.

And now I hand you back to James for the operational update.

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [4]

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Thanks, Warwick. Moving on to Slide 10. Seven Network has again proven to be Australia's favorite, delivering a 13th consecutive financial year of ratings leadership. I was impressed with the tenacity of our sales team, who worked tirelessly to grow television revenue share to achieve just under 39%. They've also built Seven's Digital revenue to $14 million from a small base in only 18 months. Seven News is #1, Sunrise continued to dominate, and Seven Sport's coverage remains second to none. Our Summer of Cricket debuted with a total reach of over 16.1 million Australians. And at financial year-end, our AFL audiences and ratings were up 10% year-on-year.

On Slide 11, we've broken out Digital financials for the first time. In June, our owned and operated digital products recorded an all-time record unique audience of over 6.1 million Australians, having grown by 27% year-on-year.

Our EBIT for the year was $15.1 million, which represents a 356% growth out of the $3.3 million from last year. Consumption on 7plus grew 72% in the year, helping us achieve 35% share of the BVOD market across the year. 7News.com.au has had a fantastic start, debuting in the top 5 news publishers in the Nielsen DCR only 3 months since launch, demonstrating the power of our 7News brand.

Next, we turn to Seven Studios on Slide 12. We are the largest producer of premium long-form content in Australia. EBIT for the year grew 5.3% to a new high of just under $60 million. This is the seventh consecutive year of growth, and a large percentage of those earnings are underpinned by life-of-series contracts. Seven Studios is capitalizing on the global demand for content by doing licensing and coproduction deals with Netflix, Twitter and Facebook. Over the year, we created more than 900 hours of scripted, factual, kids, and reality program, building our content library to over 9,000 hours.

Moving on to publishing, Slide 13. These businesses are transforming but continue to face challenging conditions. In June, thewest.com.au launched digital subscriptions, which as well as providing new revenue streams will give us valuable audience data and insights which we can then use to further monetize the lead in local journalism. The print edition has undergone a renewal under new editorial leadership, resulting in a readership increase of 6% over the year. Pacific's transformation program has resulted in costs coming down by $8.3 million or 6%, and digital revenue was up 27% and now represents around 30% of total ad revenue. The transformation of both publishing businesses continue to pace, and we will reduce their cost basis further with initiatives already underway in this financial year.

Looking on Page 14 at new ventures. Our investments are in growth stage and continue to perform well, we're scaling rapidly, with the value of the portfolio growing 24% over the year to some $95 million. We continue to evaluate and identify disruptive growth businesses where we can make a rapid difference while leveraging the power of Seven and its enormous reach.

Moving on to Slide 15. I'd now like to make some initial observations about the business. First and foremost, when you look at the markets we operate in, the strength of our offering is undeniable, and it was this reach and breadth of Seven West Media's assets that was the major attraction for me in taking the job: over $1.5 billion of revenue, platforms that reach 18.6 million Australians every month; a television network that's been #1 for 13 consecutive financial years; market-leading news, breakfast and current affairs shows; world-class entertainment brands; year-round coverage of Australia's #1 summer and #1 winter sport; as well as the best horseracing coverage in the country. And we can't wait for the Tokyo Olympics in 2020, with just a 1-hour time zone differential, it will be the most-watched Olympics in history with over 35 streams.

Our job is to redefine how we go to market to be the most relevant and exciting offer to advertisers, superior and unmistakable. Our industry and Seven West Media needs to be less inward focused and more determined and progressive to fight hard for our unfair share, and it's my job to shout from the rooftops.

There's been much written about our ratings over the past few days. Don't get me wrong. Our focus is to improve them, but for the avoidance of depth, after leading at the half, our current year-to-date commercial viewing share is 38.8%, just 0.3 of a share point behind 9 and some 17 share points in front of 10. Those are the numbers we have to build on, underpinned by solid foundations in news, public affairs, AFL and a truly amazing Summer of Cricket ahead and, of course, a formidable platform to be building from, particularly with an Olympic summer on the horizon.

I'd now like to address our immediate focus and key objectives as I see them. Last year was a tough slog in the economy and advertising market, and there is no doubt that Seven West Media had lost some momentum. We have incredibly strong assets, and we now need to speed up the rate of transformation as well as return some onshore thinking and market leadership back into our agenda. I see our immediate focus in 3 areas: First, content-led growth. We need to simplify our organization to be a content-led company focused on growth. We need to revitalize our entertainment programming. We need to create momentum to engage heartland Australia and enrich our demographic mix. We have some tired formats, and we are skewing too old in some areas. But as I've said before, we have solid foundations with our news, current affairs and sport platform.

Seven was the best at creating, executing and launching formats in the past, and we need to work hard to wrestle back that momentum. By doing this, we will be the most relevant and exciting offer to advertisers. We need to look to distribute our content widely on more platforms, and we are looking to explore meaningful streaming partnerships in the eSports space.

Second, transformation. We'll run our business with some more entrepreneurial thinking, some hunger for possible deals and to run it less as a traditional media business. We'll sharpen our focus on being a high-performance audience and sales-led organization. We'll redefine our work practices, becoming more efficient and effective to look at savings which do not impact ratings. Whilst we have a responsibility to run our cost base as efficiently as possible, we can't cost-cut our way to success.

Thirdly, we need to consider our capital structure and balance sheet and focus on working down debt. We will be a hunter and explore M&A opportunities in both traditional media and nontraditional adjacencies that are positive for our shareholders.

On Slide '17, a trading update. In FY '20, we expect EBIT to be in the range of $190 million to $200 million, including the impact of AASB 16, and I'll provide you with a further update at our AGM in November. We will maintain cost discipline across the group and deliver operating savings where prudent. We expect the television metro ad market to decline in the low single digits and the BVOD market to grow by more than 25%. We are targeting growth in ratings and revenue share both in broadcast and BVOD. Seven Studios will deliver an eighth consecutive year of growth. And we will have an ongoing focus on improving the balance sheet and working down our debt.

As with any organization, change and improvement will take time. We have acted to implement significant focus for the business, and we'll be striving to improve the performance as quickly as possible to grow value for shareholders.

So that concludes the presentation. I'd now like to hand it back to the operator to take any question.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question is from Kane Hannan from Goldman Sachs.

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Kane Hannan, Goldman Sachs Group Inc., Research Division - Research Analyst [2]

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Just 2 for me, please. Just James, starting on the balance sheet, so gearing 2.3 above the previous 2x target. You think it's coming down in '20, yet you're talking about becoming a bit of a hunter on the M&A side. Just interested if you could comment around how you're seeing your balance sheet outlook and the portfolio degearing it, yes, and whether we should still be thinking about that 2x target is what you're aiming for.

And then in terms of the content-led growth comments, given you're obviously looking at growing through that, should we be reading that as a step-up in content investment or just a refocus of the existing spend discussed?

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [3]

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Yes, no problem. So I'll take your first question in relation to the balance sheet. And as you can see, it's one of the key pillars for us to focus on. And we really have a range of options to work down our debt: obviously, improving our ratings and revenue; and particularly, our revenue share is pretty material and cut through to the bottom line; M&A, obviously; and much depends on the ad markets; and certainly, some sentiment in terms of potential improvement. So as I said, there's many options for us to look at how we work through that.

In terms of your second question, it's a bit of both. We are investing in content and have sort of allocated some funds, if you like. But in addition to that, we're also looking overall at the organizational structure and improvements and still targeting approximately more than $15 million, let's say, of operational incentives and improvements, which we're working on at the moment.

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Operator [4]

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Your next question is from Mr. Raykovski from Credit Suisse.

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Entcho Raykovski, Crédit Suisse AG, Research Division - Research Analyst [5]

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Entcho Raykovski here. Three from me. So firstly, apologies if I missed this somewhere in the materials. But can you talk to the AASB 16 impact on EBITDA and EBIT. I'm assuming that the EBIT impact might be that material given that it's post D&A, but any color you can provide us would be helpful.

Then secondly, if you can provide any commentary on the underlying assumptions behind your FY '20 guidance around revenue share and costs. You've obviously spoken about the market and increases in revenue share, but any further data would be quite helpful as to how high you think that revenue share can increase.

And just finally, you've spoken about a meaningful streaming partnership play that you would explore. Are you thinking of launching something on your own? I mean I'm just conscious that hasn't quite played out in the past. Will you consider investing in existing players? What is your thinking around that area? That's all.

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [6]

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Yes, no problem. Let me start with your second question first. And that is that the assumptions we've made is that there's a low single-digit decrease in market, and we would see our share around 39%. But of course, our focus is to grow our share. Secondly -- or thirdly, your third question in terms of streaming. At my account, there's 9 players coming into the Australian market with all the various announcements. And obviously, Disney announcing today at $8.99 or $9.99, I can't remember. $8.99. And ultimately, from our perspective, we'd be an incredible partner in a range of fronts: one, obviously, we reach 18.6 million Australians a year. Two, we're clean. And three, you can see Seven Studios is already working in terms of content with many of the streaming partners in this country -- in various countries but this country as well. So from that perspective, we have the capability, the ability to promote, and we'll be looking to use our editorial and power of our assets, and we're up as a business. Don't know whether it will be successful. But ultimately, for us, it is actually about looking for these partnerships and talking to the market about being open for business.

And on the first question, I'll hand you to Warwick.

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Warwick Lynch, Seven West Media Limited - CFO [7]

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Thanks, Entcho. So the EBIT impact for FY '20 is approximately $8 million to $10 million benefit to EBIT. It will be slightly higher in EBITDA, and I'll give some more clarity over the coming reporting periods on that impact to EBITDA.

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Operator [8]

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Your next question is from Derek Choi (sic) [Eric Choi] from UBS.

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Eric Choi, UBS Investment Bank, Research Division - Director and Australian Telco and Media Lead Analyst [9]

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It's Eric Choi from UBS. And welcome aboard, James, as well. Just one for Warwick. First, just wondering on those onerous provision releases, how much has been banked into FY '20 guidance?

And then maybe a second one for James. I hope this isn't too insensitive, but just based on your new LTIs, there's some comment on the TSR hurdle. Just wondering if you can comment on what those TSR hurdles are.

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Warwick Lynch, Seven West Media Limited - CFO [10]

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Thanks, Eric. On your first question, I guide you to Slide 7. You'll see that the onerous provision release in FY '20 will be approximately $20 million, down from this year, slightly down from this year.

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [11]

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Yes. Thanks, Eric. I think in relation to my package, what I will say is that I'm heavily motivated alongside the shareholders in terms of the structure with what's at risk, so to speak. And obviously, that -- a detail of that will be worked through by the Board at the relevant time.

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Operator [12]

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Your next question is from Liza Lang (sic) [Lucy Huang] from Merrill Lynch.

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Lucy Huang, BofA Merrill Lynch, Research Division - Analyst [13]

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I just have 2. So in terms of the TV business, you talk about looking to increase revenue share potentially above the 39% for next year. I'm just wondering, what kind of strategies are you looking to implement? Particularly in terms of content, what types of formats are you looking to invest in or potentially retire maybe into the coming year? And then just secondly, on cost, so do you see a lot more scope to reduce costs? And which areas of the business do you see more potential for cost to come out? So is it TV or print?

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [14]

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Okay. Thanks for the question. So I think for us, as I've detailed, we've got a very strong platform. We've got leadership in many areas of the schedule. And for us, it's really focusing on the 7:30 p.m. time slots and, particularly, Sunday to Tuesday. And that is the absolute focus of the business.

And Warwick on the costs, will you make a comment?

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Warwick Lynch, Seven West Media Limited - CFO [15]

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Sure. So James mentioned before, there's at least $15 million of operating costs to come out of the business in FY '20, and that's primarily around the transformation initiatives we have already put in place during this financial year that flowed through this one -- this next one, and that is across all 3 businesses, very focused on operational efficiencies, back-office processed and where it does not hurt the revenue and ratings.

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Operator [16]

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Next question is from Brian Lin (sic) [Brian Han] from Morningstar.

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Brian Han, Morningstar Inc., Research Division - Senior Equity Analyst [17]

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James, it's Brian Han. I know you've only been CEO for 2 minutes, but just philosophically, do you still like the outdoor sector. And if so, how hard do you think it will be to convince Mr. Stokes to do a deal in that space?

And my second question is -- I mean, James, it's not my intention to be flippant here. But given the downward earnings spiral of both newspapers and magazines, at what point would you concede that maybe EBIT is too hard and too marginal and that maybe you can -- let somebody else achieve better synergies?

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [18]

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Thanks, Brian. It feels a lot longer than 2 minutes. Been 5 days. Look, and I think as I've detailed very specifically that we will have -- we'll be a hunter, and we're looking at M&A in a whole range of sectors, traditional and nontraditional and so, obviously, looking at sectors that we'd like to be in, where there's growth and, obviously, where any form of M&A activity makes sense. And so it's been 5 days. So give me a bit of time to sort of detail the thinking on that.

And ultimately, from a news and sort of newspapers and magazines perspective, as Warwick's detailed, there's significant transformation going on in both of those assets. And it's our job to sweat those assets as hard as we possibly can and to integrate them as much as we possibly can with the rest of the business. And so that's the intention at this particular point in time. But I've made the comment as I was announced that nothing is on the table and nothing is off the table. We're absolutely open for business, and we're going to be extremely focused, entrepreneurial. And as I said before, we are now a hunter to really consider what our options are as we move forward in transformation.

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Operator [19]

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Your next question is from [Tim Butler] from The Guardian.

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Unidentified Participant, [20]

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So I'll just pick up on that line you've been saying a lot, "We're going to be a hunter." With what? You've got $90 million in cash. You've got $650 million gross debt which you've committed to reducing, not increasing. What money -- or what kind of deals can you do when you've got such limited cash resources?

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [21]

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Well, I think, ultimately, you've got a whole range of options to look at, whether it's scrip, whether it's other areas of mergers, cost out and operational improvement. So there's really 2 sides to it. There's the foundation of the business and improving the business, and there's a huge amount of cut-through that actually sits in the business if you can leverage your ratings and your revenue share. And ultimately, it's that type of nonthinking or nonentrepreneurial dealmaking that stagnates businesses. And so it's our job to focus on the business, work out a path and increase the value for shareholders.

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Operator [22]

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Your next question would be from Andrew White from The Australian newspapers.

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Andrew White;The Australian;Associate Editor, [23]

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A couple of questions from me. With that balance sheet, do you think -- you've got about $100 million in net assets now after the write-downs. Do you need to undertake a capital raising in the next 12 months?

And the second one on content, we've seen the Disney deal announced this morning. I'm just wondering with those numbers of streamers coming in from various companies, do you foresee any implications for the cost or availability of any programming that you have on Seven at the moment? And what would that be?

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [24]

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Yes. First question forward, as I've said, nothing is on or off the table. But at this point, as I've said, we've got a range of options to look at how we consider our capital structure and our balance sheet. And so as I said before, improving our rating and revenues position, ad markets will dictate a lot of that, and we'll continue to work on it, but it is an area of focus.

In terms of programming, we're pretty set in terms of schedule and our big tentpole programs other than we're looking to completely revitalize and reevaluate that programming slate, and we're looking to invest in new formats. And those 2 areas are crucial and the cut-through of that in profitability is significant in working down our debt and giving us other options.

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Operator [25]

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Your next question is from Jay Shyam from Macquarie.

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Jay Shyam, Macquarie Research - Analyst [26]

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I just wanted to have a quick follow-up on the AASB 16 standard. Am I correct in saying that there's an $8 million to $10 million benefit? It was my understanding that the impact on the EBIT line would generally be negligible to flat, the higher EBITDA would be offset by higher D&A, or am I missing something?

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Warwick Lynch, Seven West Media Limited - CFO [27]

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You also need to factor in the interest component. So there is a benefit of $8 million to $10 million to EBIT. And -- but the interest expense will go up by that or a little bit more.

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Operator [28]

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Your next question is from Peter Ryan from Australian Broadcast.

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Peter Ryan;Australian Broadcasting Corporation;Reporter, [29]

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Welcome back to Seven, James. Just 2 questions. One is, what's your view on the future of free-to-air TV given you mentioned some of the tired formats there? And also, given that you're saying that nothing's on or off the table about mergers or acquisitions, have you maybe been in talks with, say, a News Corporation, for example, about a possible deal there for the new media world?

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [30]

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Sure. Look, I think in terms of your first question, you look at the impact that BVOD has had on the business, in particular, in bringing back young viewers is pretty extraordinary. You think about being a content-led business when you're generating the types of quality premium content that we are across platforms, and you start to think very, very differently, sort of about being on everywhere and then being on every screen.

Let's also not forget a couple of things. And one is that we've only been in the BVOD business for a very, very short period of time. News only came online, really, at the beginning -- it's around March, actually, I think, from memory. And the rest of our unwinding of Yahoo7 was around November of last year but really didn't hit until January. So seeing the strength of the digital and promotional area is extraordinary. The VODs platform, which obviously measures the collectibility of the BVOD and the television together, gives us a huge shot to really take on Google and Facebook in the addressable advertising area. And so clients are sort of particularly excited about that.

I think in terms of the rest, I'm very clear and very focused in terms of what I've said. We've got the foundation, and we have to improve our core. And so we're very focused on that. You don't flick a switch. It's not going to happen in 5 minutes flat. It's a very specific and intelligent sort of push towards improving our content and monetizing it. And you can see our sales team has the ability to monetize sort of better ratings and better content. And then the second part of it is actually transforming the company and looking at where we need to be and what sectors we need to grow in, in both traditional and nontraditional measures.

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Operator [31]

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(Operator Instructions) We have another question from [Tim Butler] from The Guardian.

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Unidentified Participant, [32]

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I should've -- two things. I should've asked this last time. In the debt -- you've disclosed this gross debt of $650 million. How much of that falls due in November 2021?

And my second question relates to Tim Worner's termination payment. His contract said he was -- he got 12 months in lieu of notice. Will he get that? It's not clear from the annual report what's going on there.

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Warwick Lynch, Seven West Media Limited - CFO [33]

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Okay, Tim, just on the debt question. So we have $750 million of facilities but net debt of $560 million. So $400 million is the first tranche at the end of December '21. But because we're -- debt is already much lower than the total facilities. At this point in time, only $200 million is necessary to refinance at that point in time, and that's 2 years away.

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Operator [34]

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We have another question from Peter Ryan from Australian Broadcast.

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Peter Ryan;Australian Broadcasting Corporation;Reporter, [35]

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So I was just following up on my previous question there about mergers and acquisitions in the media world. And is Seven interested in any potential mergers or discussions with big players, for example, like a News Corporation?

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [36]

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Yes. Look, I think, as I said, I've been pretty transparent in terms of the fact that we want to. We have a desire, as does the Board, to transform the company, and nothing is on or off the table. We need to -- everyone's run around and looked at all the various options, and it needs to be the right deal for shareholders, for all of our shareholders, and it's something that, as I said, nothing's on and nothing's off the table. But the point of focus is transforming the company.

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Operator [37]

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There are no other questions as of the moment. Presenters, please continue.

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James R. Warburton, Seven West Media Limited - MD, CEO & Director [38]

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Well, thank you. I just wanted to thank everyone for the time, and we look forward to the road show and catching up with as many of you as we possibly can. Thank you.

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Operator [39]

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Ladies and gentlemen, that does conclude our call for today. Thank you for participating. You may all disconnect.