Anemic Seven profits prompt stock sell-off

Increase in expenditures, stake in MGM cause loss

SYDNEY — Australian investors dumped stock in Kerry Stokes Seven Network, driving stock prices down 4.5% by Tuesday, as the web revealed post-tax profits for the six months ended Dec. 31 rose just 4.1% to A$65.6 million ($43.9 million), far below analysts’ expectations of 15%.

The result was dented partly by an estimated 10% increase in expenditure on sports, local and overseas programming, and by interest charges of $7.5 million, linked to Seven’s $420 million stake in Hollywood studio MGM.

But earnings before interest and tax rose 14.4% to a record $77.8 million on revenues of $286.4 million, while profit before tax and one-time extraordinary items climbed 9.2% to a record $70.3 million.

Stokes said Seven may revalue its TV licenses, which are presently on the books at a “conservative” $382 million. Rival webs Kerry Packer’s Nine and CanWest-backed Network Ten, which Monday unveiled the prospectus for its long-awaited partial IPO, have their licenses valued at more than $800 million each.

“Over the past two years, our primary business objective has been the strengthening of the performance of the TV network in audience delivery, advertising revenue and profitability,” said Stokes, who is estimated to have suffered a paper loss of $13 million on his 26% stake after the share dip. “We tackle the coming year with confidence.”

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