It wasn’t the strongest of interim results from the embattled Ten Network today. And when you strip out the one-off write-downs and losses from the same period in 2013, operationally, it was worse. Shareholders again get no dividend — not that it will worry billionaire shareholders Lachlan Murdoch, James Packer, Gina Rinehart and Bruce Gordon. Smaller shareholders are resigned to the prospect of never seeing an income stream from the company again.
While television revenue rose 3.2% to $316 million in the six months to the end of February, the detailed accounts filed with the ASX revealed that none of this came from higher advertising revenue. Directors conceded it was mainly “due to increased affiliate fees and other income”.
Not a word about higher ad revenues, though. Executive chair Hamish McLennan said:
“Our television revenue growth was ahead of the growth rate for the capital-city free-to-air television advertising market during the six months to February 28. That result was driven by the successful launch of the KFC T20 Big Bash League, which gave TEN its best summer ratings since 2008, and the XXII Olympic Winter Games in Sochi, Russia. But, as expected, the increase in revenue did not off-set the investment in critical new content.”
The higher affiliate income comes through a deal with Southern Cross, which agreed to pay Ten a higher proportion of its revenue. That extra income drops straight to the bottom line, though in Ten’s case much of it was chewed up by higher spending.
While Ten said in its truncated press release that TV earnings before interest, tax, depreciation and amortisation were $10.1 million, the directors’ report shows that was down from $34.9 million earned in the six months to February 2013, and that EBIT (earnings before interest and tax) fell to just $2.6 million from $27.145 million. These were more indicative of its true performance than the reported net loss after tax of just under $8 million (compared to the loss boosted $243 million a year earlier). The latest result was just plain weak, with no discernible boost from the cricket or the Olympics.
Both the T20 and Sochi telecasts pushed costs 8.2% higher, or around $38 million, to just over $311 million for the half year. That more than outweighs the $24 million or so in higher revenues and other income in the half year.
The extra costs for the Big Bash can be offset against the costs of the second season next summer, but there’s no making back the money on the Olympics. Ten has the Glasgow Commonwealth Games later this year, but the Delhi experience in 2010 doesn’t bode well (Seven also fared poorly from the Manchester Games in 2002).
Ten has little confidence in what’s to come this year. It said in its statement:
“Advertising market conditions remain ‘short’, with many advertisers reluctant to commit to long-term campaigns. As a result, the outlook for the television advertising market is uncertain at this stage.”
Nine and Seven would be more confident about their outlooks — they predict a lift in revenues (slightly) and a steady net profit. But they have considerably better programming slates.
The big bonus for Ten is that debt has been slashed to just $35.9 million, and it has the special $200 million in financing from the Commonwealth Bank (that will cost several million a year in fees over four years to each of the big guaranteeing shareholders — Murdoch, Packer and Gordon).
Ahead, Ten has the 2014 version of MasterChef and Offspring to bring back to its schedule. If MasterChef can’t at least match last year’s weak ratings Ten is in real trouble. Apart from the 5pm Eyewitness News, and perhaps The Project, nothing else is working for Ten at the moment on its main channel, which is where the overwhelming majority of earnings and revenues are taken. It has to convince departed viewers to return (very hard when they are not watching) and hold onto the loyal viewers still with the network and not alienate them.
It has money to finance new programs in the back half of this year and into 2015. It is the last chance for Ten.
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