The bloom has well and
truly gone off the commercial TV industry in Australia
judging by the Ten Network full year results released today. Slowing revenues, rising
costs and compressed profit margins are now as much a part of Ten as Nine and
Seven, even though the latter is still experiencing faster than industry growth
in revenues.

Revenue
growth in TV was up 11% for the year, after being ahead 15% at the February 28
half way mark, and even more after the first quarter.

They
show a sharp drop in revenue growth, a sharp fall in second half profit margins
and lower second half profits, compared to 2004. Ten reports a financial year
that finishes at the end of August.

Ten
said its television division had earnings before interest tax and depreciation
and amortisation (ebitda) of $316.1 million, up a solid 16.2% on 2004’s $272.1 million. That
produced a gross margin of 37.7%, again a solid figure and the best in the
industry.

But the
interim result for the first half, released last March, disclosed a gross profit
margin of 44.7%, indicating a very sharp contraction in margins in the second
half as costs rose and revenue slowed.

A
comparison of second half profits showed that in 2004, Ten earned $126 million in
the second half of the year (on an ebitda basis), but
in the six months to the end of August this year, that fell to $122.1 million,
echoing the slow down in earnings seen at rival Nine Network.

As well,
the company had a sharp rise in second half costs. Costs for the year rose 8.1%
(one of the highest figures Ten has reported). They
were up 5.1% in the six months to February 28, indicating a 60% jump in the
growth of costs in that second half.

Overall
Ten still had net earning from TV and its outdoor
advertising business of $100.6 million, up 30.8% because of the good result from
the outdoor business, Eye Corp. The
company’s shares this morning rose by 5c to $3.54 ahead of the result, but
the poor second half and the growth in costs will worry big
investors.