Ten Network Improves

By Glenn Dyer | More Articles by Glenn Dyer

The Ten Network managed to improve its financial performance in the second quarter with higher revenues and earnings.

And it is confident the second half will be much better than the same period of 2006 when the company’s TV revenues and earnings were hurt by a sharp drop in advertising sales and profits, thanks to general market weakness and the impact of the Commonwealth Games last March.

The Games sucked up a lot of the advertising in March for Nine, and Ten experienced its worst month for years and made a loss. It struggled for the rest of 2006 to recover.

Now analysts are confident the company will boost earnings this half with some talking about a rise of 14 per cent or more, which would reverse the first half downturn (due to a lower first quarter).

Ten said it was not giving guidance because the company was on the blocks with owner, Canwest exploring all its opportunities. That process is dragging on with the Blackstone private equity group from New York the latest name to emerge to join Merrill Lynch, Hellman and Friedman and an arm of Merrill lynch as showing interest.

Analysts pointed to the Network’s second quarter improvement in sales and earnings in TV which helped defray some of that first quarter downturn.

They also said the second quarter was better than it appeared as in the second quarter of 2006 rival Seven had a higher share of revenue because of the two weeks of broadcasts of the Winter Olympics which were marketed with other programming on the network and which also sucked revenue away from Ten (and Nine)in the month.

Ten reported first half earnings from TV and its Out of Home advertising business, Eye Corp of $156.4 million, which was down 7.9 per cent on the $169.9 million of the first half of the 2006 year when earnings were still feeling the impact of the boom at the end of 2005.

Its EBITDA margin was just over 35 per cent, which is better than both Nine and Seven.

The ad market tanked from early 2006 onwards and Ten’s earnings and revenue followed (thanks to the impact of the Games and then the depressed ad market and the fact that Ten paid for a poor 2005 ratings performance from advertisers who drove rates lower) and it was only in the first quarter of the 2007 that the situation showed some improvement, which has continued into the second quarter.

TV earnings before interest, tax, depreciation and amortisation fell 8.7 per cent to $142.4 million ($156 million in the pcp).

TV revenues for the half were 0.6 per cent higher at almost $403 million ($400.5 million). Ten’s first quarter revenues fell 3.5 per cent to $251.8 million from $261.0 million. That was better than it seems as the Network lifted its share of revenue closer to its desired 30 per cent mark.

The second quarter saw more improvement with the company claiming that it capitalised on its “record 2006 ratings and a stronger television advertising market,” and quarter revenue rose 8.4 per cent on the prior corresponding period, and boosted EBITDA by “more than 10%”.

“TEN has achieved its previously stated ambition of regaining more than 30% of the metropolitan television advertising market with a 30.3% share in the six months to 31 December 2006”. Ten said.

Ten’s TV EBITDA of just over $142 million is around $6 million short of Nine’s December half figure of just over $148 million with Seven network well ahead of both with just over $197 million.

Ten said that it was confident of its competitive position and there are signs that the advertising market is strengthening ahead of a potential sale of the company.

Net profit fell 12 per cent for the first half to $37.72 million, from the previous corresponding period of 2006.

Last October, Ten’s major shareholder, CanWest Global Communications, which owns a 56.4 per cent economic interest in Ten, said it was examining options for its Australian and New Zealand media assets after the federal government unveiled its new media ownership laws, which take effect this year.

Executive chairman, Nick Falloon said Eye Corp’s revenue had increased in established businesses, but this had been countered by start-up costs as Eye Corp continued to expand into North America and Europe.

“While Eye’s revenue rose 40 per cent in the half (to $89.5 million), earnings were impacted, as expected, by investment in our new US mall and European airport operations, which are already demonstrating their potential,” Mr Falloon said. Eye’s EBITDA was $14.4 million in the first half compared to $14.5 million in the pcp.

Eye had booked a non-recurring profit of $8.9 million on the sale of its Malaysian investment in Big Tree Outdoor, but this was partly offset by start-up losses in the US and UK of $6.5 million.

Mr Falloon said Eye Corp would have similar start-up losses for the second half of the 2007 financial year.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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