Shares in the Ten Network fell yesterday despite the company revealing a small improvement in its interim profit, thanks to better ratings in the six months to February 29 and higher ad revenues.
But in reality Ten’s ratings, revenue and earnings recovery was only enough to take it back two years, to the first half of the 2013-14 financial year.
The company yesterday reported earnings before interest, tax, depreciation and amortisation (ebitda) – the standard media profit measure- from its TV business of $10.1 million, up from the $7.5 million in the first half of 2014-15, but the same as for the first half of 2013-14.
The shares fell half a per cent to $1.005 (10.0005 cents before last year’s share consolidation).
Importantly, there was no sign of the weak ad conditions Nine saw in the March quarter, and triggered its earnings and revenue downgrade earlier this month, nor the slide experienced by Prime Media, the regional affiliate of Seven, which has extended into this month.
The network reported an 8% rise in TV revenues in the half year to $334.2 million from $309.8 million a year earlier and $315 million in the first half of 2013-14, which was a big positive. And it has seen a similar improvement in revenue growth in the past two months.
Net profit reported was $13.4 million, which included $23.3 million of significant items (mostly the net gain of $24.8 million on the sale of the company’s Eye outdoor business in the US. That was actually a non-cash item resulting from “the reversal of a $20.4m foreign currency translation reserve from equity into the income statement in line with accounting standards".
But if you strip out the significant items for this year and last year (the impairment of the TV licences of $251 million) and the interest, depreciation, tax and amortisation costs, you find Ten actually made a loss of $10.4 million, from the previous year’s $13.2 million.
Ten’s better performance from September 1 to February 29 was because of programs such as The Big Bash Cricket, I’m A Celebrity, The Project, Spelling Bee and others.
And Ten is confident the improvement will continue.
“Despite the soft conditions in the capital city free-to-air television advertising market so far in calendar 2016, TEN has maintained its strong revenue performance since 29 February,” Ten said in yesterday’s statement to the ASX.
"TEN’s gross advertising revenue is expected to increase by approximately 8% in the first two months of the second half of the 2016 financial year. "The Company has a strong line-up of new and returning content for the rest of calendar 2016, including MasterChef Australia, The Bachelor Australia, The Bachelorette Australia, Shark Tank, The Great Australian Spelling Bee, Have You Been Paying Attention?, Offspring, Brock, The Wrong Girl and Australian Survivor, plus Rugby Union Test series, key V8 Supercars rounds including the Bathurst 1000 and the start of the 2016-17 KFC Big Bash League.”
CEO Paul Anderson said in yesterday’s statement, "Ten achieved its strongest first half revenue performance since 2012 due to the sale of TV, catch-up and digital advertising through MCN (the TV ad sales arm of Foxtel), in which Ten bought a 25% stake in 2015 as part of the deal which saw Foxtel take a 14.9% stake in Ten.
“February 2016 marked the 12th consecutive month in which Ten had increased its revenue and revenue share year-on-year," he said. "Our relationship with MCN is innovative and it is changing the way advertising is bought and sold in Australia." Ten said its share of television revenue rose 2.5 percentage points between September and February, almost exactly accounting for a combined 2.4 point decline for rivals Seven and Nine.
