THE last of Ten Network's billionaire investors has backed the struggling broadcaster's second capital raising in six months.
The mining billionaire Gina Rinehart decided to participate in the institutional component of the $230 million capital raising before the 5pm deadline on Friday. This ensured she would maintain her 10 per cent stake in the broadcaster.
Shares that were not picked up by institutional shareholders were to be redistributed for sale, but the word was that no main blocks of shares became available - a signal Mrs Rinehart had taken up her entitlement.
Investors are paying 20? a share and are entitled to four new shares for every five they own.
The stock was trading above $1.50 a share in November 2010.
The decision answered questions, for now, about whether Mrs Rinehart still has an appetite for media stocks after making significant losses on her investments in Ten and Fairfax Media, the publisher of The Sydney Morning Herald.
After the shareholders' meeting on Thursday Mrs Rinehart was blunt about Ten's shortcomings. "We have to be more prompt on where we could cut costs. Over the last two years, we could have done more there," she said.
"Obviously we're not doing well enough yet with our programming, so these are things that I hope we'll see some more improvements on. I think we're right to be heading to that particular age category (18-49) as our main demographic share, because they do a lot of the advertising."
Ten's chairman, Lachlan Murdoch, said on Thursday that he and the network's other billionaire shareholders, James Packer and Bruce Gordon, would participate in the raising, which he described as "prudent" given the deteriorating outlook for media.
"Poor execution of our spring programming schedule, compounded by a weak advertising market, has negatively impacted our results," Mr Murdoch said at the meeting.
He failed to give any words of support for the man who replaced him as chief executive less than a year ago, James Warburton.
Analysts said that the latest capital raising - on top of a $200 million raising in July, and the sale of the company's outdoor advertising business in October for about $100 million - addressed concerns about its balance sheet but not the company's operational issues.
JP Morgan analysts said they were forecasting an 18 per cent revenue decline for Ten in the current half year "given the poor ratings start to the year, in a weak TV advertising market".
Ten has even lost share in the 18-49-year-old audience that it is targeting, according to Deutsche Bank which said the company generated no operational cash flow for the first quarter. "We suspect cash flow will look worse in the second quarter due to annual licence fees and programming costs," Deutsche said.
But it added there was room still for three commercial broadcasters in Australia.
"In our view Ten remains a viable third option for advertisers despite the weakness in its ratings, particularly given its attractive younger demographic."
Frequently Asked Questions about this Article…
How did Gina Rinehart respond to Ten Network’s latest capital raising?
Gina Rinehart participated in the institutional component of Ten Network’s $230 million capital raising before the deadline to ensure she maintained her roughly 10% stake in the broadcaster. Reports said she took up her entitlement rather than leaving large blocks of shares available to the market.
What are the terms of Ten Network’s recent share offer and entitlement ratio?
The raising was about A$230 million, with investors paying roughly A$0.20 (20 cents) per share. The offer included an entitlement of four new shares for every five shares held by existing shareholders (a 4-for-5 issue).
Will the capital raising fix Ten Network’s operational problems?
Analysts said the fresh capital helps shore up Ten’s balance sheet but does not directly solve the company’s operational issues. The fundraising addresses liquidity concerns but issues like programming execution, ratings and advertising revenue remain unresolved.
What operational challenges are Ten Network facing that everyday investors should know?
Ten has suffered poor execution of its spring programming, weak TV advertising markets and falling ratings—especially in its targeted 18–49 demographic. JP Morgan forecast an 18% revenue decline for the current half, and Deutsche Bank reported no operational cash flow in the first quarter, warning of potentially worse cash flow due to licence fees and programming costs.
Have other major shareholders backed the capital raising?
Yes. Ten’s chairman Lachlan Murdoch said other large shareholders, including James Packer and Bruce Gordon, would participate in the raising, which management described as a prudent step given the deteriorating media outlook.
What recent steps has Ten Network taken to improve its finances?
In addition to the roughly A$230 million raising, Ten completed a A$200 million raising in July and sold its outdoor advertising business in October for about A$100 million. These moves were designed to strengthen the company’s balance sheet.
What did Ten’s leadership say about the company’s performance and strategy?
Lachlan Murdoch acknowledged that poor programming execution and a weak advertising market had hurt results. Gina Rinehart also commented that Ten needs to cut costs and improve programming, and said the network is right to target the 18–49 age group because of its advertising value.
Is Ten Network still a viable option for advertisers and investors despite the weakness?
Some analysts, including Deutsche Bank, say there is still room for three commercial broadcasters in Australia and view Ten as a viable third option for advertisers because of its attractive younger demographic (18–49). However, investors should weigh that demographic appeal against weak ratings, revenue forecasts and short-term cash-flow pressures.
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