No one was anticipating any surprises from Ten Network’s full-year earnings announcement yesterday, and as expected chief executive Hamish McLennan presented to the market a series of numbers that could be described as consistently neither bad nor good.
The bad numbers were forecast, with revenue continuing to track downward at Ten. For the 12 months ending August 30, television revenue was down $97 million to $630 million, a 13 per cent drop. Earnings before interest and tax was down 62 per cent, and after impairment costs and what Ten claimed as “non-recurring items” of $334 million, the end result for the year was a net loss of $278 million.
To be fair, $292 million of the $334 million is related to impairment of the value of Ten’s television licence, and without this Ten would have most likely reported a small profit as a result of an impressive 8 per cent reduction in TV-related expenses for the year.
Many – including this writer – had thought that Ten would struggle to generate annual metro TV revenues, excluding contributions as a result of its Southern Cross regional affiliate agreement of $600 million, based on Ten’s half-year results and the overall state of the free-to-air TV sector as reported for the period ending 30 June 2013. Total television revenues of $630 million demonstrates this prediction was most likely correct.
While the numbers year-on-year don’t tell a great story for Ten, McLennan did point out during his presentation that weeks 31-40 of the ratings year have been far kinder to Ten in 2013 than they were in 2012. Its 25-54 age bracket audience has grown 6 per cent between the hours of 6:00pm and10:30pm – the key battleground for television advertising revenue.
Debt-wise, Ten is also in a much better place than it was 12 months ago. In that time it has reduced debt by $210 million and increased cash on hand by $28 million. Its interest expense has dropped $20 million year-on-year and it will take to its AGM a proposal to enter into a $200 million debt facility through the Commonwealth Bank of Australia, guaranteed by its high profile shareholders Lachlan Murdoch, James Packer and Bruce Gordon.
This means Ten is carrying significantly less debt than other media businesses such as Southern Cross Austereo (borrowings of over $690 million) and Seven West Media (borrowings of over $1.49 billion). It’s a good position to be in considering the turnaround strategy the group is aiming to execute and the often expensive content and rights requirements such a strategy will involve.
Still, the reality for Ten is its future success hinges purely on its ability to launch or acquire a programming hit, and it can be said that so far this has been something that has proven elusive. While Ten has seen some positive ratings momentum in the tail end of 2013, it lacks the programming hits that Seven and Nine have.
In TV, revenue is closely tied to ratings and ratings need hits. Ten not only needs to secure a hit, it needs to market the format to consumers. Where that hit will come from is still unknown, but the performance of formats rolled out in 2013 such as Wonderland, The Bachelor, This Week Live, Recipe to Riches and A League of Their Own would have been unlikely to worry executives at Nine and Seven. McLennan freely admits that ratings are not where they need to be.
Ten’s new catch-up digital property, Tenplay, is one worth watching. Launched only weeks ago, it has received positive feedback from the industry and consumers and has brought Ten’s programming – as well as programming not on the network – onto the web, mobile and tablets. It will allow Ten to finally compete head to head with Nine and Seven for cross-platform video deals – if it can scale quickly.