The drama's far from over at Ten

After a strong summer, Ten Network's failure to launch programming that appeals to viewers has left investors and advertisers struggling to see where any potential gains will come from.

There has been significant media interest in the trials and tribulations of the Ten Network since the beginning of the ratings year, which made the network’s first-half earnings announcement this morning one that was closely watched by investors and the industry alike.

The network, which had a strong January due to the success of the Big Bash, has endured an extremely rocky ride in recent months. Most of its key programming brands -- The Biggest Loser, Puberty Blues, Modern Family, Secrets and Lies, So You Think You Can Dance – are all struggling to gain much interest from audiences.

The numbers for the six months ending February 28 are largely unremarkable -- neither particularly bad nor good -- which was to be expected.

Revenue for the period rose 7.8 per cent to $329 million, thanks in part to Ten’s success with both the Big Bash League and the international rugby union. The Sochi Winter Olympics -- while not exactly a ratings triumph -- was supported well commercially from advertisers.

These additional sporting-based programs contributed to increased TV costs, which were up 13.9 per cent to $311.5m from $273m the prior year. The other large contributor to this, according to chief operating officer Paul Anderson, was the investment in the network’s morning programming of Wake Up and Studio 10.  Both programs are struggling to find audience numbers.

Ten’s loss for the period fell dramatically, from $243.3m to $7.9m, but it's important to dig a little deeper into the numbers.

For the first half of the 2013 financial year, Ten incurred impairment charges of $292m, largely due to a writedown in the value of its broadcast licence. In addition, for 2013 Ten had income tax revenue of $53.7m. If you remove both the writedown deduction and the tax income contribution from 2013, as well as $5.3 million in losses for first half 2013 attributable to discounted operations Ten would have effectively broken even - whilst in 2014 it has generated a loss of $7.9m. If you look more bluntly at revenue versus costs, TV costs are up $37m year-on-year and revenue is only up $27.7m for the same period.

The next six months will be the big test for chief executive and chairman Hamish McLennan. Ten had a few desperately-needed wins around the summer period but autumn has been far less forgiving.

Right now the network is failing to launch any programming initiative and is in a position where both investors and advertisers are unclear of where any potential gains will come from.

Moreover, it has the embarrassing John Stephens legal proceedings generating significant media attention and a share price that has dipped over 20 per cent in the past four weeks alone. The real white-knuckle journey for both Ten’s management team and investors commenced on March 1 and will keep on keeping on right until the end of August.

A glimpse of the potential performance of the network in that period can be gained through looking at accounts receivable on the balance sheet. This gives us an idea of forward bookings made in the first half that are due to run and be recognised (and paid) in the second half.

Accounts receivable are down from $129m for the same time in 2013 to $105m for 2014 -- a significant drop of 18 per cent. This is potentially a sign that bookings for the network’s second half are down compared to where they were the year prior. McLennan admitted in his presentation the market remains “short”, which seems to have been the case for the past five years for all networks.

The presentation by McLennan and Anderson was light on detail, continuing the same line McLennan has been rolling out since his commencement around chasing a wider 25-54 demographic, focusing on sport and building event TV momentum. McLennan also praised the digital efforts of the network, with advancements in on-demand video and mobile apps contributing to digital revenues increasing by 21 per cent.