The outlook for the Australian media got worse yesterday with the news from the Ten Network, the country’s third TV network, that underlying earnings fell 25.2% in the three months to the end of November.
It means the entire sector will enter 2009 under a cloud with earnings down, sales slowing, viewing and circulation figures under pressure and share prices weak for the listed groups.
The company, 56% owned by the struggling CanWest Global network of Canada told the ASX and yesterday’s annual meeting in Sydney that group earnings before interest, tax, depreciation and amortisation (EBITDA) fell to $91.6 million in the period, from $122.5 million in the prior corresponding quarter.
It cut its interim dividend 80% to 2c a share joining Fairfax Media which chopped its interim by a similar amount, and regional TV and newspaper group, Macquarie Media which yesterday cut its distribution 80% to 4.5 cents a share.(it’ is also Ten’s regional TV affiliate).
Ten also scrapped the 10% share buyback that was designed to support the shares in the market. It had acquired only 2.3 million shares, with no further purchases since August as the economic slowdown and volatile markets increased pressure on Ten’s revenues and earnings.
Ten won’t be alone in Australia, the US, UK or other big economies next year. The Media will be one of the victims of 2009 as newspapers fold; TV and cable TV networks contract or restructure and radio contracts.
It is going to be bloody and there will be quite a few losers, starting perhaps with Ten and its owner, CanWest of Canada.,
Ten has cut staff across the company as it feels the impact of the advertising slump, but the company wouldn’t give any numbers.
The cuts have come at the TV business and at Eye, its outdoor advertising arm.
Ten shares ended yesterday down 3.5c, or 3.3%, at $1.01
The profit fall came on a worrying 10.6% drop in revenue to $292.3 million for the quarter, which includes a bit of the end of year Christmas ‘spendathon’. That helps explain the job and cost cuts.
December is the best month of the year for the media and this will be reported in the quarter to the end of February.
"Group revenue was $292.3 million, and group earnings before interest, tax, amortisation and depreciation (EBITDA) was $91.6 million.
"Revenue from the television business Network Ten (TEN) was $244.8 million, which was 12.1 per cent lower than the same time last year.
“On a normalised basis (excluding the AFL Grand Final and the Rugby World Cup which occurred in the corresponding period in 2008), TEN’s revenue for the first quarter of financial year 2009 was down approximately 5 per cent.
"Revenue from the out-of-home advertising division, Eye Corp (EYE), was broadly in line with the prior year at $47.5 million."
Given that it is for the toughest period so far this year: September-November, when the global economy fell off a cliff and the local economy slowed noticeably, Ten’s news is a sign the malaise in the media sector won’t end soon.
Ten’s slump came at the end of a week that saw the struggling PBL Media bailed out by its banks who agreed to a recapitalistion and easing of important restrictions called covenants on its loans (on how much profit the group will earn).
And another stock to watch is APN News and Media where a controlling 30.1% stake is on the market with Tony O’Reilly’s Independent News & Media doing the selling, under the pressure of its banks. INM’s UK papers, The Independent and its Sunday stablemate are under pressure with sales and ad revenues down.
Ten is in a similar position with its Canadian parent, CanWest under pressure with huge debts of more than $C3 billion and much of that falling due in the next year to 18 months.
Ten was its best performing business, but no longer.
Ten’s part-time executive chairman, Nick Falloon told the AGM that "As we flagged at our full year results in October, the revenue market continues to be challenging and visibility remains short across the sector.
"Ten Holdings is not immune from this tough economic operating environment," Mr Falloon told the meeting.
Mr Falloon said the group had undertaken a review of its costs in recent months with an immediate positive impact to the television business. (That saw the children’s TV news show BTN shut down and staff deployed.)
"Notwithstanding the launch and ongoing commitment to our new multi-channel ONE in early 2009, as well as deployment of funds to new international and domestic program initiatives, Ten is expected to deliver zero cost growth for the full year."
Mr Falloon said it was "prudent" to cut its first half dividend payout to two cents per share, down from 10 cents in the first half of the 2008 financial year.
"We will continue to assess the ongoing level of payout, taking into account the prevailing market conditions.
"This payment represents approximately 40% of earnings since 1 July 2008. We will continue to assess the ongoing level of payout, taking into account the prevailing market conditions," Mr Falloon said.
Mr Falloon said that despite the difficult market, Ten continued to be a highly effective and efficient television operator in its youth-focused demographic.
Mr Falloon said that Ten’s 2009 schedule would include seven new Australian programs including a fourth major franchise – MasterChef Australia – which will take a prime position mid year, from Sunday to Friday night. That will be in addition to Australian Idol, which had a good year and The
