The Australian TV industry is doing it very, very tough, judging by the third quarter results from the Ten Network yesterday.
The company revealed (after some working out) a steep 76% drop in earnings before interest tax, depreciation and amortisation in the quarter ended May this year.
That was after a 15% fall in revenues in the TV division.
That’s not as tough as the US where TV stations and networks have seen falls of 20% and more in revenues in the latest quarter (to Match), and sharp falls in profits, (or losses in the case of Rupert Murdoch’s Fox Network in the US).
That 76% fall in the May quarter helped send Ten’s earnings in the first nine months of the 2009 year down 36%.
Ten said yesterday that "consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) of $128.0 million for the nine months to 31 May 2009".
That compared with the report for the first nine month of 2008 which said the company earned $201.9 million.
A look at the first half figures revealed that the Network reported EBITDA of $118.9 million for the six months to February, so overall it added just $9.1 million in earnings before interest, tax depreciation and amortisation in the three months to the end of May.
As the company said its Eye Corp outdoor advertising business "achieved positive EBITDA" in the quarter, the company’s TV business must have lost heavily.
But the Eye group also suffered a 15% fall in revenue in the quarter.
That $9.1 million compared with EBITDA of $38.2 million for the third quarter of the 2008-09 financial year.
That $29.1 million difference between the two quarters shows the extent of the downturn in TV for Ten and in the industry generally.
Nine and Seven are now owned or co-owned by private equity groups (Seven is also half-owned by the Seven Network Ltd).
Both are now buried in the accounts of other groups and the owners have cut the amount of information flowing to investors about their performance.
Seven remains the market leader and is in a better position than Ten or Nine, which have suffered from poor ratings performances in the back half of last year.
But the advertising business is ‘short’ as they say; meaning advertisers are booking ads late and taking advantage of the ‘soft’ market by getting discounts and other benefits. That in turns put pressure on the network’s finances.
SBS, the quasi Government/commercial network, has already warned of a shortfall of $9 million in its revenues this financial year.
Judging by the market outlook, it could see further pressure in the new financial year that starts July 1.
Ten does face something of an improving outlook.
The Network might be third ranked, but it the past two months it has been the most successful in ratings terms and over this year so far, is outperforming Seven and Nine in growth in ratings across all demographics.
But with ad revenues down (15% fall in the third quarter), its tough and not even out performance can find its reward.
Shareholders won’t get any more dividends: the 2 cents a share already paid is that, Ten said.
And executive chairman, Nick Falloon went out of his way to make sure the market understood that the company was not facing any debt pressures.
"We remain focused on cash flow management and debt reduction, and expect that drawn bank debt will be approximately $600 million at the end of the financial year on 31 August 2009," Mr Falloon said.
"Based on forecast debt levels, our strict cost control and our trading expectations for the final quarter, we remain of the view that Ten Holdings will be within the requirements of its banking covenants at the end of the financial year."
The heavy loss in the company’s TV business lost heavily in the third quarter won’t be of any help to its 56% owner, the struggling Canwest group of Canada which faces another debt deadline next Tuesday.
There had been speculation that Ten would announce another attempt to raise more capital to pay down debt, but there was no statement.
It failed with an attempt earlier this year to raise money at 75 cents a share. The shares traded up one cent at $1.14 yesterday.
