Ten admits ‘material uncertainty’ over its future unless new finance facility and license relief found
Australia’s third major commercial TV network has warned its future is in doubt unless it can find new debt facilities, cut program supply costs and get licence fee relief from the federal government in the upcoming budget after reporting a net first half loss of $232.2m.
Ten CEO Paul Anderson
In a stark warning to the market in its half-yearly results, the network warned that unless discussions with program providers, shareholder guarantors and the government had “favourable outcomes” its future was under direct threat.
“As a result of the matters disclosed, there is a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern, and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business,” the network revealed in the director’s report.
“The directors consider that it is reasonable that the group will be successful in the matters detailed and, therefore, have prepared the financial report on a going concern basis that no such asset is likely to be realised for an amount less than the amount at which it is recorded in the interim financial report.”
Ten went on to say the directors had formed this view based on costs and revenue initiatives that are part of a “transformation” process, renegotiation of programming contracts and the reduction in broadcast licence fees.
The report said:
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There are ongoing discussions with shareholder guarantors and their advisors to consider the necessary financing for the Group, the form and structure of which is not yet clear;
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The transformation program is Board approved and well developed with material revenue and cost saving opportunities being identified and detailed plans and activities being put in place to execute. Specialised consultants have been engaged to assist in planning and executing the transformation program;
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Discussions have commenced with a view to renegotiating material programming contracts. To date, these discussions have been constructive toward finding new commercial arrangements for the Group.
Having battled its way back to profit just a year ago, Ten Network Holdings has slipped back into the red, reporting a net loss of $232.2m for the first half of the year.
It said in the report: “The Group understands from discussions with shareholder guarantors that it needs to demonstrate the potential for improved future earnings in order for a New Facility to be guaranteed” – referencing its $200m loan facility with Commonwealth Bank which expires on 23 December.
The results sits in stark contrast to Ten’s buoyant outlook just a year ago and comes as the network struggles to find traction, having been soundly beaten into fourth place by the ABC on a number of occasions during official ratings this year.
The loss also comes despite television revenue rising 2.1% to $341.4m, higher than the network predicted in a trading update in mid-February.
It also comes in the face of an overall TV advertising market decline of 5.6% during the period.
Ten reported earnings before interest, tax, depreciation, and amortisation (EBITDA) of $2.6m which it said was in line with the market update in February.
Chief executive officer Paul Anderson said the result was being seen in a positive light at the network.
“The above-market revenue growth and increase in revenue share during the first half of the 2017 financial year was driven by investment in local content and the audience momentum Ten has built in recent years, along with the continued success of our partnership with Multi Channel Network Pty Ltd,” Anderson said in a statement.
“However, as we flagged in the 16 February trading update, the growth in revenue was not enough to offset the weak conditions in the television advertising market and the company’s increased content and other costs.
“Ten has commenced a transformation program to improve all aspects of the business. This whole-of-business program will improve revenues through a range of initiatives that complement the MCN relationship and will achieve significant cost savings as previously foreshadowed, most of which will fall in the 2018 financial year onwards.”
Speaking on a call with analysts after the results were released, Anderson said he was seeking to extend the current $200m debt facility with the Commonwealth Bank to $250m when it expires in December.
With the network undergoing a transformation after the appointment of a transformation officer, he said he was not concerned about the network’s ability to hold on one of its major success stories of the past year, the rights to the Big Bash League and the network had also not spoken to US supplies about program costs at this stage.
“Just to clarify we haven’t talked about US studios, what we have talked about in terms of our transformation project is a combination of both revenue improvements and costs and cost is right across the board, so it’s not one part of our business,” Anderson said.
“What we have said today is this is a whole of business improvement program.”
He said the ability to retain the BBL went beyond the costs of the rights
“In terms of Big Bash, we continue to have informal discussions with Cricket Australia, we have a clear ambition to retain Big Bash and we are confident that what we do and our relationship that we have with Cricket Australia, what we do with both our production and the on-air team that we have is something that’s very difficult, if not impossible to replicate.”
Asked if a license fee reduction was a “deal breaker for the lenders”, Anderson said the push to have have the fee reduced was just “one part of the puzzle”.
“We’ve spent a lot of time with government campaigning for that so we would hope that we are going to hear something in terms of licence fees in the budget, but in terms of overall quantum that feeds into a new or extended facility, its part of it, but clearly just part of it.”
The network that gave the convicted racist Andrew Bolt an appallingly low rating TV show for years?
Lol. Good riddance.
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Wow Ten has gone downhill since Russell Howcroft left
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Murdoch to buy it once the media law changes?
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I remember a certain CSO 4 years ago getting utterly smashed for suggesting a material shift was occurring in the market and Ten would not benefit from this. The critics had never worked in media only bought it – and they are two very different things – Sad to see the company struggle like this.
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How many advertisers left because they flogged V8Supercars off?
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#tanking
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Well they’ve certainly found out Peter Hellier comedy specials aren’t the answer.
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Of course, this may all be part of an elaborate plan to fail, for reasons beyond the limits of my business knowledge. If it isn’t, then it could all be turned around by reprogramming and producing quality television in a format that is not covered by the other networks. SBS get so much right in the programming sense but are woefully amateur and naive in the production area. The ABC is underfunded, tired, and bound up internally. The big three go full on sport, news, and so-called reality shows. Ten needs to work against this format, with well- produced shows that should cost less than so-called reality. Meet, talk, compare ideas, workshop, manage, negotiate, and be prepared to change; that is the way forward.
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