Shares fall close to record low as Network Ten urges approval of $200m loan
Shares in Network Ten today fell to the lowest point in the company’s history as details emerged of the broadcaster’s plans to raise a $200m loan.
Ten’s ASX price fall | Source: Google Finance
The shares briefly dropped to 24.5 cents – their lowest on the ASX in 2013. The 24.5c point has only been hit once before, on December 10 last year (Ten disputes this: see below) . The company’s price on the ASX eventually closed just above that level on 25.5c, giving it a market capitalisation of $659m.
The price plunged as soon as the market opened today. It followed the release of the company’s annual report and notice of its AGM on December 18. It also included further details of why it needed a new $200m loan guaranteed by its three biggest shareholders.
Ten argues that the numbers provided by Google Finance, Yahoo Finance and ninemsn finance are incorrect because they do not take into account the dilutory effect of last year’s two share raisings, and that in fact last year’s real number was the equivalent of 22c. This would mean that although yesterday’s fall was not the company’s lowest point of all time, it was still the lowest point of the year and close to an all time low. Ten’s preferred historical source is Bloomberg.
In a letter to shareholders published on the ASX, chairman Lachlan Murdoch calls on shareholders to approve the loan and avoid a third round of capital raising.
Ten announced plans for the Commonwealth Bank of Australia loan while declaring a loss of $285m in the 12 months to August 31 when it published the end of financial year results last month.
The new loan will need to be guaranteed by three of its largest shareholders – Bruce Gordon, James Packer and Murdoch. If it is not approved by shareholders, the network will risk breaching existing debt covenants and could be forced into another round of capital raising.
It has been a disastrous two years for Ten, as ratings and revenues have collapsed, and CEO Grant Blackley was ousted in 2011, soon to be followed by his predecessor James Warburton earlier this year.
Current CEO Hamish McLennan, who joined the network in February, has laid out a strategy to boost revenue and earnings over the next year by delivering premium sport content and a new morning television line-up. However the morning line up has since launched to disappointing ratings below that of its previous attempt at morning television with Breakfast, which was axed in 2012 after less than a year.
It also emerged that rival Seven Network is now Ten’s tenth largest shareholder with a stake of 2.4 per cent of the company. The acquisition was first reported in March at which point it was estimated to actually amount to around five per cent of the company.
Ten’s biggest shareholders | Source: Ten ASX filing
The detail is included in Ten’s notice of meeting.
The largest shareholder is Nine-affiliated WIN owner Bruce Gordon’s investment vehicle Birketu, followed by Gina Rinehart’s Hanrine. Lachlan Murdoch holds just under nine per cent through Ilyria while James Packer holds the same amount through Consolidated press Holdings.
Megan Reynolds
Interesting but not surprising read – unfortunately for Network Ten.
A few facts from an old Archair.
The fact that they must ask their key shareholders for a personal guarantee is nothing short of embarrassing and a sign of desperation given they cannot afford to breach banking covenants.
As the article reports (and my investigation confirms) the business was earning $991m in revenue, delivering $208.1m EBITDA in 2010 under the stewardship of noted executives Messers Falloon and Blackely. Both were shot for not producing higher revenues and profit ?
Now, 2013 is reporting a $285 loss, margins have been eroded from 23% to just 7.0% (not taking into account the numerous writedowns and restructuring costs) and shares at at a historic low. At least shareholders Murdoch, Packer & Rinehart are experiencing the slide along with small shareholders remembering each bought in around a $1.50.
I hate to consider what may be next !
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Well I guess these guys, Murdoch et al, will be hearing from Gina. If the management of Fairfax upset her, she must be super angry about the management of Ten.
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Another Murdoch family failure. Bwahahahahaha. This ones doubly good because Gina is caught up in the disaster too.
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As a modest shareholder why is all this happening?. How many changes of management and the scheduling of programming that just does not resonate with mass audiences, will it take to get the message thru. A well respected media commentator said on the breakfast debacle and that’s what it is, 10 can’t pull a trick full stop. The sport strategy of Winter Olympics and bash cricket is questionable and for a short period of time. What clients have woken up this morning and said I am going to tell my agency to buy 10 today?
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Falloon and Blackely, two highly experienced TV executives are pushed out the door by the Board and Ten quickly plunges. What is the media experience of the major shareholders?
Gordon – Owns an affiliate. Never has to create, develop or produce shows. Bought Crawfords and it slowly died.
Murdoch – No TV experience.
Packer – Dad had the experience and the passion, not his son.
Gina – No TV experience.
Latest CEO – Never run a commercial TV network, let alone one which is now on the skids.
It has been sad to watch this debacle unfold. The only hope for Ten is a takeover by a bunch of investors who actually know how commercial TV works and can restructure management. Perhaps they will sit in the wings a little longer as Ten’s price falls further.
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Have to say, the strategy (hope?) of relying on WInter Olympics and Big Bash Cricket to pull big audiences sounds as misplaced/ flawed as relying so heavily on their new Breakfast TV lineup has proven to be. They seem seriously out of touch in terms of what audieces actually want to watch. WInter Olympics? Seriously?
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Harry, you need to add
Jack Cowin – no media experience, experience is in QSR
Siobhan Mckenna – as above
One could argue that Falloon and Blackley had a bit too much control in their time (Falloon especially) but since they’ve gone it’s been all one way – down. Weirdly, throughout the huge shareholder loss of value over the past 3 years the board has remained relatively stable, taking zero responsibility for any of the issues despite being so vocal in 2010 that the networks performance was unacceptable.
Ten really can’t go any lower as its basically at its written off value now. 3 years ago post GFC it was at $1.80 and now it hovers at 26 cents. It has minimal assets, no cash and a $200m loan facility it needs to pay back. But it has a FTA licence in a FTA market that is still pretty bouyant. The licence alone is worth the $600m Ten is valued at.
I don’t think it’s fair for the focus to be so heavily on Wake Up etc … but the sad reality is the network has no other greenshoots or signs of a turnaround so all attention is focused on one thing. The business has zero diversification so is completely tied 100% to whether it can get shows to rate … and right now it can’t. If you look at SWM, FXJ or Nine Ent they are much more modern businesses with at least some divisions which can provide some protection from a bad ad market. Ten relies on nothing but the whims of media agencies.
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The people making the decisions in 2010 in programming and news really stuffed up, as that is when the rot set in. The botched news line up with ‘6:00pm with George Negus’ etc., announced in August 2010 to free good programs up to move to 11 was all SO disastrous. I’m sure Murdoch and Packer regret not axing all those changes when they bought in IN 2010, as was rumoured they wanted too, and just keeping programming as it was.
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You’re right Shamma. Had forgotten Jack Cowin, the hamburger king and McKenna, Lachlan’s proxy on the board. I was a little surprised that Ten didn’t go for the A League football on Friday nights. If SBS could afford it then surely Ten could have. It would have been at least a forward thinking gamble which goes deep into the ever multicultural suburbs and many more young boys and girls play soccer than NRL, AFL or Rugby. But Ten has always been determinedly white bread. Interested to see if anyone would agree. Ten sorely lacks lateral thinkers.
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Gina Rinehart joins the board of Ten and the share price steadily falls to its lowest level ever. And she thinks she should be on the Fairfax board?
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A comedy presented by clowns should in theory succeed.
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@@@”Now, 2013 is reporting a $285 loss, margins have been eroded from 23% to just 7.0% (not taking into account the numerous writedowns and restructuring costs) and shares at at a historic low.”
In fact it is entirely due to non-cash items such as writedowns that Ten reported a loss. The business is still cash positive :
@@@”Although the company declared an operating profit of $46.1m, it declared one-off charges including a $292m writedown on the value of its licence and costs involved in making redundancies and restructures” – from the link above.
The debt covenants relate to promises of performance that debt guarantors made to creditors when raising the debt. It doesn’t mean that Ten is “broke”.
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They have been on a major slippery slide since J Mcalpine left.
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John – your point is well made.
However, no financial accounting will debate that on any measure TEN has deteriorated sharply in a few years. If we take the time of purchase to now we see:
Revenue has declined some $300m or 30%.
Costs are forecast to rise next year 2014 by $100m or a staggering 18%.
EBITDA has fallen from $208.1 to $46.1 – a drop of some $161.9m or 78%.
Finally the share price has fallen from $1.50 (which Messers Murdoch, Packer & Reinhart bought) to today of $0.25 cents – a drop of 83% !
I can also not recall any dividends being paid in that time either.
I cannot add all the other writedowns and restructuring costs over the period – let’s just say extensive.
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I know how to fix it. Put Joe Hockey on the Board. He’s already BFF with Murdoch and in the blink of an eye he can get another $200 billion.
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The people who manage this station have zero…and I mean zero idea of the shifting tastes of audiences…
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The dumbest thing of all, the shows they need to make are so obvious, shows that will turn around the station but they are creating in a culture of fear…not rational pragmatic thought. STOP USING STUPID FORMULA’s!!!!
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