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Ten’s first half results: revenue falls 10.6%, EBITDA down 39.7%

Ten has announced a 10.6% drop operating revenue and an almost 40% plunge in EBITDA in its first half results.

Ten boss James Warburton said the results “reflected the tough conditions in advertising markets during the six-month period.”

The announcement from the network in full:

Ten Network Holdings Limited (Ten Holdings, ASX: TEN) today announced its results for the six months to February 29, 2012. The results included:

Ten Holdings’ Chief Executive Officer, James Warburton, said the results were in line with the guidance provided to the market on February 22 and reflected the tough conditions in advertising markets during the six-month period.

“Advertising markets were soft, particularly in late 2011 and early 2012,” Mr Warburton said. “The difficult state of advertising markets is reflected in our results for the six months to February 29. These results, however, reflect the benefits of the Operational and Strategic Review that took place last year, in particular around cost disciplines, and the ongoing efforts to create a strong platform for Ten Holdings.

“The turnaround of Ten Holdings is continuing. Our focus is on the broadcasting fundamentals of ratings and revenue. We are making good progress on both fronts, but the full benefits of the turnaround will take some time to filter through to results,” Mr Warburton said.

In line with our recent guidance, television costs were reduced by 2.4% during the six  months to February 29, while costs in the EYE Corp out-of-home division were down 2.6%.  Television costs for FY 2012 are expected to be approximately 5% or $30 million below the prior year, including a $14 million reduction in program costs due to onerous sports contract provisions incurred as at August 31, 2011.

Television: now

Mr Warburton said the Operational and Strategic Review that started in 2011 had now been successfully implemented across the organisation.  “Ten Holdings’ cost base has been reduced. The evening news and current affairs strategy has been refocused. ONE has continued to show strong audience and revenue growth since it was relaunched on May 8 last year,” he said.

“This year we are seeing good audience growth with our 5pm to 8pm strategy and with our Super Sunday program line-up, which has had an immediate impact.”

Network Ten’s three-channel, prime-time total people audience has increased 1.6% this year. “While we are realistic about our ratings challenges, we have seen good improvements in parts of the primary channel’s program schedule,” Mr Warburton said.

TEN’s Sunday night total people audience has increased 9.6%. TEN’s Monday-to-Friday early evening (5pm to 8pm) audience is up 8.3% among people aged 18 to 49 and up 3.3% in total people.

“The foundations of our prime-time schedule have been re-set. Now we will build on those foundations, slot by slot, program by program,” Mr Warburton said.

“We have built a new executive leadership team in a short space of time. That team is now completely focused on improving the performance of Ten Holdings.”

Television: the future
Mr Warburton said recent initiatives such as introducing basic sales disciplines and new yield  management initiatives, and establishing a new, in-house creative development unit were logical extensions of the Operational and Strategic Review.

“Implementing the strategy we have for Ten Holdings will require vision and patience,” he said. “A key element of that strategy is increasing our share of television revenue by focusing on selling excellence and building the CONNECT coalition, our cross-media marketing platform.

“Other key elements include producing more top-rating local television shows that we own, and reinforcing TEN’s unique brand principles,” Mr Warburton said.

EYE Corp
Mr Warburton said EYE Corp’s results for the first half of FY 2012 were affected by difficult trading conditions in the pre-Christmas out-of-home advertising market in Australia and New Zealand.

On a continuing operations basis (ex Singapore Airport and Adval), revenue was up 6.5% year on year. Tight control around costs has continued, with operating costs down by 5.5% in the first half.

Over the past six months, EYE Corp has secured several key contract wins or renewals, including Qantas, Brisbane Airport and Sydney’s Glebe Island silos. Industry figures indicate EYE Corp’s Australian division gained market share during February and March following a disappointing summer period.

On March 19, Ten Holdings issued a statement to the Australian Securities Exchange that it was undertaking a strategic review and considering strategic options for EYE Corp.

That strategic review is continuing and there is nothing further to update the market on at this point in time. There is no certainty that the strategic review will result in a transaction or that any transaction will be completed.

Interim dividend
As announced on February 22, the Board has decided that due to the difficult market conditions it is prudent that no interim dividend will be paid.

Outlook
The television advertising market remains “short”, with limited visibility in terms of forward ad
bookings, but Ten Holdings is improving its competitive position.

Although the out-of-home advertising market has been – and continues to be – more resilient than some other sectors of the media industry, it is also experiencing shorter ad booking cycles.

“A lot of hard work was done last year to re-set Ten Holdings’ cost base and create a more sustainable business. Further investment in programming will be required,” Mr Warburton said.

“While visibility remains limited, we expect to see less volatility in advertising markets over the next few months and the emergence of a more consistent trend.”

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