The Ten Network is all about being sold at the moment and what quite a few commentators don’t realise today is that by the time the next earnings update is due in late June, the company will be looking good – at least compared to the black hole that dominated the second half of 2006 financial year.

Analysts looking at the result worried about a 6.6% rise in costs in the latest half, well above what was suggested earlier in the year, and earnings under forecast but concluded that it was all irrelevant due to the sale process.

That is true but this latest result included one poor quarter (the three months to November) and one good quarter (the three months to February). The February quarter is when the company’s results improved noticeably with earnings up more than 10%, according to the company. That’s the basis of the current sales pitch to private equity groups (buyers from the media have been noticeably absent from talks).

Ten had a miserable third and fourth quarters last year, thanks to the ad market downturn, the poor 2005 ratings performance which forced price cuts for ad deals and the impact of the Commonwealth Games in March which sucked ad revenue from the market and especially Ten. So Ten knows that when the third quarter revenue update is given this year, the simple comparison will make the network’s financial picture look a lot better and reveal the potential to possible buyers negotiating with Canwest.

Ten earned just $73 million in the second half of 2006 (on an EBITDA basis), compared to $156 million in the first six months of that year. Some farsighted analysts say this year’s result will be up sharply, more than 14% by some estimates, even after the higher growth in costs simply because the last half of 2006 was so poor. This compares to the first half profit fall reported yesterday, due to a lower first quarter.

Ten reported first half earnings from TV and its outdoor advertising business, Eye Corp, of $156.4 million, which was down 7.9% on the $169.9 million of the first half of the 2006 year when earnings were still feeling the impact of the boom at the end of 2005.

TV earnings before interest, tax, depreciation and amortisation fell 8.7% to $142.4 million ($156 million in the PCP). TV revenues for the half were 0.6% higher at almost $403 million ($400.5 million). Ten’s first quarter revenues fell 3.5% from $261.0 million to $251.8 million. That was better than it seems as the Network lifted its share of revenue closer to its desired 30% mark.

The second quarter saw more improvement with the company claiming that it capitalised on its “record 2006 ratings and a stronger television advertising market,” and quarter revenue rose 8.4% on the prior corresponding period, and boosted EBITDA by “more than 10%”.

Ten’s TV EBITDA of just over $142 million is around $6 million short of Nine’s December half figure of just over $148 million with Seven Network well ahead of both with just over $197 million.

Ten’s EBITDA margin in TV was just over 35%, just ahead of Seven’s 34%and Nine’s 32%.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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