The Ten Network's full year profit plunged 90.5% as stand-in CEO Lachlan Murdoch drives a clean-up of the company's books that will make it easier for his replacement, James Warburton, to look good in his first year.
All the costs (including more than $85 million of restructuring charges reported, including $39 million writing down or off the value on unprofitable sports rights for its ONE digital channel) relate to programming and other decisions by the ousted former management team, led by executive chairman Nick Falloon and CEO Grant Blackley.
It's a standard technique by new management teams or shareholders as they seek to justify their takeover and sackings.
Ten's operational and strategic review continues, but one thing that escaped axing was the commitment earlier in the year to pay a final dividend.
Suffering shareholders, who have seen their shares sink from $1.35 in May to 85c this morning, a loss of more than 40%, will receive a payment of 5.25c a share, which will please Murdoch, James Packer, Gina Rinehart and WIN's Bruce Gordon, all of whom effectively control the company with about 42% of the issued shares.
About $53 million will be paid to shareholders in the dividend, which means the four billionaires will share in about $22 million. The hard-pressed Gordon will get about $7.5 million and Packer and Murdoch will get about $4.7 million each, while the Perth-based Rinehart will get just over $5 million, which will go a little way to meeting some of the costs of their assault on the boardroom of Australia's third commercial TV network.
Gordon is the heaviest loser, with much of his stake acquired above $3 a share years ago. Packer bought in late last year (and then sold half his 18% stake to Murdoch) with the shares costing more than $1.10. Rinehart probably has a cost of closer to $1.20, but she did sell some shares at 93c a couple of months ago to reduce her stake to less than 10%.
Even though there was a commitment to pay the dividend, you'd have to ask why, given that net profit amounted to just $14.2 million. So Ten will have to borrow about $38 million to make sure shareholders, including the big four, can feel good.
While you can argue that it is a confidence-building move in that the company and the board are upbeat about the outlook, the fact that four big shareholders will get some of the holding costs covered in the payout introduces a note of self interest into the decision.
In the statement from the company and Murdoch, there was little talk about how the company's ratings have sunk this year on the main channel. The overall ratings, including revamped ONE channel and Eleven, which started last January, have lifted the Ten share by 4.9%. But the main channel share is down and the company has lost share in the TV ad revenue battle with Nine and Seven.
talked a lot about the clean out and cost cutting and what 2012 would bring, when Warburton, whom Murdoch poached from Seven, will become CEO.
It's clear that Ten's costs have been chopped sharply and Murdoch was promising this morning that 2012 costs would be flat and wouldn't rise from the 2011 level.
That's come at a cost, with the ending of the late news, the 6.30 With George Negus
and state-based weekend broadcasts have been stopped and consolidated into one weak national bulletin. Monday-to-Friday bulletins have been extended by half an hour because it is cheaper than commissioning a new soap drama to fill a half-hour spot. And when the Negus program ends, the 7PM Project
is being extended to an hour, renamed The Project
, and starting at 6.30pm. It's audience will fall as a result.
Ten is starting a three-hour breakfast program to take on Seven's Sunrise
and Nine's Today
show next year. Murdoch said that Ten was only getting $3 million a year from an advertising market for breakfast TV of $100 million. He promised that Ten would stick with the breakfast show -- it would be with the network "for a decade".