Brokers Take Razor To Ten Forecasts As Profit Dives
Sydney Morning Herald
Saturday October 18, 2008
BROKERS slashed their profit forecasts for Ten Network yesterday after it reported a 79 per cent slump in fourth quarter earnings, and analysts predict further troubles ahead as its weaker ratings and the global financial crisis deter advertisers.
Macquarie Bank forecast the stock, which slid to a record low of $1.16 this week, would be trading below the $1 level in 12 months' time as business conditions continue to deteriorate, with the $2.9 billion TV advertising market expected to decline 8 per cent in 2008-09."Ten will struggle more than rival networks given it has lost ground in the ratings game," said a Macquarie media analyst, Alex Pollak. "The very big problem for Ten in 2009 is that even a minimal reduction in advertising revenue of only 4.5 per cent" could push net profit down by nearly a third and force the broadcaster to review its dividend policy of paying out 100 per cent of profits, he said.Ten's executive chairman, Nick Falloon, on Thursday shied away from forecasting profit for the year to August, arguing the industry was "clearly in unprecedented times". He flagged further cost cuts to blunt the impact of the decline, but analysts questioned how much room the network has for savings with its fixed cost ratio of more than 80 per cent. Several brokers put a razor to their profit estimates instead, using headlines such as "Big Bother", "Change the channel" and "Scary movie" for their research.UBS said Ten's television sales were unlikely to recover before 2011 and cut its earnings forecasts for the company by 39 per cent this year and 52 per cent the following year. "We believe Ten is particularly exposed to a hard landing, given its position as the third of three players in the commercial free-to-air TV market, and therefore in our view most exposed to advertising budget cuts," wrote UBS's media analyst, Lauren Moran. Ten, which is seeking to retain a 30 per cent share of the TV advertising market, might be forced to cut its rates, she said.There is pressure on Ten's head of TV, Grant Blackley, to replace the 120 prime-time hours from the axed Big Brother with successful new programs, which is raising the stakes, Goldman Sachs JBWere's Christian Guerra said.
© 2008 Sydney Morning Herald