Notes to the consolidated financial statements Note 1: Basis of Preparation of the Half Yearly Report This general purpose Half Yearly Report for the reporting period ended 28 February 2007 has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards (AASB), which include Australian equivalents to International Financial Reporting Standards (AIFRS). This Half Yearly Report does not include all the notes of the type normally included within the Annual Financial Report. Accordingly, this Report should be read in conjunction with the Annual Financial Report as at 31 August 2006 and any public announcements made by Ten Network Holdings Limited during the interim period in accordance with the continuous disclosure requirements of the Corporations Act 2001. These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities (including derivative instruments) at fair value though profit or loss. The accounting policies adopted in the preparation of this Half Yearly Report are consistent with those applied and disclosed in the 31 August 2006 Annual Financial Report. Note 2: Adjustment to equity for Out Of Home site lease costs AASB 117 Leases requires lease costs to be recognised on a straight line basis for contracts with fixed annual increases. In previously reported results, site lease costs were expensed as incurred. The impact of AASB 117 is that costs recognised for site leases will be higher in earlier years and balance out in later years of the lease term. This is a timing issue only with no impact on total costs incurred and recognised over the full term of a contract. Opening retained earnings have been adjusted by $1.0m to reflect this treatment. The comparatives in the balance sheet and income statement have not been restated for this adjustment as it is not material. Current period results reflect this treatment for site lease costs in the Out Of Home segment.
Note 3: Revenues and Expenses
| | 28 February
2007
$'000 | 28 February
2006
$'000 | | 1.1 Revenues from ordinary activities Sales Revenue
Other revenue from ordinary activities - Interest revenue - Profit on sale of Big Tree Outdoor (Equity accounted associate) H - Profit on sale of other non-current assets | 481,702
1,240 8,924 8 | 463,255
1,279 - - | | Total revenues from ordinary activities | 491,874 | 464,534 | | 1.2 Expenses from ordinary activities
Details of relevant expenses - Television activities
- Out Of Home activities - Corporate | (268,089) (79,501) (429) | (252,622) (52,085) (620) | | Total expenses from ordinary activities | (348,019) | (305,327) | | 1.3 Income tax expense | (36,241) | (43,743) | Note 4: Reconciliation of Income Tax Expense The main non-deductible expense was debenture interest of $43.3m, after adjusting for this, tax expense for the half year to 28 February 2007 represents 29.2% of profit from ordinary activities before income tax. Note 5: Dividends Details of dividends/distributions declared or paid to the members of Ten Network Holdings Limited during or subsequent to the half year ended 28 February 2007 are as follows: |
Payment date
|
Type
| Amount per security |
Total dividend
$
| Franked amount per security | Foreign sourced dividend amount per security | | 11 January 2007 | 1st 2007 Dividend | 9.0 cents | 35,900,918 | 9.0 cents | - | Note 6: Earnings per security | | Half year
28 February
2007 | Half year
28 February
2006 | | (a) Basic EPS (Refer Note (i) below) (b) Diluted EPS (Refer Note (ii) below) (c) Weighted average number of ordinary shares outstanding during the period used in the calculation of the Shareholding EPS | 9.46 cents 9.46 cents
398,899,094
| 10.75 cents 10.75 cents
398,789,204
| Notes on Earnings Per Share Calculations (i) Basic Earnings Per Share Basic earnings per share is determined by dividing the operating profit after tax attributable to members of Ten Network Holdings Limited (“TEN”) by the weighted average number of ordinary shares outstanding during the financial year. Number of ordinary shares on issue as at February 2007 was 398,899,094 (February 2006: 398,899,094). (ii) Diluted Earnings Per Share Diluted earnings per share has been calculated on the basis that the convertible debentures in TEN had been converted and the subordinated debentures had been redeemed. This method also reflects the potential conversion of options over ordinary shares in TEN during the year. As at 28 February 2007, there are no longer any options on issue. The maximum number of potential ordinary shares on issue is 927,585,000. Note 7: NTA Backing | | Half year
28 February
2007 | Half year
28 February
2006 | | Net tangible asset backing per ordinary share | ($1.38) | ($1.21) | | Net asset backing per ordinary share | $1.12 | $1.18 | Note 8: Changes in the Composition of the Consolidated Entity 2007 During the half year ended 28 February 2007, the consolidated entity made two acquisitions: · On 15 September 2006, Eye Corp Pty Limited, a controlled entity, acquired 100% of the issued capital of Ultimate Media Group Pty Limited (now called Eye Study Pty Limited). · On 14 December 2006, Eye Corp Pty Limited, a controlled entity, acquired 100% of the issued capital of Foxmark Media, LLC. The contribution of the above acquisitions to the consolidated entity's profit after tax in the current period is not material. There have been no disposals during the current financial year. Note 9: Associates and Joint Venture entities |
Name
|
Ownership interest
| Aggregate share of profits/(losses) $A’000 |
Contribution to net profit
$A’000 | | | 28 February
2007 | 28 February
2006 | 28 February
2007 | 28 February
2006 | 28 February
2007 | 28 February
2006 | | Big Tree Outdoor Sdn Bhd I |
-
|
30.0%
| 779 | 585 | 779 | 585 | | Global Television Limited J |
-
|
24.3%
|
629
|
222
|
629
|
222
| | Eye Outdoor Pty Limited K | - | 50.0% | - | 26 | - | 26 | I: On 12 January 2007, Eye Corp Pty Limited, a controlled entity, entered into a binding share sale agreement to sell its 30% interest in Big Tree Outdoor Sdn Bhd. J: On 5 January 2007, The Ten Group Pty Limited, a controlled entity, sold its 24.3% interest in Global Television Limited. K: On 1 July 2006, Eye Corp Pty Limited, a controlled entity, acquired the remaining 50% of Eye Outdoor Pty Limited. This investment is no longer equity accounted. Note 10: Segment Note Primary reporting segment – business segments: | Half year 2007 | Television
$’000 | Out Of Home
$’000 | Eliminations/Unallocated $’000 | Consolidated
$’000 | Revenue | | | | | | Sales to external customers | 402,157 | 79,545 | - | 481,702 | | Inter-segment sales | 86 | 265 | (351) | - | | Total sales revenue | 402,243 | 79,810 | (351) | 481,702 | | Other revenue L | 930 | 9,111 | 131 | 10,172 | | Total revenue | 403,173 | 88,921 | (220) | 491,874 | | | | | | | Segment Result | | | | | | Result | 141,803 | 13,608 | (429) | 154,982 | | Share of associates’ and joint ventures’ profit | 629 | 779 | - | 1,408 | | EBITDA | 142,432 | 14,387 | (429) | 156,390 | | Depreciation | (7,906) | (3,183) | - | (11,089) | | Amortisation | - | (1,278) | - | (1,278) | | EBIT | 134,526 | 9,926 | (429) | 144,023 | | Finance costs M | | | | (64,279) | | Interest revenue | | | | 1,240 | | Profit before tax | | | | 80,984 | | Income tax expense | | | | (36,241) | | Net profit after tax | | | | 44,743 | | | | | | | L: Other revenue in the Out Of Home segment includes $8.9m relating to the profit on sale of Big Tree Outdoor Sdn Bhd. M: Finance costs include $43.3m of subordinated debenture interest in respect of profits for the period. Note 10: Segment Note (continued) Primary reporting segment – business segments (continued): | Half year 2006 | Television
$’000 | Out of Home
$’000 | Eliminations/
Unallocated $’000 | Consolidated
$’000 | Revenue | | | | | | Sales to external customers | 400,176 | 63,079 | - | 463,255 | | Inter-segment sales | 86 | 135 | (221) | - | | Total sales revenue | 400,262 | 63,214 | (221) | 463,255 | | Other revenue | 907 | 199 | 173 | 1,279 | | Total revenue | 401,169 | 63,413 | (48) | 464,534 | | | | | | | | Segment Result | | | | | | Result | 155,771 | 13,893 | (620) | 169,044 | | Share of associates’ and joint ventures’ profit | 222 | 611 | - | 833 | | EBITDA | 155,993 | 14,504 | (620) | 169,877 | | Depreciation | (8,264) | (2,304) | - | (10,568) | | Amortisation | - | (548) | - | (548) | | EBIT | 147,729 | 11,652 | (620) | 158,761 | | Finance costs N | | | | (65,385) | | Interest revenue | | | | 1,279 | | Profit before tax | | | | 94,655 | | Income tax expense | | | | (43,743) | | Net profit after tax | | | | 50,912 | | | | | | | N: Finance costs include $49.5m of subordinated debenture interest in respect of profits for the period. Note 11: Issued and quoted securities at end of current period | Category of securities | Total
number | Number quoted | Issue price per security | Amount paid up per security | | Ordinary securities | 398,899,094 | 398,899,094 | | | | Changes during current period: Increases through issues | - | - | - | - | | Options | | | Exercise
price | Expiry date
(if any) | | Options outstanding at end of current period | - | - | - | - | | Issued during current period | - | - | - | - | | Exercised during current period | - | - | - | - | | Lapsed during current period | - | - | - | - | | Expired during current period | - | - | - | - | | Debentures (totals only) Subordinated debentures Convertible debentures | 45,500,000 455,000 | - - | | | Note 12: Events occurring after reporting date
| No matter, item, transaction or event of a material nature has occurred between 28 February 2007 and the date of this report. | Commentary on results Refer to attached Media Release.
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