2008 First Half Result Notes To The Consolidated Financial Statements
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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 29 February 2008 has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards AASB 134 Interim Financial Reporting, 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 2007 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 2007 Annual Financial Report.
Note 2: Exchange of minority shareholders and Tax Consolidations
Exchange of minority shareholders in The Ten Group Pty Limited
During February 2008, AMP and Copplemere exchanged their remaining interests (totalling 5,435,916 shares) in The Ten Group Pty Limited into the equivalent number of new shares in Ten Network Holdings Limited. The value of the shares exchanged was recorded at the prevailing market value of $13.1m in total.
Tax Consolidations
Following the above exchange, Ten Network Holdings Limited now holds 100% of the shares in The Ten Group Pty Limited and as a result becomes the head of a new tax consolidated group. This triggers the requirement to reassess the tax cost bases of the tax consolidated group – broadly with reference to proportional market values. An income tax benefit of $183.7m was booked to the income statement as a result of this calculation. Of this benefit, an amount of $182.3m relates to a reduction to deferred tax liabilities arising from an uplift of $607.6m in the tax cost base of television licences. The remaining benefit of $1.4m relates to uplifts in the tax cost bases of other depreciable assets, particularly fixed assets such as plant and equipment.
Note 3: 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. 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 in 2007 were adjusted to reflect this treatment.
Note 4: Revenues and Expenses
| | 29 February
2008
$'000 | 28 February
2007
$'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)
- Profit on sale of other non-current assets
|
526,045
1,568 - - |
481,702
1,240
8,924 8 |
| Total revenues from ordinary activities | 527,613 | 491,874 |
| 1.2 Expenses from ordinary activities Details of relevant expenses |
(284,757)(93,783)
(483) |
(268,089)(79,501)
(429)
|
| Total expenses from ordinary activities | (379,023) | (348,019) |
| 1.3 Income tax benefit/(expense) Normal Tax consolidations (Refer Note 2) |
(37,471)
183,695 |
(36,241)
- |
| Total income tax benefit/expense | 146,224 | (36,341) |
Note 5: Reconciliation of Income Tax Expense
Excluding the $183.7m tax consolidation tax benefit adjustment, tax expense of $37.5m was 30.0% of profit from ordinary activities before income tax.
Note 6: Dividends
Details of dividends/distributions declared or paid to the members of Ten Network Holdings Limited during or subsequent to the half year ended 29 February 2008 are as follows:
|
Payment date
|
Type
| Amount per security |
Total dividend
$
| Franked amount per security | Foreign sourced dividend amount per security |
| 4 January 2008 | 1st 2008 Dividend | 10.0 cents | 92,214,908 | 10.0 cents | - |
Note 7: Earnings per security
| | Half year
29 February
2008 | Half year
28 February
2007 |
| Reported (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 |
29.33 cents
29.33 cents
922,481,749
|
9.46 cents
9.46 cents
398,899,094
|
| Normalised I (a) Basic EPS (Refer Note (i) below) (b) Diluted EPS (Refer Note (ii) below) |
9.42 cents
9.42 cents |
9.46 cents
9.46 cents |
I: 2008: excludes the income tax benefit of $183.7m resulting from tax consolidations.
2007: the exclusion of subordinated debenture interest has no impact on the normalisation of EPS as CanWest debentures accrued benefits at the same rate as other shareholders.
Excluding the above income tax benefit and subordinated debenture interest (and associated minority interests), normalised net profit after tax for the 2008 half year was $87.4m (2007: $88.1m) and normalised net profit attributable to members for the 2008 half year was $86.9m (2007: $74.3m). 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 29 February 2008 was 927,585,000 (28 February 2007: 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.The maximum number of potential ordinary shares on issue is 927,585,000.
Note 8: NTA Backing
|
| Half year
29 February 2008 | Half year
28 February 2007 |
| Net tangible asset backing per ordinary share | ($0.44) | ($1.38) |
| Net asset backing per ordinary share | $0.86 | $1.12 |
Note 9: Changes in the Composition of the Consolidated Entity
There were no material changes in the composition of the Consolidated Entity in the half year to 29 February 2008.
Note 10: Associates and Joint Venture entities
|
Name
|
Ownership interest
| Aggregate share of profits/(losses) $A’000 |
Contribution to net profit
$A’000 |
|
| 29 February
2008 | 28 February
2007 | 29 February
2008 | 28 February
2007 | 29 February
2008 | 28 February
2007 |
| Big Tree Outdoor Sdn Bhd J |
-
|
-
|
-
|
779
|
-
|
779
|
| Global Television Limited K |
-
|
-
|
-
|
629
|
-
|
629
|
J: On 30 March 2007, Eye Corp Pty Limited, a controlled entity, completed the sale of its 30% interest in Big Tree Outdoor Sdn Bhd.
K: On 5 January 2007, The Ten Group Pty Limited, a controlled entity, sold its 24.3% interest in Global Television Limited. Note 11: Segment Note
Primary reporting segment – business segments:
| Half year 2008 | Television
$’000 | Out Of Home
$’000 | Eliminations/Unallocated $’000 | Consolidated
$’000 |
| Revenue |
|
|
|
|
| Sales to external customers | 433,698 | 92,347 | - | 526,045 |
| Inter-segment sales | 94 | 382 | (476) | - |
| Total sales revenue | 433,792 | 92,729 | (476) | 526,045 |
| Other revenue | 1,141 | 341 | 86 | 1,568 |
| Total revenue | 434,933 | 93,070 | (390) | 527,613 |
|
|
|
|
|
|
| Segment Result |
|
|
|
|
| EBITDA | 158,698 | 5,519 | (483) | 163,734 |
| Depreciation | (10,046) | (5,038) | - | (15,084) |
| Amortisation | - | (1,628) | - | (1,628) |
| EBIT | 148,652 | (1,147) | (483) | 147,022 |
| Finance costs |
|
|
| (23,732) |
| Interest revenue |
|
|
| 1,568 |
| Profit before tax |
|
|
| 124,858 |
| Income tax benefit/(expense) |
|
|
|
|
| Normal |
|
|
| (37,471) |
| Tax Consolidations (Refer Note 2) |
|
|
| 183,695 |
| Net profit after tax |
|
|
| 271,082 |
|
|
|
|
|
|
Note 11: Segment Note (continued)
Primary reporting segment – business segments (continued):
| 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 12: 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 | 927,585,000 | 927,585,000 |
|
|
| Changes during current period: Copplemere exchange AMP exchange |
749,998 4,685,918 |
- - |
- - |
- - |
| 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 |
- - |
- - |
|
|
Note 13: Events occurring after reporting date
No matter, item, transaction or event of a material nature has occurred between 29 February 2008 and the date of this report.
Commentary on results
Refer to attached Media Release.
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 29 February 2008 has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards AASB 134 Interim Financial Reporting, 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 2007 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 2007 Annual Financial Report.
Note 2: Exchange of minority shareholders and Tax Consolidations
Exchange of minority shareholders in The Ten Group Pty Limited
During February 2008, AMP and Copplemere exchanged their remaining interests (totalling 5,435,916 shares) in The Ten Group Pty Limited into the equivalent number of new shares in Ten Network Holdings Limited. The value of the shares exchanged was recorded at the prevailing market value of $13.1m in total.
Tax Consolidations
Following the above exchange, Ten Network Holdings Limited now holds 100% of the shares in The Ten Group Pty Limited and as a result becomes the head of a new tax consolidated group. This triggers the requirement to reassess the tax cost bases of the tax consolidated group – broadly with reference to proportional market values. An income tax benefit of $183.7m was booked to the income statement as a result of this calculation. Of this benefit, an amount of $182.3m relates to a reduction to deferred tax liabilities arising from an uplift of $607.6m in the tax cost base of television licences. The remaining benefit of $1.4m relates to uplifts in the tax cost bases of other depreciable assets, particularly fixed assets such as plant and equipment.
Note 3: 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. 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 in 2007 were adjusted to reflect this treatment.
Note 4: Revenues and Expenses
| | 29 February
2008
$'000 | 28 February
2007
$'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)
- Profit on sale of other non-current assets
|
526,045
1,568 - - |
481,702
1,240
8,924 8 |
| Total revenues from ordinary activities | 527,613 | 491,874 |
| 1.2 Expenses from ordinary activities Details of relevant expenses |
(284,757)(93,783)
(483) |
(268,089)(79,501)
(429)
|
| Total expenses from ordinary activities | (379,023) | (348,019) |
| 1.3 Income tax benefit/(expense) Normal Tax consolidations (Refer Note 2) |
(37,471)
183,695 |
(36,241)
- |
| Total income tax benefit/expense | 146,224 | (36,341) |
Note 5: Reconciliation of Income Tax Expense
Excluding the $183.7m tax consolidation tax benefit adjustment, tax expense of $37.5m was 30.0% of profit from ordinary activities before income tax.
Note 6: Dividends
Details of dividends/distributions declared or paid to the members of Ten Network Holdings Limited during or subsequent to the half year ended 29 February 2008 are as follows:
|
Payment date
|
Type
| Amount per security |
Total dividend
$
| Franked amount per security | Foreign sourced dividend amount per security |
| 4 January 2008 | 1st 2008 Dividend | 10.0 cents | 92,214,908 | 10.0 cents | - |
Note 7: Earnings per security
| | Half year
29 February
2008 | Half year
28 February
2007 |
| Reported (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 |
29.33 cents
29.33 cents
922,481,749
|
9.46 cents
9.46 cents
398,899,094
|
| Normalised I (a) Basic EPS (Refer Note (i) below) (b) Diluted EPS (Refer Note (ii) below) |
9.42 cents
9.42 cents |
9.46 cents
9.46 cents |
I: 2008: excludes the income tax benefit of $183.7m resulting from tax consolidations.
2007: the exclusion of subordinated debenture interest has no impact on the normalisation of EPS as CanWest debentures accrued benefits at the same rate as other shareholders.
Excluding the above income tax benefit and subordinated debenture interest (and associated minority interests), normalised net profit after tax for the 2008 half year was $87.4m (2007: $88.1m) and normalised net profit attributable to members for the 2008 half year was $86.9m (2007: $74.3m). 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 29 February 2008 was 927,585,000 (28 February 2007: 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.The maximum number of potential ordinary shares on issue is 927,585,000.
Note 8: NTA Backing
|
| Half year
29 February 2008 | Half year
28 February 2007 |
| Net tangible asset backing per ordinary share | ($0.44) | ($1.38) |
| Net asset backing per ordinary share | $0.86 | $1.12 |
Note 9: Changes in the Composition of the Consolidated Entity
There were no material changes in the composition of the Consolidated Entity in the half year to 29 February 2008.
Note 10: Associates and Joint Venture entities
|
Name
|
Ownership interest
| Aggregate share of profits/(losses) $A’000 |
Contribution to net profit
$A’000 |
|
| 29 February
2008 | 28 February
2007 | 29 February
2008 | 28 February
2007 | 29 February
2008 | 28 February
2007 |
| Big Tree Outdoor Sdn Bhd J |
-
|
-
|
-
|
779
|
-
|
779
|
| Global Television Limited K |
-
|
-
|
-
|
629
|
-
|
629
|
J: On 30 March 2007, Eye Corp Pty Limited, a controlled entity, completed the sale of its 30% interest in Big Tree Outdoor Sdn Bhd.
K: On 5 January 2007, The Ten Group Pty Limited, a controlled entity, sold its 24.3% interest in Global Television Limited. Note 11: Segment Note
Primary reporting segment – business segments:
| Half year 2008 | Television
$’000 | Out Of Home
$’000 | Eliminations/Unallocated $’000 | Consolidated
$’000 |
| Revenue |
|
|
|
|
| Sales to external customers | 433,698 | 92,347 | - | 526,045 |
| Inter-segment sales | 94 | 382 | (476) | - |
| Total sales revenue | 433,792 | 92,729 | (476) | 526,045 |
| Other revenue | 1,141 | 341 | 86 | 1,568 |
| Total revenue | 434,933 | 93,070 | (390) | 527,613 |
|
|
|
|
|
|
| Segment Result |
|
|
|
|
| EBITDA | 158,698 | 5,519 | (483) | 163,734 |
| Depreciation | (10,046) | (5,038) | - | (15,084) |
| Amortisation | - | (1,628) | - | (1,628) |
| EBIT | 148,652 | (1,147) | (483) | 147,022 |
| Finance costs |
|
|
| (23,732) |
| Interest revenue |
|
|
| 1,568 |
| Profit before tax |
|
|
| 124,858 |
| Income tax benefit/(expense) |
|
|
|
|
| Normal |
|
|
| (37,471) |
| Tax Consolidations (Refer Note 2) |
|
|
| 183,695 |
| Net profit after tax |
|
|
| 271,082 |
|
|
|
|
|
|
Note 11: Segment Note (continued)
Primary reporting segment – business segments (continued):
| 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 12: 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 | 927,585,000 | 927,585,000 |
|
|
| Changes during current period: Copplemere exchange AMP exchange |
749,998 4,685,918 |
- - |
- - |
- - |
| 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 |
- - |
- - |
|
|
Note 13: Events occurring after reporting date
No matter, item, transaction or event of a material nature has occurred between 29 February 2008 and the date of this report.
Commentary on results
Refer to attached Media Release.