Making change, building momentum. Making change, b and restoring value. For personal use only

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financial results and strategy presentation Lachlan

1 Making change, building momentum Making change, b and restoring value TEN NETWORK HOLDINGS LIMITED 1H FY2011 financial results and strategy presentation Lachlan Murdoch Interim Chief Executive 7 April 2011 TNHL H Results - 1

2 AGENDA Ten Holdings is at a crucial juncture in its history Financial underperformance over the last 5 years with deteriorating margins February 2011: Unacceptable half year results required immediate action Need to restore shareholder value and refocus on core strengths Hard decisions are being made Focus on restoring value for all shareholders Initial action taken on News, Costs, ONE, Sales Building new leadership team from best internal and external candidates Building a winning culture With renewed vigour Ten can play to its strengths Three complementary channels and a growing outdoor business Unique understanding and track record in 18 49s Best in class program franchises with strong commercial partnerships Creative and committed staff Solid cash flow and balance sheet TNHL H Results - 2

3 Ten Holdings at a crucial juncture: Television Free-to-air television is an excellent business with strong growth prospects Financial performance in Television had become unacceptable over the past 5 years Erosion of shareholder value and returns The company s August Year Plan was unacceptable F F F TNHL H Results - 3

4 Ten Holdings at a crucial juncture Out-of-home is one of the fastest growing media sectors Return to shareholders from the EYE business has been unsatisfactory Australian business is performing well Offshore investments, while yet to deliver returns, are gaining critical mass Strict cost review underway Divested non-core ADVAL, exited Singapore Ten is committed to growing EYE TNHL H Results - 4

5 Unacceptable 1H FY2011 results required action TEN NETWORK HOLDINGS LTD 1H H 2010 Fav / (Unf) 1H FY2011 DIVISIONAL RESULTS $M $M % OPERATING REVENUE Television % Out of Home % % EXPENSES Television (8.1%) Out of Home % (6.1%) EBITDA Television (13.4%) Out of Home % (9.8%) Sustained EBITDA underperformance and lack of growth aspiration required intervention The Board resolved to appoint a new CEO Interim CEO appointed to arrest the decline in financial performance and set foundation for new era and position Ten for growth 1 Unallocated Corporate costs of $0.6m have been reallocated to Television (2010 1H - $0.6m) in this table and for future segment disclosure. 2 Before restructuring costs TNHL H Results - 5

6 Focused and aggressive change agenda Financial Underperformance Refocus Outperform 2007 Feb Feb July 2011 From August 2011 Inadequate focus on shareholder returns Change in approach to costs in FY10 and FY11 Change in News strategy Excellent programming of Ten successful launch of ELEVEN, ONE less successful. Sales team unable to pursue cross-platform opportunities No-growth aspiration Action on: Costs News ONE Sales focus Leadership team rebuilding Priority to maximise revenue Integrated sales Partnership sales 3-channel sales Brand rejuvenation Continued programming excellence High-performing Leadership team Winning culture TNHL H Results - 6

7 Action on News Recommenced 5pm weekend News Introduced Australia s first 90-minute News bulletin Expand on winning TEN News hour at 5pm Reducing duplication of 2 separate News teams for 5pm and 6.30pm bulletins Moved Negus to 6:30pm timeslot Acted on viewer feedback Continue to develop and improve production values Introducing new program The Bolt Report 8 May launch Continue to develop and invest in our News credentials, staff and brand TNHL H Results - 7

8 Action on ONE Successful launch of ELEVEN has demonstrated potential profit contribution of multi-channels ONE s poor weeknight prime-time ratings were unsustainable Introduction of male-skewed general entertainment has lifted ONE s prime- time ratings Action movies and adventure programming: Ice Road Truckers, Extreme Fishing with Robson Green ONE will be relaunched on 8 May 2011 with 2.5+% share aspiration Opportunity to add significant revenue to ONE post-relaunch ONE will contribute meaningful earnings to the group in FY12 TNHL H Results - 8

9 Expanded programming on ONE Factual Extreme Fishing with Robson Green Drama Son s of Anarchy Movies Premium live sport AFL Moto GP Formula 1 TNHL H Results - 9

10 Action on Costs Ten Holdings has a strong record of cost discipline In the past 2 years there had been a change in approach to costs Cost base in TV has increased excessively $100m+ in costs added over the past 5 years, but only $69m in revenue 1H FY11 cost growth of 8% against revenue growth of just 2% Cost base in EYE has also increased to support offshore start-up operations A rigorous cost review has been initiated across the group but expected impact in FY11 will be minimal. TNHL H Results - 10

11 Interim CEO Lachlan Murdoch TNHL H Results - 11

Strong assets to leverage 18 49 Home of family entertainment Big entertaining productions & major franchises Major US& Australian initiatives and and Event TV Long-term supply deals Distinctly Male,

entertainment for younger viewers Premium drama, premium comedy, premium animation Joint venture with CBS/Long-term supply deals Themed nights and hostingsto create consumer and client benefits

12 Strong assets to leverage Home of family entertainment Big entertaining productions & major franchises Major US& Australian initiatives and and Event TV Long-term supply deals Distinctly Male, Premium sports & male targeted general entertainment Premium sport, premium HD factual, HD movies MON-FRI GE CONTENT SAT-SUN PREMIUM SPORT Distinctly Youthful, Bold and fun quality entertainment for younger viewers Premium drama, premium comedy, premium animation Joint venture with CBS/Long-term supply deals Themed nights and hostingsto create consumer and client benefits Premium inventory in quality environments EYE Fly EYE Shop EYE Drive EYE Study Fast growing media sector SAMPLE BRAND-DEFINING SHOWS MasterChef Australia Glee Modern Family Offspring 7pm Project SAMPLE BRAND-DEFINING SHOWS AFL F1 HD Movies Action and Adventure Factual Sons of Anarchy Ice Road Truckers SAMPLE BRAND-DEFINING SHOWS Neighbours The Simpsons Dexter Supernatural So You Think You Can Dance Operations established in: Australia /New Zealand leader in malls and airports USA #1 mall media operator UK 40% of UK flyer market Indonesia DIGITAL PORTFOLIO ten.com.au, Catch-up TV, iphone app DIGITAL PORTFOLIO onehd.com.au, iphone app DIGITAL PORTFOLIO eleven.com.au, Catch-up TV, iphone app DIGITAL PORTFOLIO Digital display technology for indoor/outdoor TNHL H Results - 12

13 TEN long term supply deals CBS FOX NBCU TNHL H Results - 13

14 TEN strong consistent slate of domestic product TNHL H Results - 14

Uplifting, touching and optimistic, CLASS OF will resonate in every home across the country.

15 TEN strong pipeline of new programs Exciting and compelling new formats Class of... A bold and powerful series following a group of students as they attempt to get their academic careers back on track. Uplifting, touching and optimistic, CLASS OF will resonate in every home across the country. 6 rundown houses The world s biggest workshop On 6 nights a week 26 of Australia s best renovators 6 huge auction events From the creator of Enough Rope and Gruen Transfer comes the most controversial panel show Australia has ever seen. That elephant in the room just got very nervous. TNHL H Results - 15

16 ELEVEN Leading Australian digital channel TNHL H Results - 16

17 Chief Financial Officer Paul Anderson TNHL H Results - 17

18 FINANCIAL RESULTS Key Points H1 FY2011 Group EBITDA of $106m Slightly above previous market guidance (23 February 2011) of $103m Improvement in EBITDA relates to: Better than expected costs in Television for H1 FY2011 Certain first half costs now forming part of the restructuring charges Restructure provision of $7.1m included at H1 FY2011 Relates to changes of Group and Television personnel Dividend No interim dividend proposed due to franking credits Expect to pay fully franked final dividend for full FY2011 TNHL H Results - 18

19 FINANCIAL RESULTS TEN NETWORK HOLDINGS LTD 1H H 2010 Fav / (Unf) 1H FY2011 DIVISIONAL RESULTS $M $M % OPERATING REVENUE Television % Out of Home % % EXPENSES Television * (8.1%) Out of Home % (6.1%) EBITDA Television (13.4%) Out of Home % (9.8%) * Unallocated Corporate costs of $0.6m have been reallocated to Television (2010 1H - $0.6m) in this table and for future segment disclosure. TNHL H Results - 19

20 FINANCIAL RESULTS TEN NETWORK HOLDINGS LIMITED 1H H 2010 Fav/(Unf) 1H FY2011 GROUP RESULTS $M $M % EBITDA (9.8%) Depreciation Amortisation EBIT (9.8%) Net Interest Expense PROFIT BEFORE TAX & NRI (7.5%) Non Recurring Items (NRI) Television Restructuring Provision (7.1) n/a PROFIT BEFORE TAX Tax (Expense) Normal (24.5) (26.6) Prima facie tax rate 31.00% 31.20% Tax effect of NRI's PROFIT/LOSS AFTER TAX Non-controlling interest (0.2) - NET PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS Underlying Net Profit After Tax Attributable To Members (7.0%) TNHL H Results - 20

21 Cash Flow Analysis & Capex Operating cash flows of $91.3m an increase of 78.5% on 2010 Cash flows positively impacted by Commonwealth Games licence fees prepaid Licence fee rebate timing Future capital expenditure guidance 2011 capital expenditure of $35m 2012 capital expenditure of $15m Finance costs of $16.7m includes $0.5m of non-cash cost Non-cash cost relate to the unwinding of the Eyecorp onerous contract provision $1.9m and hedge accounting ($1.4m) Bank interest paid per cash flow of $14.8m Eyecorp onerous contracts Provisions of $39.2m at February 2011 (August $46.9m) Actual cash EBITDA of $4.0m for H1 FY2011 TNHL H Results - 21

22 Strong Financial Foundation Net Debt of $403m at February 2011 (Feb 2010: $402m) Drawn Debt of $410m offset by Cash of $7.0m Newly completed $350m Three Year Syndicated Facility Signed February 2011 and due February 2014 Syndicate Banks : Westpac / ANZ / NAB / CBA and JP Morgan Revised Bank Covenant Package Debt Service Ratio (Drawn Debt is less than 4.0 times EBITDA) Interest Cover Ratio (EBITDA exceeds 3.0 times Net Interest Expense) Complements existing Private Placement (fully drawn) funding $125m USD ($210m AUD) US Private Placement due March 2013 $150m AUD US Private Placement due December 2015 Projected Debt Interest Cost of 6.8% pa (all-in cost) Covenant performance: Debt Service Ratio Feb 2011 at 2.1 times Interest Cover Ratio Feb 2011 at 7.4 times TNHL H Results - 22

23 Summary Interim CEO Lachlan Murdoch TNHL H Results - 23

24 QUESTIONS TNHL H Results - 24

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