TEN: Breakfast, beauty and brawn can't mask issues

Free to air television is a tough business, and Ten is feeling the heat

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What: Ten Network Holdings Limited (ASX: TEN) today released its results for the six months to the 29th February 2012. Revenues fell by 10.6 per cent to $432.8m, and Ten suffered a 70 per cent fall in net profit from $49.5m to $14.8m.

Television advertising revenues were down 11% versus the market at 6%, showing that the business is facing more than just normal market pressures.

Ten has admitted to inadequate focus on shareholder returns in the past, and although it announced an Operational and Strategic Review last year, results don't appear to be forthcoming. Expenses rose 2.5%, and the company still has over $400m in net debt.

Ten has also announced a strategic review of its EYE Corp business, including a possible sale of the division, but as yet nothing definitive has been announced. The company currently operates three free-to-air television channels and EYE Corp, an out-of-home advertising company, specialising in airport, retail, roadside and university media.

So what: Ten is rolling out its MasterChef Australia series after Easter, and two new series featuring Lara Bingle in "Being Lara Bingle" and Kiefer Sutherland in "Touch". The company has also adopted the "If you can't beat them, join them" strategy, by introducing a new three hour breakfast show, named "Breakfast", to compete against Channel Seven, owned by Seven West Media Ltd (ASX: SWM), and Channel Nine.

In Ten's 2011 full year results presentation, the company stated that 2012 was going to be a difficult year for the business, and this result clearly shows that. With Channel Nine broadcasting the London Olympics, channels Seven and Ten will struggle to attract viewers and advertisers during that time and the second half of 2012 is not going to be any easier.

Now what: With a net profit margin of just 3.2%, debts of over $400m, inconsistent dividend payouts and a weak and uncertain outlook, there are better investing alternatives out there.

If you are looking for ASX investing ideas, look no further than "The Motley Fool's Top Stock for 2012." In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

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Motley Fool contributor Mike King doesn't own shares in Ten. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

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