TMS 5.41% 3.9¢ tennant minerals limited

Anyone still holding ?, page-2

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    Yes, to holding.

    No, to going under.

    The businesses of TMS comprise:
    Global Television
    Val Morgan


    Global Television is responsible for the outsourced television production of the Nine and TEN networks. Both networks are substantial shareholders in TMS.

    Global Television is also responsible for the outsourced broadcasts of Fox Sports (ie: Fox Footy, the cricket, the NRL, etc).

    Elsewhere, Global television handles the outsourced broadcast production for TVSN (but at TVSN's Pyrmont studios), and for Becker.

    In Becker, TMS holds 12.63%, and PPT 17.68%. Richard Becker holds 33.31%.

    Global Television has grown in the last few years to generate $71.5m in revenue for FY02. EBITDA was $14.1m, and segment results (ie: contribution to final results) was $8.8m. That makes for an EBITDA multiple of ~20%, and a segment contribution multiple of >12%.

    Comparative results for FY01 were $49.5m in revenue, $12.2m in EBITDA (24.5%), and segment contribution of $6.0m (12.0%).

    Additional revenue growth has also kicked in in FY03 as a result of the Fox Footy broadcast activities.


    Omnilab is responsible for post-production work in both films and for television.

    Again, the major takers of the Omnilab service are the major networks in Australia, the Australian production houses, and independent /overseas film makers.

    In FY02, Omnilab's revenue contribution was $14.5m. EBITDA was negative at -$500k, and segment contribution was negative at -$2.3m.

    Comparative results for FY01 were revenue of $13.9m (segment contribution), EBITDA of $324K, and segment contribution of negative -$318K.


    This is where TMS' problem lies, both in the high cost of theatre rentals previously paid for, as well as the cost of the MEG integration, and of the overseas operations acquired through the MEG acquisition (ie: Singapore).

    In FY02, Val Morgan contributed $98.5m in revenue, EBITDA of $600K (<1.0%), and a negative segment contribution of -$75.4m. This, however, included a $66.5m writedown in the carrying value of the Val Morgan advertising system and of the MEG acquisition.

    Back in 2001, MEG was acquired through an all scrip acquisition.

    Apart from the writedowns in the Val Morgan /MEG systems, the additional main drag on the cinema results was the annual amortisation /depreciation charge of >$8.0m. Without this charge in place, the cinema advertising contribution was at near break even.

    Going forward in FY03, the $8.0m annual charge will not be repeated (ie: due to the FY02 writedowns). This alone should improve the cinema outlook, along with the closure of the Singapore operations, and the managed exit from the USA.

    In FY01, however, cinema advertising contributed $76.3m in revenue, for an EBITDA result of $8.4m, and a contribution result of -$7.5m (again, amortisation and depreciation charges were the main drag).

    Going back 3 years, however, cinema advertising was contributing significant profits to the bottom line results.

    It, therefore, depends upon how one views things. Yes, TMS is affected by debt. They are, however, moving to address this through asset sales, business exits, etc. In the process, TMS is also moving to tackle the structural vagaries of the Val Morgan system. Global television though is quite profitable, and OmniLab is within range of being profitable.

    With bottom line revenue of $167m (excluding the $19m North Ryde property sale) in FY02, compared with FY01 revenue of $140.0m, TMS is unlike many other companies (ie: where those comapnies lack an inherent, or growing revenue stream, lack a dedicated customer base, and lack a good or decent product).

    TMS' problems, therefore, are more structural in nature which once dealt with from either a re-structuring or divestment perspective will return TMS to a positive revenue and profit growth path.

    Until then, TMS will struggle (like any other company going through a restructuring program will generally struggle).

    Now, it's time for me to go back to work.

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