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Wednesday, August 11, 2010

ABS-CBN Consolidated Revenues Grow 44% in 1st Half of 2010

ABS-CBN’s consolidated revenues grow 44% in 1H 2010, pushing net profits to nearly triple to P2.27 billion.

For the first six months of 2010, ABS-CBN Broadcasting Corporation (“ABS-CBN” or the “Company”) (PSE: ABS, ABSP), the country’s largest multimedia conglomerate, generated profits of P2.27 billion from strong growth in regular advertising revenues complemented by political ad spending. This is 179% more than net income of P813 million in the first half of 2009.

For the six months ending June 30, 2010, ABS-CBN Broadcasting Corporation (“ABS-CBN” or the “Company”) brought in consolidated revenues of P16.84 billion from advertising and consumer sales, which are P5.16 billion or 44% higher than the P11.69 billion in the first half of 2009.

Consolidated advertising revenues across all platforms and subsidiaries reached P11.5 billion in the first six months of the year, P4.78 billion or 71% higher than the P6.72 billion in the same period in 2009. This total includes non-recurring advertising revenues amounting to P2.33 billion, which are advertising revenues from political advocacies and political ads that cannot be replaced by revenues from regular advertisers during non-election periods.

Recurring advertising revenues, mostly from regular advertisers, grew by P2.45 billion or 36% to P9.17 billion, attributable to both a strong increase in total advertising minutes sold and the rate adjustments that took effect in August last year and in February this year.

Total advertising minutes sold by Channel 2 in the first six months of the year jumped 42%, boosted by strong regular advertising minutes growth, complemented by election-related advertising that contributed 11% of total minutes sold. Advertising minutes sold to regular advertisers in the first semester rose 26%, driven by strong national ratings and high audience shares.

In a reversal of relative share in total minutes sold, Channel 2 enjoyed a 60% share v. GMA7’s 40% share of the combined total minutes sold by the two channels beginning in May. Channel 2 has overtaken GMA 7’s advertising minutes load since March, based on figures from Nielsen Media Research.

ABS-CBN maintained its national audience share and ratings leadership with total-day audience share averaging 44% in the second quarter, keeping a comfortable lead of 12 to 13 percentage points over GMA7, based on the Kantar Media/TNS National Philippines Television Audience Measurement service.

ABS-CBN has also taken the lead in Metro Manila with a 38% audience share in June, and in Mega-Manila with a 36% audience share. In South Luzon and in the Visayas and Mindanao regions, ABS-CBN dominated the airwaves in June with audience shares hovering at around 60% or higher, and maintaining 35 to 50 percentage point-wide margins over GMA7.

In June 2010, ABS-CBN swept the top 11 slots in the Top 20 programs list, with the top 10 programs enjoying ratings of at least 25% and audience shares ranging from 43% to as high as 61%. Primetime programs launched in the first half of 2010—Agua Bendita, Kung Tayo’y Magkakalayo, and Pilipinas Got Talent—enjoyed national program ratings in the mid- to high 30s. Habang May Buhay, Momay, Tanging Yaman, Rubi and PBB Teen Clash enjoyed ratings in the mid-20s and held their own against competing programs in the same time slots.

Consumer Sales for the first semester of 2010 amounted to P5.34 billion, registering an increase of P376 million or 8% over the first half of 2009 growth, mainly from ABS-CBN Global and Skycable.

ABS-CBN Global’s revenues rose by 14% in US dollar terms but this was slowed down to a 9% year-on-year growth in peso terms by the appreciation of the Philippine peso exchange rate. ABS-CBN Global’s overall viewer count increased by 10% year-on-year, driven by continuing strong double-digit subscriber growth in cable TV and IPTV subscriptions. Double-digit subscriber growth in Canada was driven by new cable distribution partnerships, while in Australia, more affordable and flexible plans attracted new direct-to-home subscribers.

Skycable’s revenues from cable TV and broadband services grew 13% year-on-year in the first semester, driven by a 92% increase in broadband service revenues as its broadband subscriber count rose 61% versus a year ago. Skycable’s low-priced postpaid cable TV offering Sky280 and higher-ARPU SkyBroadband services have been gaining traction among their target markets.

Three of ABS-CBN Film Productions, Inc. six films in the first six months of this year– I Love You, Goodbye, Miss You Like Crazy and Here Comes the Bride–topped the P100 million mark in box office receipts.

Expenses

Total expenses in the first six months of 2010 grew by P2.12 billion or 23% year-on-year to P11.32 billion, driven mostly by higher production costs and general and administrative expenses (GAEX).

Total programming hours of in-house produced primetime dramas, afternoon programs, and variety shows increased by 22% in the first six months of the year, as Channel 2 introduced more local programs in response to viewer needs as well as advertiser demand. Correspondingly, total production costs in the first semester of 2010 rose by P896 million or 30% to P3.84 billion.

Cost of sales and services grew by only 5% or P166 million to P3.49 billion, in line with the increase in consumer sales. ABS-CBN Global’s cost of sales grew 11% in peso terms from higher variable costs associated with the growth in IPTV subscriptions, even as its sale of services and goods rose by 9% year-on-year. Skycable’s cost of sales rose by only 5% year-on-year even as its subscription sales went up by 12%.

Total General and Administrative Expenses (GAEX) posted a 42% or P1.14 billion year-on-year increase to P3.82 billion, which includes P591 million for non-recurring employee costs including performance pay and pay adjustments to keep compensation packages competitive. Netting out the non-recurring employee costs of P591 million, recurring total GAEX growth is only 20%.

Net Income and EBITDA

As a result of continuing efforts to manage and control our expenses even with strong revenue growth, recurring net income reached P1.26 billion in the first half of 2010, 55% or P445 million more than the P813 million net income generated in the first half of 2009.

Net income from non-recurring political ad revenues amounted to P1 billion for the first semester of the year. Consequently, total reported net income for the first semester reached P2.27 billion, surpassing full year 2009 net income. This is also 179% or P1.45 billion higher than the year-ago period.

Net profit margin for the first half of the year is 13%, six percentage points higher than the 7% net profit margin in the first semester of 2009.

Recurring EBITDA for the first half of 2010 totals P3.56 billion, an improvement of P189 million or 6% over the recurring EBITDA of P3.37 billion in the same period a year ago. Adding non-recurring EBITDA from political ads of P1.44 billion, total reported EBITDA reached P5 billion, 48% or P1.63 billion higher than reported EBITDA in the first half of 2009. This translates to an EBITDA margin of 30% which is one percentage point higher than the EBITDA margin for the first half of 2009.

Capital expenditures

Capital expenditures and film and program rights acquisitions for the first half of 2010 amounted to P1.25 billion, P108 million or 8% lower compared than in the same period last year. The total CapEx budget for the year is P3.49 billion which is expected to be fully used up by the end of 2010.

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