ABS-CBN’s recurring ad revenues grow 45% in 1st Quarter 2010, profits reach P1.08B


I Love You, Goodbye (top frame) and Miss You Like Crazy (bottom frame) topped P100 million in box-office receipts, according to an investor report prepared by ABS-CBN.


For the first three months ending March 31, 2010, ABS-CBN Broadcasting Corporation reportedly generated consolidated revenues of P7.75 billion from advertising and consumer sales.

According to an investor report furnished to PEP (Philippine Entertainment Portal) by Charles Gamo, head of Investor Relations, this figure is P2.46 billion or 47% higher year-on-year.


The report also states that the core net income (profits) of ABS-CBN jumped nearly six-fold to P1.08 billion in the first quarter of 2010. Executives attribute this increase to the 45% rise in recurring advertising revenues, complemented by non-recurring advertising revenues from political ads that boosted growth in total advertising revenues to 83% year-on-year.


Recurring net income amounted to P667 million after deducting income attributable to non-recurring election-related advertising revenues. This translates to a 249% increase year-on-year over the P191 million net income in the first quarter of 2009.


ADVERTISING REVENUES.
Recurring advertising revenues, mainly from regular advertisers, grew by P1.26 billion or 45% to P4.02 billion as a result of an 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 the Kapamilya Network in the first three months of the year grew 41%, largely driven by the 23% year-on-year increase in advertising minutes sold to regular advertisers. This is attributed to "strong national ratings and audience share."


Because of the 2010 automated national elections, non-recurring election-related advertising revenues amounted to P1.04 billion. All together, total advertising revenues across all platforms and subsidiaries reached P5.06 billion in the first three months of the year, P2.29 billion—83% higher than they were in the same period in 2009.


Strong growth in advertising revenues pushed its contribution share to consolidated revenues to 65%, reducing the relative contribution share of consumer sales to 35%. Minus the non-recurring election-related advertising revenues, the contribution share of consumer sales to consolidated revenues is 40%.

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CONSUMER SALES. Consumer sales for the first quarter amounted to P2.69 billion. This is P170 million more than consumer sales of P2.53 billion in the first quarter of 2009, a relatively slower growth of 7% year-on-year.


The substantial appreciation of the Philippine peso against the U.S. dollar between the 1st Quarter this year versus the same period a year ago tempered ABS-CBN Global’s revenue growth of 11% in U.S. dollar terms to 7% in peso terms. ABS-CBN Global’s 13% growth in overall viewer count to an estimated 2.2 million at the end of March 2010 was driven by strong double-digit subscriber growth in cable TV and IPTV subscriptions.


The investor report indicates that SkyCable’s low-priced postpaid cable TV offering Sky280 and SkyBroadband services have been well-received by their target markets. Correspondingly, SkyCable’s revenues from cable TV and broadband services grew 14% year-on-year.


ABS-CBN Film Productions, Inc. released three films in the past few months. Two of these—the Metro Manila Film Festival entry I Love You, Goodbye and Miss You Like Crazy—topped P100 million in box- office receipts, earning blockbuster status by local standards.


EXPENSES.
Total expenses grew by P996 million or 22% year-on-year to P5.44 billion. ABS-CBN believes that this was driven mostly by higher production costs and general and administrative expenses (GAEX).

Total production costs in the 1st Quarter of 2010 rose by P388 million or 27% to P1.8 billion, as total programming hours of in-house- produced primetime dramas, afternoon programs, and variety shows increased by 25% in response to viewer needs as well as advertiser demand.


Cost of sales and services grew by only 2% or P32 million to P1.70 billion with ABS-CBN Global’s cost of sales remaining flat in peso terms, even as its sale of services and goods rose by 7% year-on-year. Skycable’s cost of sales also remained nearly flat, registering only 1% growth year-on-year even as its revenues went up by 14%.

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Total General and Administrative Expenses (GAEX) posted a 51% or P624 million year-on-year growth to P1.85 billion, which includes P261 million of one-time expenses for performance bonus accruals and consultancy fees.

Net of these one-time expenses, recurring consolidated GAEX amounts to P1.59 billion with a correspondingly lower 30% year-on-year GAEX increase for the first quarter of 2010, mostly from an increase in personnel expenses for salary adjustments to make the Company’s compensation structure more competitive, increased provisioning for doubtful accounts and higher research and survey expenses.


Mr. Gamo pointed out in his report: "While the growth in the major expense buckets seems high, these are programmed and are well within expectations and within budget."


NET INCOME AND EBITDA.
As a result of executives’ continuing efforts to manage and control its expenses even with strong revenue growth, core net income reached P1.11 billion in the first quarter of 2010, 5.8X or P924 million more than the P191 million posted in the first quarter of 2009. After deducting a P28.6 million accounting adjustment required under Philippine Financial Reporting Standard 3, the reported net income attributable to shareholders for the first quarter of 2010 is P1.09 billion, 5.7X or P896 million higher than in the first quarter of 2009.


Net of P420 million derived from non-recurring advertising revenues, recurring net income amounts to P667 million, which is 249% higher than or is 3.5x the recurring net income of P191 million a year ago.


EBITDA (earnings before interest, taxes, depreciation, and amortization) for the first quarter of 2010 reached P2.44 billion, yielding an EBITDA margin of 31% and is 80% higher than EBITDA of P1.35 billion in the first quarter of 2009. After netting out P600 million EBITDA from non-recurring advertising revenues, recurring EBITDA for the first quarter of 2010 totals P1.84 billion. This translates to an EBITDA margin of 27% and is 36% higher than recurring EBITDA a year ago.

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Capital expenditures and film and program rights acquisitions for the first quarter of 2010 amounted to P486 million, P153 million or 24% lower year-on-year.


ABS-CBN maintained its national audience share and ratings leadership with total-day audience share averaging 47% in the first quarter. For the period January to March 2010, the first 16 programs and a total of 18 of the Top 20 programs were from ABS-CBN, based on the Taylor Nelson Sofres National Philippines Television Audience Measurement service. The top 10 programs in that list enjoyed ratings of at least 30% and audience shares ranging from 48% to as high as 60%.


Primetime programs launched in the first quarter of 2010–Agua Bendita, Kung Tayoy Magkakalayo and Pilipinas Got Talent–enjoyed national program ratings in the mid-to high 30s, according to data from TNS.


ABS-CBN also considers Tanging Yaman’s ratings of 25.2% as high for its 6 pm timeslot.

(CLICK HERE to related article about ABS-CBN’s financial gains in 2009)


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