News blog
Ten Alps
- BY: Andrew Hore |
- POSTED: 15/10/2010 |
Ten Alps says that the government is cancelling its Teachers TV contract, which has been an important revenue generator and an effective blueprint to help the company set up other themed services.
Shares in Ten Alps fell by one-third to 10.5p each following the news, valuing the media content and marketing company at £7.75m.
Ten Alps says that it has received notification that the Department for Education will terminate the Teachers TV project on 29 April 2011.
Ten Alps is the majority shareholder of the UK government-funded Teachers TV (www.teachers.tv), which has been broadcasting for more than five years. This has historically been a strong contributor to the content side of the business but recent performance payments have been lower than before because the terms had been changed. The service has migrated from satellite and cable to online and that will save money, but the government obviously thought that it was not enough.
Ten Alps says that it is considering its options. The company is also undertaking a corporate reorganisation in order to reduce its overheads. It will be difficult to find sponsors or a revenue stream to completely replace the government’s money but Ten Alps may still be able to run a service under the Teachers TV name.
At the time of its full year figures, Ten Alps said the contract lasted until 2013 but it had a six-month notice period. The accounts also said that the business represented £10m-£11m of annual revenues. The loss of this revenue will undoubtedly hurt Ten Alps whose revenues were £66.1m in the year to March 2010. It is even more worrying for the content division, though because Teachers TV accounts for around one-half of its revenues. Last year’s group operating profit was £4.45m, although most of that came from the communications division.
The minority interest in the post-tax profit is small and gives an indication of the profit contribution, although this also includes a Far East business. That suggests that the profit produced by Teachers TV may have been small as a percentage of the total profit. However, that may be because overheads were loaded onto that part of the business.
Ten Alps chief executive Alex Connock has talked in the past about potential interest in the Teachers TV concept in other territories. He was particularly keen on the US market where he felt there was a big gap in the market. Ten Alps has sold the Teachers TV format to the Canadian market and is negotiating a deal in Thailand and other markets.
Whether the cancellation of the UK service will scupper this international expansion is yet to be seen.
Online science channel Newton TV is being tested thanks to a grant from the North East’s development agency. “The online science channel is set to be a joint venture with the Science Museum, Open University and Royal Institution in which Ten Alps will be majority shareholder”, according to the Ten Alps accounts. The model assumes commercial and foundation content sponsorship but it is yet to launch. Whether these joint venture partners will still have the cash to back this venture must be uncertain at this time.
Ten Alps will have to reassess its whole business to make sure that it has an appropriate cost structure for a smaller business.
Net debt was £5.3m at the end of March 2010 and around £1.2m was raised at 22.3p a share just after that. However, much of that cash raised will have gone into the development of Newton TV. The net asset value is more than three times the market value but nearly all of the NAV is covered by goodwill. Then again, Ten Alps does have some valuable assets, although there may be a requirement to reassess that goodwill figure.
A fortnight before the Teachers TV news Herald Investment Management bought 2m shares taking its shareholding in Ten Alps to 17.4%. In April it bought 1m shares at 22.3p a share.
Download the October edition of AIM Journal at http://www.hubinvest.com/AIMPDFOctober2010_13.pdf
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