was thinking about this one but not after todays report in the paper, must have been an announcement yesterday. Does anyone think the US has found a temporary bottom?
Survival prospects slim for TMS By Cosima Marriner October 1 2002
Television & Media Services has confirmed what most investors already suspected - its prospects of survival are slim.
In its annual report released yesterday, TMS directors admitted there was "significant uncertainty" as to whether the company will "continue as a going concern". TMS ended 2002 awash in red ink, after a swathe of writedowns - mostly related to the Val Morgan cinema advertising division - cost the company a $76 million loss.
TMS directors also confessed the company breached some banking covenants last year and was likely to breach further covenants this year. Although TMS's banks waived the 2002 covenant breaches, it said it was unclear whether they would waive future breaches.
TMS's survival hinges on its bankers agreeing to continue to fund the company.
TMS had just $6 million cash left in the bank at the end of June. Its bank facilities amounted to $80 million.
TMS must also persuade major cinema chains Hoyts, Village Roadshow and Greater Union to renegotiate crippling cinema rental agreements struck with Val Morgan. The division has not been able to sell enough advertising to cover the high rents it must pay. TMS revealed it had suspended its payments to the cinema chains as it attempted to negotiate lower fixed rents. TMS shares have plummeted 73 per cent since the $76 million loss was revealed. The stock closed at 6c yesterday, down 1c.
Val Morgan booked an $8.9 million operating loss in 2002, a sharp turnaround from the $631,000 profit made the previous year. The "severe" advertising downturn, expensive theatre rental agreements and the acquisition of MEG in mid-2001 combined to drag Val Morgan into the red.
In an attempt to rescue Val Morgan from the brink of financial collapse, TMS has engaged Investec Wentworth to conduct a strategic review. Val Morgan's US arm, VMI, was sold to New York screen advertising group Screenvision late last month.
TMS is now restructuring the remaining Val Morgan operations in Australia, New Zealand, South America and the United Arab Emirates as an "urgent priority". TMS admitted the restructure was "imperative" if Val Morgan were to stay afloat.
Market watchers believe the Val Morgan Australian business must be sold if TMS is to have any hope of survival.
Kerry Packer has been mooted as a potential buyer. Mr Packer already owns 15.75 per cent of TMS, held through PBL and Consolidated Press Holdings. He also privately owns the Hoyts cinema chain.
TMS Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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