Franchise debacle widens ABS-CBN's net loss in 2020

MANILA, Philippines — It was a year of heartbreak for ABS-CBN Corp. in 2020 after a bitter battle with the government for its license and a pandemic-induced recession drove the embattled media company to a massive loss.

ABS-CBN dramatically widened its net loss to P13.5 billion in 2020 from P2.6 billion losses in the preceding year, the broadcast giant told the stock exchange on Tuesday. Earnings before interest, taxes, depreciation, and amortization (EBITDA), another gauge of financial strength, dropped a staggering 168.1% year-on-year to P6.2 billion.

Investors were already expecting the depressing financial results, which was belatedly released. At the end of the trading day, shares in ABS-CBN slightly inched down 0.34% to close at P11.60 each.

For Arielle Santos, equity analyst at Manila-based brokerage Regina Capital, a “rocky recovery” is ahead for ABS-CBN. Figures showed the financial hemorrhage continued for the Lopez-led network in the first quarter after incurring a net loss of P1.95 billion during the period.

“I only expect ABS to revert into profitability region once they get their hands on a new franchise,” Santos said in a Viber message.

There is basis to this assessment. Last year, consolidated revenues collapsed 50% annually to P12.4 billion on the back of 69.2% decline in advertising revenues, after ABS-CBN’s free TV and radio channels were shut when House lawmakers allied with President Rodrigo Duterte killed its application for a new 25-year franchise. In turn, advertising revenues, which typically contribute the biggest to total earnings, cornered a smaller 33% share in the revenue mix last year.

The denial of franchise also sent consumer sales plummeting 27.8% on-year to P14.4 billion after it prevented Sky Cable Corp., an ABS-CBN affiliate, from engaging in direct-to-home services and distribution of TV Plus Boxes, once thought a cheap alternative to satellite television and cable subscriptions. Adding to the network’s woes is the impact of the COVID-19 outbreak that forced it to cease various ancillary operations such as Heroes Burger, Kidzania Manila and Studio XP.

With much of its broadcast operations crippled, ABS-CBN said direct expenses fell 20.9% year-on-year to P33.5 billion. Broken down, production costs were reduced 21.5% on-year while cost of sales and services of its Food & Beverage, Live Experiences, TV Plus and Direct-to-Home business operations fell 28.3%.

The company also had to lay off thousands of workers in the middle to the health crisis to stay afloat, but this meant paying affected employees a total of P1.1 billion in retirement costs and separation benefits last year. Overall, general and administrative expenses dropped 14.3% compared to the previous year, figures showed.

So far, the company is redirecting its resources to a massive shift to digital and has entered into a block-time deal with Zoe Broadcasting to keep its TV shows airing. This allowed the company to rake in P1.01 billion revenues last year. At the same time, ABS-CBN sealed a standstill agreement with its existing lenders to prevent a default of its P21.48-billion outstanding debt.

But Regina Capital’s Santos believes the digital shift may take some time to pay off. “I think more time is needed before we can see this segment contribute to the firm as much as advertising revenues did back then,” she said.