Michael Boggs says NZME has a "phenomenal reach". Photo / Michael Craig
Establishing a clear business plan and communicating it well with the mantra 'Keeping Kiwis in the Know" has paid big dividends for re-energised nationwide publisher and broadcaster NZME.
"In November 2020 we laid down a path through to 2023 to galvanise the business and create value. We have stayed on that path with clear goals and articulation," says NZME chief executive Michael Boggs.
"We have gone from a business that was unsure of itself with lots of debt to one that has cash in the bank and is redistributing $30 million to shareholders. This clearly shows the transformation of the business.
"It comes back to having strong brands and keeping Kiwis in the know. They want to be informed, entertained and at the centre of it all. It hit me when we were developing the Premium logo — if someone clicked through, then they were judging us on what they read. So, it forced us to focus on the quality of content," Boggs says.
Over the past year NZME has grown revenue market share and audience numbers to record levels, underpinned by digital transformation. And the market has noticed.
NZME's share price has risen from 18c in early April 2020 to $1.32 after it announced its latest annual result in late February. It reached a high of $1.46 on December 15 - and it sat at the same price when the market closed yesterday - and its market capitalisation has gone from $40m to nearly $261m.
NZME's revitalisation has earned the company top prize in the Most Improved category of the Deloitte Top 200 Awards, fending off other finalists Fletcher Building and PGG Wrightson.
Judge Neil Paviour-Smith, managing director of Forsyth Barr, says NZME is continuing a strong turnaround and has had "a very substantial re-rating" by the market.
"When you think about NZME, it was rated as a company with very little equity value in the business. Its revenue was fairly flat year-on-year with a changing mix of what was in the company and what wasn't. There were doubts about whether NZME would prevail."
Paviour-Smith says management has focused hard on containing costs and rationalising the business to improve the overall product. NZME sold GrabOne (for $17.5m) and bought BusinessDesk (for $5m) to increase the quality of its digital offering.
"NZME operates in a difficult sector with print media, and radio is the jewel in its crown. But looking at the metrics, they have had a substantial uplift in performance and profitability," he says.
For the 2021 financial year ending December, NZME achieved revenue of $349.2m, up 5 per cent; steady operating earnings (Ebitda) of $66m; and net profit of $34.64m, an increase of 134 per cent on the previous year's $15.4m.
Digital revenue grew 37 per cent to $79.5m, and audio advertising revenue was up 11 per cent to $101m. Advertising market share increased across all three key channels — 40.9 per cent in radio, 47.4 per cent in print and 24.3 per cent in digital display.
NZME is on track to meet its 2023 Ebitda margin growth for each of its three divisions — audio 15-17 per cent from 11 per cent in 2021; publishing 19-20 per cent from 18 per cent; and OneRoof 15-25 per cent from 2 per cent.
It paid off its $100m debt in three years and the balance sheet is so strong that NZME is returning $30m to shareholders by buying back shares on the market through to December.
When the digitally-focused NZME launched its new strategy in November 2020, it had three clear pillars:
• To be the country's leading audio company, with Newstalk ZB and ZM radio stations topping the ratings in their different segments;
• To make the Herald accessible to everyone and become 'New Zealand's Herald';
• To make OneRoof your complete property destination.
Since the NZ Herald Premium brand was introduced in April 2019, NZME has grown Herald print and digital subscribers to 191,000 and digital-only subscribers to 83,000. About 50 per cent of the subscribers are using the (paid for) premium services, and another 50 per cent of advertising is now generated from the digital platform.
NZME's three business divisions are together reaching 3.5 million New Zealanders. "We are getting to 85 per cent of people in the country aged 12 years and more," said Boggs. "That's a phenomenal reach.
"We've had a strong news year and something I'm proud of is our 90 per cent vaccination campaign. The Government wasn't prepared to put a target figure on it, but we saw the campaign as part of responsible reporting and leading the way on key issues," he says.
"The whole team of 1200 has come together and worked hard to galvanise the whole business. There's lots of talent and it's amazing when you harness it and put it together — it just shows the power of the brand," Boggs says.
Finalist: Fletcher Building
Fletcher Building chief executive Ross Taylor is excited that the company was nominated as a Top 200 award finalist.
It was validation for the turnaround in the Fletcher Building business. "When it came to Fletcher Building everyone had an opinion on it. Having got to where we are now, the mood has changed and we are better regarded," said Taylor.
"I've been very consistent over the past few years that we will get to an ebit (earnings before interest and tax) margin of 10 per cent by the full year 2023.
"I guess it takes years to get the trust back, but we are well on the way."
Bogged down by debt of $2.3 billion at the start of 2018 and its construction division under all sorts of pressure, Fletcher Building concentrated on stabilising the business, reduced its footprint in Australia and New Zealand, and then pushed hard in overall operational performance.
It had to suck up $1b in provisions on the construction division. Fletcher Building sold Formica Group for $1.226b and Roof Tile Group for $60 million, settled its troublesome Australian business down, reduced the construction backlog and grew the residential division.
By the end of June 2021, Fletcher Building had re-created a strong balance sheet with net debt of $173m and liquidity of $1.6b. So strong that the company is now on the market buying back shares through to June 2022 and returning $300m to shareholders.
In its latest financial result, Fletcher Building achieved revenue of $4.064b, up 2 per cent; operating earnings (ebit) of $332m, up 3 per cent; and net profit of $171, up 41 per cent, for the six months ending December 2021.
Once the construction legacy work is cleared in full-year 2022, the division's margin will lift to 3-5 per cent.
Fletcher Building, which employs 16,000 people, builds 800 dwellings a year in New Zealand and has the land and footprint to increase the rate to 1300 a year. It has an offsite manufacturing facility in Auckland that makes walls, roofs and floors for houses.
Judge Neil Paviour-Smith says Fletcher Building went through a period of significant problems and under-performance but a new board of directors and management focused on consolidation and improving the underlying business.
"Fletcher has had a significant turnaround in profitability and they are exposed to a booming housing and construction sector, though they have challenges with chain supply constraints and import competition.
"Their balance sheet has gone from being stretched to a very strong financial position, with very modest gearing. Fletcher is worthy of being a most improved finalist, putting runs on the board in their two to three-year turnaround journey," says Paviour-Smith.
Finalist: PGG Wrightson
Rural services firm PGG Wrightson has been around for 165 years in one form or another — but it needed a new impetus as the long-established business foundered.
Then PGG Wrightson sold its capital-intensive seeds business for $410 million in 2019. "This allowed us to restructure the balance sheet to the right size of the business and reset our strategic direction," says chief executive Stephen Guerin.
"We asked ourselves 'what does a traditional stock and station business do?' We focused very much on growing retail and supplying the horticulture, livestock, wool and rural real estate sectors.
"We expanded our research and development team to provide new technology for our clients — at present we are involved in 80-odd product trials in the horticulture sector," says Guerin.
PGG Wrightson introduced the Go-Stock programme. The company buys the sheep, cattle and deer, and organises farmer clients to graze the livestock for weight gains and improved prices for beef, lamb and venison.
The company established an online auction platform called Bidr which generated $50m in sales for the year ending June. Bidr goes live to all the saleyards around the country.
PGG Wrightson is also distributing exclusive agriculture chemicals and animal health products that don't have a logistical network in New Zealand.
"We are in a good place and can afford the opportunity of seeing growth in our people and business. We pride ourselves on our relationships with clients and being an integrated provider for the agricultural sector," says Guerin.
For the June 2021 financial year, PGG Wrightson reported revenue of $847.8m, up 7.6 per cent; operating earnings (Ebitda) of $56m, up 33 per cent; and net profit of $22.7m, an increase from $15m.
Then PGG Wrightson reported a record half-year result to December with revenue up 11 per cent to $552.4m; operating earnings (Ebitda) increasing 20 per cent to $47.4m, and net profit rising 32 per cent to $22.5m compared with the previous corresponding period.
For the 12 months ending June PGG Wrightson reported revenue of $847.8m, up 7.6 per cent; operating earnings (Ebitda) of $56m, up 33 per cent; and net profit of $22.7m, an increase from $15m.
Neil Paviour-Smith says PGG Wrightson controversially sold its seeds business and it has been on quite a journey in recent years rationalising its business and focusing on capital management.
"It is concentrating on its absolute core business, improving its margins, taking its indebtedness to zero, and picking up market share. From a flat performance PGG Wrightson has shown evidence of an uplift and has been re-rated by the market," he says.
• The Most Improved Performance award is sponsored by BusinessNZ.
OPINION: Tensions are likely to become more evident next year.