NZME lifts earnings guidance, refunds staff, updates dividend plan

NZME chief executive Michael Boggs. Photo / Dean Purcell

NZ Herald-owner NZME has lifted its earnings guidance and says it intends to reinstate dividend payments to shareholders next year following a better than expected revenue recovery from the Covid-19 crisis.

It is also refunding the balance of staff salary sacrifices that were taken up on a voluntary basis at the height of the pandemic crisis in April.

Shares were up 8 per cent to 67c as the market opened.

The media company said this morning it now expects operating earnings before interest, tax, depreciation and amortisation (ebitda) of $63 million to $66 million for the year to December 31, above the previous guidance of $60-63m.

NZME, which owns the New Zealand Herald, Newstalk ZB, the OneRoof property website and a suite of entertainment radio stations, also confirmed a revised capital management plan and dividend policy.

The company intends to pay dividends of 30-50 per cent of free cash flow subject to being within its target leverage ratio range of 0.5 to 1 times rolling 12-month trading ebitda.

That would be subject to capital requirements, operating performance and financial position and won't happen until after June 2021 given the terms of NZME's debt facilities.

Any return to dividend payments remains subject to the company's capital management plan and may change at any time at the board's discretion, the company said.

NZME's net debt at September 30, 2020 was $50.9 million, down from $55.2 million at June 30. The company is expecting net debt of less than $45m at December 31, 2020.

The improved forecast is on the back of a better than anticipated revenue recovery while costs continue to be closely managed, NZME said in a statement to the NZX.

Advertising revenues for the fourth quarter of 2020 are still expected to be down 7 per cent year-on-year.

Chief executive Michael Boggs told staff today the company would be refunding the balance of voluntary 15 per cent pay cuts taken during the height of the Covid-19 crisis.
This would be made at the next pay cycle, he said.

"While we expect advertising revenues for the end of this year to be 7 per cent lower than for the same period last year, thanks to the huge effort you're putting in right across our business, we continue to recover from the Covid crisis faster than we originally expected," Boggs said in an internal staff email.

"Given those continued improvements, I am thrilled to let you know that we will be refunding the balance of the salary reductions that many of you were able to make."

NZME said its new target level of debt gives it the flexibility to invest in areas of the business to grow shareholder value, whilst also returning value to shareholders through future dividend payments where economic conditions permit.

NZME shares closed Monday at 62c having recovered sharply from an all-time low of 18c in early April.