Focus: NZME CEO Michael Boggs shares the news from the 2019 financial results plus the future prospects to acquire Stuff.
NZME full-year
Cost-cutting measures lifted NZME's operating profit 4 per cent to $19.7 million last year but the media company has reported a net loss of $165.2m after deciding to impair the value of intangible assets to account for a lower share price.
NZME, which owns the NZ Herald, several radio stations including Newstalk ZB and online resource tools OneRoof, said a challenging advertising market continued to affect print and digital advertising, together with declines in print circulation revenue.
However, the company has made progress with its digital subscription model and now has more than 46,000 NZ Herald Premium subscribers including more than 21,000 paid premium digital subscribers and 25,000 print subscribers who have activated their accounts. Digital subscriptions generated $1.7 million revenue in the first eight months since launch.
Operating earnings before interest, tax, depreciation and amortisation fell 7 per cent to $50.6m, slightly ahead of analyst expectations (Jarden was forecasting $50.2m). Taking into account one less publishing week compared to the previous year, Ebitda decreased by 5 per cent and grew in the second half of 2019 compared to the equivalent period in 2018.
NZME revenue
NZME said it has impaired the carrying value of non-amortising intangible assets as at December 31 to account for a difference between the value of the company implied by its share price and the accounting value of equity.
"This is an accounting charge only with no change to cash flows and no impact on bank covenants."
The result of this impairment reduces the carrying value of net assets from $1.46 per share as at 31 December 2018 to $0.59 per share as at 31 December 2019.
NZME shares closed yesterday at 33c and have fallen 32 per cent over the past 12 months.
Capital expenditure was lower at $11.8 million, compared to $14.1 million in 2018, and the company made further progress in reducing debt.
Net debt was $74.7 million at December 31, 2019, a significant reduction from $98.3 million one year earlier. Net debt to operating Ebitda was 1.5 times for the 2019 financial year, a decrease from 1.8 times for the 2018 financial year.
Directors elected not to declare a final dividend with respect to the 2019 financial year as the company continues to target a net debt reduction of between $10 million and $15 million per year.
Radio continues to shine
NZME's radio assets continued to perform well with an increase in revenue growth of 2 per cent compared to 2018 and growth of 5 per cent in the second half.
Radio audience market share increased to 35.9 per cent in December 2019 (up from 34.9 per cent in December 2018) and radio revenue market share increased to 39.5 per cent for the 12 months to December 2019 (up from 39.0 per cent for the 12 months to December 2018).
Print revenue was $192.4 million in 2019 – including print advertising and circulation revenue – a decline of 9 per cent from 2018.
"While this was disappointing, this is reflective of the challenging print environment in New Zealand," NZME said.
NZME's combined radio, digital and print audience of 3.2 million New Zealanders represents 80 per cent of the New Zealand population. NZME print readership is 1.3 million weekly print readers, with the NZ Herald weekly brand audience of 1.7 million people while NZME digital platforms reach 2.3 million digital users per month.
Acquisition update
As previously announced, NZME has sought the Government's support to buy rival media company Stuff, which is owned by Australian media company Nine.
The two companies previously had a merger proposal blocked by the Commerce Commission, which cited concern that the resulting entity would control too much of the print and website media.
NZME said today it was actively engaged with the Government regarding a proposed transaction that would involve the Stuff newsroom being transferred to an NZME subsidiary company in which a Kiwi Share would be held by the Government.
"The impact of big international players continued to put pressure on the New Zealand advertising market," the company said.
"In an already highly competitive local media market, there simply aren't enough advertising dollars and not a large enough audience market to sustain New Zealand's current industry structure.
"An acquisition of Stuff is aligned with NZME's strategic priorities, our commitment to protecting the craft of journalism."
NZME's proposal to acquire Stuff is being considered by Broadcasting Minister Kris Faafoi. Photo / File
NZME outlined several expected benefits from a deal including the creation of a stronger and more sustainable media presence, enhanced audience and advertising proposition, cost savings and synergy benefits and increased financial scale.
"While no agreement in relation to the transaction has been reached, we continue to progress towards obtaining the required regulatory approvals," NZME said.
The proposed transaction is subject to the Government's agreement to hold the proposed Kiwi Share, NZ Commerce Commission clearance, agreement with Nine, shareholder approval and finance.
In December, NZ First leader Winston Peters threw his support behind NZME buying Stuff, saying such a deal was in the "national interest".
Peters recently has said his party would support NZME's proposal to make specific editorial commitments under a $1 'Kiwishare', which the government would own in the merged entity and which would give a time-limited guarantee to keep journalists employed and existing titles open.
NZME's latest proposal is being considered by Broadcasting, Communications and Digital Media Minister Kris Faafoi.
