NZME upbeat on advertising market

NZME held its annual general meeting on Wednesday afternoon. Photo / Jason Oxenham.

News and entertainment group NZME is seeing signs of life in a sluggish advertising market, but is still focused on keeping a lid on mounting costs as the country lumbers towards recession.

Chief executive Michael Boggs told shareholders at today’s annual meeting in Auckland the firm’s advertising revenue fell in the March quarter from a year earlier, which had been bolstered by the Ministry of Health’s Covid-19 spend-up, extending the softer period from the December quarter.

That has been compounded by the slump in New Zealand’s property market, where sales have tapered off and prices have unwound the turbocharged gains of recent years.

Still, Boggs said advertising booking trends are improving, although he was less upbeat about the pace of recovery in real estate listings.

”May 2023 advertising revenue bookings to date reflect an improving trend for NZME,” he said.

Media companies often feel a slowing economy earlier than other industries as their customers pare back advertising spending to shore up their own balance sheets, and economists predict New Zealand will slide into recession later this year.

Still, NZME’s cautious optimism about the state of the advertising market follows stronger-than-expected ad revenue from Google-parent Alphabet, which reported a smaller decline in ad revenue than Wall Street analysts had predicted.

NZME’s Boggs reaffirmed his commitment to keeping a lid on costs in an inflationary environment, and the company retained its forecast to report earnings before interest, tax, depreciation and amortisation (Ebitda) of between $59 million and $64m in calendar 2023.

NZME, which owns a number of the country’s major radio stations, newspapers and news websites including nzherald.co.nz, reported Ebitda of $64.7m in calendar 2022.

Chair Barbara Chapman, who was up for re-election at the meeting, told shareholders the board wants the company to operate at the lower end of its target leverage ratio of 0.5-to-1 times Ebitda and is committed to returning excess capital to its owners.

NZME completed a share buyback plan in December, buying 14.7 million shares, or 7.4 per cent of shares on issue, for $17.5m, or roughly $1.19 per share.

Chapman said the board will review whether to run another buyback programme as part of the first-half result to be announced in August.

In response to a question, Chapman agreed the share price could and should be better, and reiterated the board’s capital management initiatives to try help lift it higher.

The board tracks how the share price performs against its Australian and NZ peers, and Chapman noted there’s a “definite sentiment in the market on all New Zealand shares”.

Another shareholder thanked the board for its effort in turning around the company, saying he bought in at around 20 cents.

Boggs told shareholders he’s trying to raise the profile of the company, including expanding analyst research beyond the sole coverage by Jarden.

NZME’s shares traded at $1.07 in mid-afternoon trading on the NZX up 0.9 per cent on the day.

Chapman - who retired by rotation - was re-elected by shareholders as a director of the company. More than 95% of shareholder votes supported the resolution for her re-election.