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TVNZ posts 6.2% decline in first-half earnings as ad revenue falls faster than expenses

Wednesday 22nd February 2017

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Television New Zealand posted a 6.2 percent decline in first-half earnings as advertising revenue fell faster than operating costs, which the state-owned broadcaster said was a creditable performance in a declining TV market.

Earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments fell to $26.7 million from $28.5 million a year earlier, the Auckland-based company said in a statement. Advertising revenue fell 5 percent, or about $8.7 million, to $159 million while operating expenses dropped 5.4 percent, or $8.1 million, to $142 million.

Chief executive Kevin Kenrick said TVNZ had outperformed the broader TV market by increasing its audience and revenue share in what he said was a period of unprecedented change for the media industry. New Zealand's television advertising revenue market fell by 8.4 percent in the first half.

The first-half performance gave him confidence TVNZ would achieve the full-year target set out in its 2017 statement of performance expectations, which the broadcaster's board is required to provide for its government shareholders.

That document shows an earnings before interest and tax target for the year ending June 30 of $9 million, almost half of the $22.6 million it achieved in 2016. It didn't give a projection for total shareholder returns for the 2017 year, having recorded a 31 percent decline last year. Its return on programme investment, or operating margin, is projected to slip to 40.7 percent from 42.4 percent.

Kenrick said free-to-air television "continues to provide unrivalled daily reach compared to other media options" but increasingly audiences were "showing up online". TVNZ is planning to launch a new website shortly, offering live TV and on-demand viewing, it said.

"While the ongoing fragmentation of viewing audiences will continue to impact free-to-air audiences we expect the second half of the financial year will bring some certainty around the local market structure as the outcomes in relation to the mergers between Sky/Vodafone and NZME/Fairfax are determined," Kenrick said.

The Commerce Commission is scheduled to hold a briefing tomorrow morning on the Sky-Vodafone proposal.

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