NZME posts 0.5% gain in debut first-half earnings as costs fell faster than revenue

Friday 26th August 2016

NZME, the New Zealand media group awaiting Commerce Commission approval to acquire Fairfax Media’s local assets, posted a 0.5 percent gain in first-half pretax earnings as costs fell faster than revenue. Net profit jumped on a gain from the sale of its Australian Radio Network stake.

In its debut results as a separate, New Zealand-listed company NZME reported trading earnings before interest, tax, depreciation and amortisation of $32.5 million, from $32.4 million a year earlier. Revenue fell 7.9 percent to $197.8 million and costs declined 9.4 percent to $165 million.

Net profit jumped to $60.8 million from $21.9 million, including $125 million from discontinued operations offset by an income tax expense of $61.5 million. Tax included $17 million as its share of a $33.9 million settlement of a historical tax dispute with the Inland Revenue Department. APN New & Media, which spun off NZME in June, is paying the other half.

“NZME have delivered stable results in a challenging advertising market as well as listing on the NZX Main Board and ASX and completing the demerger from APN News & Media,” said chairman John Anderson.

APN spun off NZME via a distribution of shares to focus on its Australian assets. Rupert Murdoch's News Corp subsequently bought APN’s Australian regional newspaper business, leaving APN to focus on its radio stations and outdoor advertising business. News Corp owns 14.99 percent of NZME.

NZME shares last traded 82 cents, having listed at $1 amid speculation some Australian shareholders aren't natural holders of a New Zealand media business and represent an overhang of stock in the market, while uncertainty about the final shape of the company and the downturn in advertising revenue in the media generally capped the pool of potential buyers.

The company declared an inaugural interim dividend of 3.5 cents a share.

Revenue in its print division, which includes the NZ Herald and Herald on Sunday but excludes the impact of the closure of its unprofitable Pacific Magazines licensed business, fell 8.1 percent to $118 million in the first half.

Print advertising revenue, which contributed about 33 percent to NZME’s overall revenue in the first half, was “impacted by a tough agency market” although there were signs of improvement in the second quarter, it said. Print circulation revenue was little changed from a year earlier.

Its Radio and Experiential business, which includes Newstalk ZB, recorded a 6 percent decline in sales to $55.8 million, or 28 percent of NZME’s total revenue.

The company said Newstalk ZB “continues to dominate NZ Radio with the largest share, at 11.3 percent, of any commercial radio station in the market.”

Other radio revenue, including iHeart Radio and NZME Events reported first-half revenue of $2.2 million.

Digital revenue grew 19.5 percent to $23.9 million, which the company said was “driven by audience growth and the creation of new advertising units through product innovation and development.” E-Commerce revenue, relating mostly to GrabOne, fell about 21 percent with revenue “remaining under pressure as the business continues to evolve from a traditional daily deals site”.

This week the Commerce Commission delayed its decision on the proposed merger between NZME and Fairfax Media's New Zealand assets, saying the deal is complex and it needs more time to assess the impact on both news content and the advertising market. It now expects to release a draft determination in early November.

NZME didn’t give specific guidance for the full year.

“Against a sector backdrop of revenue pressures, NZME will continue to see the benefit of developments that have taken place already to grow audiences and revenue and will maintain a strong focus on costs and improving value to shareholders,” chief executive Michael Boggs said in a statement.

NZME had net debt of $97.8 million as at June 30 and undrawn bank facilities of $48 million.

BusinessDesk.co.nz

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