MediaWorks confident of sorting out TV problem child after 2016 loss

Tuesday 30th May 2017

MediaWorks Investments, the free-to-air broadcaster owned by private equity firm Oaktree Capital, is confident a new strategy will turn around its television business after a poor performance in 2016 drove the bottom line into the red.

The Auckland-based company posted a net loss of $14.8 million in calendar 2016, due in part to $6.4 million of impairment charges on the TV business which left the value of that unit's goodwill and broadcasting licences at nil, according to accounts filed with the Companies Office. MediaWorks changed its balance date in the year-earlier period when Oaktree took full ownership of the media group, and it posted a $7 million loss in the 15 months ended Dec. 31, 2015.

In a presentation by chief executive Michael Anderson and chief financial officer Ciara McGuigan to provide like-for-like, revenue fell 5.7 percent to $298 million, driven by an 11 percent decline in TV ad sales to $130 million.

"The TV result, in particular, is a reflection of the disruption this business was operating in during the first half of last year and certainly the year before that," McGuigan said.

The TV unit's ability to meet revenue assumptions was raised as an uncertainty by the directors in notes to the accounts, and the carrying value of the division earned a qualified opinion by auditor PwC.

Anderson, who took over the reins in August last year, told BusinessDesk the decline in free-to-air television was a global phenomenon and while MediaWorks had lagged behind the market in 2016 he was confident a new strategy to try to lock-in prime time viewers for longer and compete against international content platforms with local fare would help it bounce back from a "disappointing" 2016.

While MediaWorks only had $10.3 million of programme rights commitments coming up in the current year, Anderson said local content wasn't cheap, but that there were opportunities to grab market share to grow top line revenue.

McGuigan said the business has "stabilised" since 2016 with the financials running ahead of budget as it nears the end of the first half.

"We're confident and comfortable about where we're performing - there's a difference in our financials compared to last year and in my opinion, that's a consequence of the focus and calmness that's come into the business," she said.

Part of the decline in TV advertising was due to the closure of the TV4 channel and introduction of Bravo, which the accounts show required a $4.5 million investment from Mediaworks.

The company went through a period of turmoil last year when then-CEO Mark Weldon departed following the resignation of long-running news anchor Hilary Barry during the integration of the news operation, and a shake-up of the board which saw Jack Matthews replace Rod McGeoch as chairman.

Despite the travails in TV, MediaWorks' radio business remained robust in 2016, with revenue largely flat at $156.9 million, while digital ad sales slipped to $11.1 million from $11.9 million.

MediaWorks' preferred measure, trading earnings before interest, tax, depreciation and amortisation, which also excludes one-off costs such as restructuring and long-term incentives, fell to $18.6 million in calendar 2016 from $19.1 million.

Oaktree continued to support MediaWorks with equity injections last year and pumped a further $8 million after the Dec. 31 balance date, having funded new capital projects over the past two years, however, Anderson said there weren't any plans for new investments.

The private equity firm is the company's biggest lender, with a $72.9 million loan, while Westpac New Zealand provides a $20 million working capital facility. MediaWorks was in breach of interest cover and leverage ratio covenants, which required it to seek a waiver from Westpac, and McGuigan said she expects the company to be back within the undertakings by September.

(BusinessDesk)

Comments from our readers

No comments yet