NZME keeps focus on repaying debt over dividend as first-half profit tumbles
By Paul McBeth
Aug. 27 (BusinessDesk) - NZME's net profit sank 73 percent as the media group's advertising revenue fell faster than it could strip out costs, and the board is still focused on reducing debt over paying dividends.
Net profit tumbled to $950,000 in the six months ended June 30 from $3.7 million a year earlier as revenue fell 4 percent to $181.1 million. The bottom line was hit by a $3.1 million redundancy bill, up from $2.1 million a year earlier, and $1.1 million of costs from NZME's exit of the Ratebroker website and historical holiday pay adjustments.
NZME trimmed operating costs by 3 percent to $158.1 million, principally by cutting staff numbers and as smaller printing volumes cost less. Operating earnings before interest, tax, depreciation and amortisation fell 16 percent to $19.4 million.
"NZME’s audience and brand growth have taken place in an advertising market that continues to be challenging. Ongoing pressure on print and digital advertising, along with a small decline in print circulation revenues, have impacted the financial results in the period," chief financial officer David Mackrell said in a statement.
The media group's board eschewed declaring a final dividend at the end of 2018, instead choosing to focus on reducing the newspaper publisher and radio station operator's debt. The directors affirmed that intention today, and NZME's net debt fell to $90.2 million as at June 30 from $98.3 million at the end of December.
While on track to trim the debt load by $10-15 million in calendar 2019, NZME's weaker earnings meant the net debt to ebitda ratio remained at 1.8 times, above its target of 1-1.5 times.
The firm's net finance costs rose 14 percent to $2.4 million, although new accounting standards meant the reported finance cost was almost $5 million compared to $2.2 million a year earlier.
The media company's operating cash flow generated a net inflow of $18.3 million, compared to $3.1 million a year earlier. After spending on investment and financing, NZME held cash of $10.9 million at the end of June.
NZME's print operations - spearheaded by the NZ Herald newspaper - reported a 7 percent decline in revenue to $96.6 million. Ad revenue was down 8 percent, outperforming the wider market's 14 percent decline.
The radio unit - which The Radio Network stations such as Newstalk ZB, ZM and The Hits - increased revenue 0.2 percent to $53.5 million, its first increase in several years.
Digital revenue slipped 3 percent to $28.2 million due to an 8 percent decline in digital advertising. The classifieds business, which includes NZME's OneRoof property listings portal, reported revenue of $1.4 million compared to $200,000 a year earlier, and the Herald's new online subscriptions generated $200,000 of revenue from just two months of operation.
Chief executive Michael Boggs said the result was supported by strong growth in the company's digital initiatives. The company signed up 15,000 digital subscriptions, ahead of its 10,000 target for the year, while One Roof generated revenue of $1.3 million and lifted monthly unique browser numbers 33 percent to 297,000.
"While our ‘new kids on the block’, NZ Herald premium and OneRoof are already proving their potential value to NZME, there have also been some exciting highlights in our print business during the past six months," he said.
Boggs said there were signs of a recovery in the advertising market with third-quarter bookings up 6 percent from a year earlier, although he was wary of the softening economy and weak business confidence.
NZME shares last traded at 52 cents, and are up 4 percent so far this year.