Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZME pays smaller dividend than expected as earnings sink

NZME pays smaller dividend than expected as earnings sink, reviewing policy

By Paul McBeth

Aug. 23 (BusinessDesk) - NZME will pay a smaller interim dividend than analysts expected as first-half earnings almost halved on declining print revenue and as weak business confidence dented radio agency advertising.

The Auckland-based media group will pay an interim dividend of 2 cents per share on Oct. 26 with an Oct. 16 record, down from 3.5 cents a year earlier. First NZ Capital had predicted a dividend of 3 cents and Forsyth Barr forecast a 2.8 cents per share payment.

NZME chair Peter Cullinane and chief executive Michael Boggs said the dividend reflected "lower earnings available for distribution, partly due to the investment in digital classifieds and continued revenue challenges".

Underlying profit dropped 44 percent to $5.5 million, or 2.8 cents per share, meaning the dividend ratio was in the middle of NZME's policy to pay 60-to-80 percent of underlying profit.

That policy is up for review, with the newspaper publisher and radio operator hiring an external adviser to assess the company's capital management and to help refinance $160 million of banking facilities that expire in 2020.

"Part of that advice will involve reviewing our capital structure and dividend policy," it said.

NZME has been reinvesting into its business to find new income streams as the media industry goes through a fundamental shift where global giants such as Facebook and Google have cornered the market in online advertising, while newspaper publishers have tended to give their content away for free, undermining the value of their paid hard-copy publications.

The media group will launch a 'freemium' model in the second half of this year, giving away day-to-day news and current affairs to drive traffic, while charging for indepth analysis and opinion.

"A key focus will be on enhancing user experience and offering subscription bundles for print and online content that provide value to customers," it said.

That investment has included digital ad products such as the OneRoof property, Yudu jobs and Driven cars brands, which it will pitch against Trade Me's dominant online classified business.

"While we are broadly satisfied with our revenue performance, our earnings were lower partly due to our strategy to increase spending in specific areas to pursue medium term growth," Boggs said. "These investments are integral to achieving our medium term growth objectives."

Annual earnings before interest, tax, depreciation and amortisation will "reflect underlying business decline and investment in digital classifieds," he said.

NZME's cash flow statement shows it increased capital spending to $7.1 million from $6.8 million a year earlier at a time when operating cash flow more than halved to $3.1 million due to the timing of a tax bill. That saw it draw down more heavily on bank debt to cover $11.8 million of dividend payments.

FNZC said in an earnings preview that it's too early to make "significant judgments" on NZME's new investments, but "it will be interesting to see if NZME adjusts dividend policy in favour of ongoing debt repayment and greater investment in the digital initiatives".

The stock had been trading at a dividend yield of 11 percent at a time when low interest rates have attracted investors wanting stable returns. It last traded at 83 cents, and has declined 5.7 percent so far this year.

The media company's net profit dropped 53 percent to $3.7 million on a 3 percent decline in revenue to $185.7 million. The bottom line was weighed down by increased redundancy costs of $2.1 million and $400,000 spent on external consultants "assisting with the proposed merger with Stuff Ltd and the continuing integration and co-location of NZME".

NZME and Fairfax Media Group's Stuff are appealing the rejection of a merger.

The company's drag on earnings, which missed analysts' expectations, came from a 6 percent decline in print revenue to $103.6 million and a 3 percent fall in radio revenue to $48.8 million.NZME said deteriorating business and consumer confidence weighed on advertising markets in the period. Digital and e-commerce revenue grew 17 percent to $23.9 million.

That contraction in the wider advertising market has continued into the third quarter, although NZME has increased its market share.

The company said cost cutting programmes are slowing and are "not expected to be sufficient to offset softening advertising revenue in the underlying business". It will also incur extra costs from investments in digital classifieds, it said.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Frog Recruitment: Kiwi Workers Reluctant To Make Business Trips Across The Ditch Despite Trans-Tasman Bubble Opening

When the trans-Tasman travel bubble opens today, many Kiwi companies won't be rushing to buy an air ticket, reluctant to cross the ditch to do business. The latest survey conducted by leading recruitment agency, Frog Recruitment of nearly 1,000 New Zealand ... More>>

Tourism: Employers Welcome Back Working Holidaymakers

Tourism businesses gearing up for the return of Australian visitors from next week will be relieved to learn that they will also have access to an offshore pool of much-needed job candidates, Tourism Industry Aotearoa says. Tourism employers around ... More>>

Commerce Commission: Latest Broadband Report Confirms Improved Performance Of Premium Fibre Plans

The latest report from the Commerce Commission’s Measuring Broadband New Zealand programme shows that the performance of Fibre Max plans has improved substantially. This follows a collaboration between the Commission, its independent testing partner, ... More>>

Air New Zealand: Capital Raise Deferred

Air New Zealand has decided to defer its planned capital raise to later in 2021 allowing more time to assess the impacts of recent developments on the airline’s path to recovery. 'We’ve seen some clearing of COVID-19 clouds recently, with ... More>>

Stats NZ: New Report Shows Impact Of Demands On Land In New Zealand

A new environmental report released today by the Ministry for the Environment and Stats NZ, presents new data on New Zealand’s land cover, soil quality, and land fragmentation. The land cover data in the report, Our land 2021 , provides the most ... More>>


Stats NZ: March Card Spending Rebounds Despite COVID

There was a lift in retail card spending in March following a fall in the lockdown-disrupted February month, Stats NZ said today. Seasonally adjusted retail card spending rose by $53 million (0.9 percent), compared with February 2021. Visit our website to read ... More>>

PwC: Outcome Of Review Into Air New Zealand Gas Turbines Business

Air New Zealand has received the report into its Gas Turbines business from independent external advisers PwC. Air New Zealand Chairman Dame Therese Walsh says the report identified a range of effective controls in the Gas Turbines revenue contracting ... More>>