NZME getting its Stuff together
Media company NZME declares itself the "right owner" of Stuff and gives more details of its push for political and regulator support.
NZME expects further details of its proposed bid to buy rival Stuff to be made public in "coming weeks" - and any Kiwishare offered to the Government to be lasting, but subject to changes in conditions in the media market.
The company's chief executive, Michael Boggs, told investors as part of the 2019 annual results presentation while the StuffMe II proposal would require the Government to accept the Kiwishare plan, NZME expected metrics within the agreement to be "open to discussion" later if competition against the combined company became stronger.
NZME had won support from NZ First leader Winston Peters for a Kiwishare over a subsidiary company of NZME that would hold the Stuff mastheads and journalist numbers at agreed levels. Other political parties have been more circumspect in their reactions.
NZME "firmly believes it is the right owner for the Stuff Ltd business," Boggs said, and had been "engaged with the Government" on the proposal and was encouraged by the progress to date.
"We continue to press hard on it. We don't think it will be too far away - in coming weeks - to be able to say more."
NZME has already started spending on "costs in relation to the potential acquisition of Stuff" as part of $3m of exceptional items in 2019.
Boggs' presentation said buying Stuff met NZME's strategic priorities of "creation of a stronger and more sustainable media presence" as well as providing a bigger audience and advertising presence, cost savings and increased financial scale.
"The proposed Kiwishare arrangement imposes certain obligations on NZME and Stuff to address the competition concerns that were ultimately upheld by the Court of Appeal in 2017."
The company said: "The impact of big international players continued to put pressure on the New Zealand advertising market. In an already highly competitive local media market, there simply aren't enough advertising dollars and not a large enough audience market to sustain New Zealand's current industry structure.
"What has been pleasing to see is the great importance that New Zealanders place on the need for quality local journalism, for trustworthy in formation, and for the opportunity to engage as communities in the stories that impact close to home."
NZME owns the New Zealand Herald, regional newspapers, Newstalk ZB and a range of music radio stations. Stuff owns the country's largest news website, metropolitan papers in Wellington and Christchurch, two Sunday papers and a stable of regional and community papers, plus separate digital services businesses providing broadband and video viewing.
A previous bid by the two companies to merge, StuffMe I, was rejected by the Commerce Commission, High Court and Court of Appeal. The previous owner of Stuff, Fairfax Media, sold out to Nine Entertainment, which has tried but failed to sell the New Zealand business.
On the renewed bid to buy Stuff, Boggs told analysts: "We fundamentally believe in the future of journalism. So the commitment we would be making along those lines is to protect journalism for a period of time which gives us the opportunity to synergise across the rest of the business."
NZME declared a net loss of $165m for the year, but only because of a write-down of the goodwill in its business from $70m to nil, and of the value of its newspaper mastheads from $147m to $74.3m.
Its ebitda (earnings before interest, tax, depreciation and amortisation) for 2019 was down 7 percent on the year before, from $54.7m to $50.6m.
The Stuff deal apart, the company's results highlighted the performance of its radio division which grew its advertising revenue by 5 percent in the second half of the year to be 2 percent up for the year and at $111m now heading the print division ($102m) for ad revenues.
Advertising revenues for the newspapers fell by 10 percent in the year, or 8 percent when adjusted for an extra reporting week in 2018.
Two big digital plays in 2019 - the new subscriber paywall for nzherald.co.nz and large investment in its realestate website OneRoof - reported positive numbers, albeit after heavy investment.
The Herald paywall had 21,000 paying subscribers by the end of December and had revenues of $1.7m for the first eight months of its operation. However, NZME has said it would spend $1.2m in 2019 establishing the paywall product, and its results announcement noted the paywall implementation affected audience and page view numbers on the website, contributing to a reduction overall of $2.1m in digital advertising revenues.
The growth in subscriber numbers has slowed considerably on the first burst of enthusiasm. NZME signed up 10,000 in six weeks, another 5000 in the next six weeks but has taken six months to add 6000 more. The number of newspaper subscribers taking up their free digital access nudged up by just 1000 to 25,000 in the six months since numbers were last reported.
OneRoof produced $2.8m of the year's $3.2m total in digital classified revenue - but it had slowed in the second half of 2019 because of the cooling real estate market, and had cost most of the $7m in digital classifieds investment in the year. Boggs said NZME would like to achieve OneRoof revenue higher than $5m this year.
On the company's outlook, he said the encouraging result in the second half of 2019 had been tempered by advertising bookings for the first quarter of this year being 2 percent below the same period a year ago. "Although New Zealand businesses are showing an increased confidence about the future, we remain cautious of the potential impact of trading and economic uncertainty following the coronavirus outbreak."
Cost 'containment' would remain a focus, although chief financial officer David Mackrell told an analyst, Arie Dekker of Jarden, that while there was a constant need to adjust, NZME did not expect to repeat the same level of redundancy payments in 2020 as the $6m in 2019. "We would expect that we have undertaken quite a lot of that activity this year."
NZME's share price on the NZX, which has been languishing this year, clawed up to 34 cents on Tuesday morning, having hit a new low of 32.5 cents briefly on Monday afternoon.
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