Never let a crisis go to waste
Hit hard by the pandemic, lockdown and disappearing revenues, Herald publisher NZME regathered, cut costs and with the support of government millions has reported an increased profit for the first half of the year
Media company NZME has surged out of the Covid-19 crisis with the help of taxpayer emergency funding to record an increased half year profit.
It reported strong growth in paid subscribers for the nzherald.co.nz website and has dangled even bigger earnings and restored dividend payments in front of shareholders for next year.
NZME was one of many in the industry that pleaded with the Government in April, as the country was in Level 4 lockdown, for a range of state-funded interventions and policy changes to help its business. It received $8.6m in wage subsidies, $1.7m off its broadcasting transmission costs, and will be given a cash advance of up to $2m for a year's worth of departmental advertising.
That $12m or so from taxpayers and a deep round of cost-cuts - which saw 200 positions or 15 percent of its workforce cut and $7m in redundancies plus $20m in permanent expenditure reductions - meant NZME could report a five percent lift in its June 30 half-year earnings before interest, tax, depreciation and amortisation to $28.9 million.
Stripped of the wage subsidy, that half year ebitda would sit around $20m, down $7m on the same period in 2019.
However, with that taxpayer boost, NZME now expects its annual profit to be between $60m and $63m, for that to jump again in 2021 and for shareholders to finally get the chance of a dividend payment after June 30 next year.
NZME's performance was lauded by market analysts as "superb", "exceptional in Australasia" and "very solid" after the pandemic had slashed its advertising revenues, for example, by 47, 39 and 23 percent in the months of April, May and June, from the year before.
Its muscular result in such hard times comes even without the government action against global digital platforms such as Google and Facebook that NZME and its competitor Stuff, among others, have been demanding.
It will also give the Government some comfort, when seen alongside Stuff's reinvigoration under new, debt-free ownership and the widely expected purchase of the troubled MediaWorks television and news division by global giant Discovery, that the absence of its 'second tranche' of media bailout spending will now not be fatal.
NZME's paywall has delivered $2.4m in subscriber revenue for the first half of the year and its current growth would equate to an annualised $7.5m in subscriber income from nzherald.co.nz. It had 21,000 paying subscribers at the end of 2019. That is now 43,000, and lately running around 3500 additional subscribers a month. That could indicate a total of nearly 60,000, with a third currently paying annual subscriptions, by the end of this year.
The paywall has lowered nzherald.co.nz's total monthly audience to around 1.6 million, where it had once been up to 1.9 million in the Nielsen measurement, but the market leader Stuff's separate decision to no longer put its content out on Facebook will likely have impacted its monthly unique audience as well from its normal 2m mark. NZME has claimed the bragging rights in July, saying it "beat our nearest competitor, Stuff, in total traffic overall." But Nielsen is reviewing the July numbers in its online ratings report, as some are incorrect.
Readership of the print Herald and Weekend Herald had fallen in the first quarter of this year, but the company reported an increase in audience once the Covid and economic crisis hit from April. Sales of the physical papers were down substantially during the lockdown periods, affecting the business' circulation revenue. However, price rises and yield management had offset some of that drop.
The Herald and NewstalkZB owner also revealed it is investing in more journalists in Wellington and Christchurch to take on Stuff in its historic readership strongholds. Its expansion of company news and business reporting on nzherald.co.nz is also aimed at winning digital subscriptions from an intense competition with former content wholesaler BusinessDesk, the once mighty NBR and Interest.co.nz.
NZME's radio business, including ZB and a suite of music stations such as ZM, The Hits, Coast and Hauraki, saw revenues drop by 18 percent in the June half year, from $53m to $43m, but the company said radio's result had been encouraging in the months before Covid. While it gained market share in 'talk', it had lost share in the music battle against MediaWorks, with its More, Breeze, the Edge, the Rock and Mai FM brands.
NZME chief executive Michael Boggs told an investor call on Tuesday he believed the Government's second tranche of media assistance was on hold because of the election. But nevertheless the company's "current expectation of recovery" meant the full year profit of $60-63m and further improvement next year was likely.
He expected the job and other cost cuts made this year to be permanent. NZME would only resume any of that spending if initiatives could demonstrate good revenue possibilities. Chief financial officer David Mackrell told analysts the cost of 'extraordinary items' such as the $7m in redundancies was not expected to repeat in the next period. "Most will fall in the first half. I do not expect us to have much in the second half at all."
NZME's share price on the NZX rose 12.5 percent to 32.5c on Tuesday morning after the result was announced.
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