Digital pullout spoils boom year for TVNZ

By KARYN SCHERER

A decision to write off nearly $13 million from its aborted foray into digital television has marred an otherwise bumper year for Television New Zealand.

The state-owned broadcaster revealed in March that it had decided to write off nearly $7 million after the Government pulled the plug on its ambitious plans for a digital service this year.

Yesterday, it revealed that it had decided to write off another $6 million, salvaging just $1.6 million of capital costs from the project.

Coupled with its $5.9 million payout to former presenter John Hawkesby, the write-offs put a dent in an otherwise strong performance from the broadcaster for the year ending in June.

After a soft first half, TVNZ enjoyed a bumper second half, with advertising revenue hitting a record $295.8 million - up 6 per cent on the previous year.

The revenue increase follows its highest ratings for more than four years, in a period the organisation described as the most challenging in its history.

Overall revenue was up more than 10 per cent on last year, to $473.4 million.

Lower costs enabled TVNZ to boost its pre-tax profit by nearly a quarter to $88 million, despite the fact that it hired about 140 new staff over the period, largely for its new media operations.

Its after-tax profit was $43.1 million - a 20 per cent increase on last year, excluding last year's one-off gains from the sale of its shares in Clear and Sky TV.

However, the write-offs have meant the result is still not as good as that achieved in 1998, and slightly below the target set by its political masters for the period.

TVNZ has paid the Government a final dividend of $15.1 million, taking its total dividend for the year to $30.2 million.

The dividend is lower than in 1998 and 1996.

It has also warned that is unlikely to be able to match the performance next year, with the weak New Zealand dollar driving up the cost of programmes, bought in US dollars.

Although it has hedging policies in place, TVNZ still expects the fluctuations in the exchange rate to affect its bottom line.

Its fledgling new media business, Nzoom, which became a separate subsidiary in March, is also expected to lose $2.5 million this year. TVNZ does not expect Nzoom to make a profit for a further three years.

Chief executive Rick Ellis was also reluctant to comment on what effect the Government's policies would have on its bottom line.

The digital strategy also remains up in the air. Although it is known to be talking to Sky TV about joining Sky's digital satellite service, Mr Ellis stressed that TVNZ was not ruling out other options.

He maintained it had made "substantial progress" in investigating other ways of delivering digital services, such as UHF, wireless terrestrial, cable and high-speed internet access.

TVNZ has already made it clear it does not want Sky to have monopoly control over the set-top boxes that are necessary to decode digital signals, and Mr Ellis said yesterday that the issue was still some time away from being resolved.

Meanwhile, chairman Ross Armstrong hit back at broker reports that the Government was playing into Sky's hands by encouraging TVNZ to strike a deal with the pay-TV operator.

He said he was "quite astonished" at the reports, and denied he had even discussed the issue with Prime Minister Helen Clark.