NZME downgrades earnings guidance, lifts dividend payout ratio

NZME says lower advertising revenue will see lower earnings than previously expected. Photo / NZME

NZ Herald owner NZME has downgraded its full-year earnings forecast, citing expected lower advertising revenue.

However, the media company is increasing its dividend payout ratio despite what it describes as significant business and consumer uncertainty in the market.

NZME, which also owns several radio stations - including Newstalk ZB - and the OneRoof real estate platform – had previously maintained its 2022 full-year guidance for earnings before interest, tax, depreciation and amortisation (ebitda) of $67 million to $72m.

But today it announced to the NZX a new lower range of $64m-$67m. This compares to the reported $62.6m in 2021, excluding GrabOne, which was divested.

NZME said it still expected advertising revenues to return to pre-Covid levels for the full year ended December 2022, despite significant business and consumer uncertainty in the second half of 2022.

“This uncertainty has resulted in lower than anticipated advertising revenue and a reduced number of new real estate listings being marketed for sale,” the company said.

NZME chief executive Michael Boggs said the company was experienced at delivering through times of uncertainty and delivered strong profit results despite the challenges of the Covid operating environment.

The company said its current on-market share buyback programme will end on December 16.

NZME over the last 14 months returned more than $40m to shareholders through dividend payments and the share buyback programme.

“The board will consider undertaking a further on-market share buyback programme during 2023, taking into account the net debt position, the economic outlook and the NZME share price and liquidity at the time,” the company said in a statement.

Despite the uncertain economic environment, the company is increasing its dividend payout ratio to 50-80 per cent of free cash flow - subject to being within the target leverage ratio range of 0.5 to 1 times ebitda and “having regard to NZME’s capital requirements, operating performance and financial position”.

This is an increase from the previously advised ratio of 30-50 per cent on the same basis.

Based on an example of $30m of free cash flow, this dividend payout ratio would result in dividends of between 8 cents and 13 cents per share, it said.

At the half-year result in August, the board declared an interim dividend of 3c a share, which followed a special dividend of 5c a share.

“The Board believes that NZME’s strong cashflows support an increase in the dividend payout ratio.”