Sam Hayes and Mike McRoberts were among almost 300 casualties when Newshub closed. Photo / Getty Images
As Sky TV prepares to take over, Three’s latest financial losses have been announced – along with a redundancy bill of almost $15 million.
Warner Bros Discovery’s Three (TV3) has posted a $77.6 million after-tax loss, a red-ink-stained financial result that highlights the challenge facing new owner Sky TV.
Despite the magnitude of the loss for the 12 months to December 31, 2024, it is a number that won’t come as a major shock and is an improvement on the $138.2m after-tax loss in 2023, although that result also included a $79.5m impairment.
Discovery NZ’s financial results, released on Friday, say the company has been undertaking further strategic initiatives to reduce costs and it has been in discussions with a potential purchaser of the company.
That party was revealed earlier this week to be Sky TV, which has bought the Discovery NZ TV assets for a nominal $1 in a cash-free, debt-free deal.
“The company’s ultimate parent, together with the company’s shareholder, is currently assessing options for the future of the New Zealand business,” according to notes attached to the financial results.
“These options include continuing to focus on strategic transformation initiatives to improve the financial performance of the business, as well as the potential sale of the business as a going concern, for which discussions are ongoing with a potential purchaser and could result in a transaction in 2026.”
Sky will, in fact, take ownership of Three from next Friday, although viewers and advertisers will notice little difference in the first few months.
Sky and Warner Bros Discovery acknowledged the financial difficulties facing the business when they announced the $1 deal this week.
Sky TV chief executive Sophie Moloney said that, notwithstanding the “ongoing challenges” faced by Discovery NZ, Sky was “uniquely placed to give effect to this opportunity to accelerate our growth strategy”.
“In particular, acquiring the established and fast-growing ThreeNow BVOD [broadcasting video on demand] platform adds an important missing component to Sky’s portfolio, without incurring the significant brand and platform development costs and inherent revenue risks associated with building a BVOD service ourselves,” said Moloney.
“The combined portfolio will give Sky significantly increased scale, diversity and mass reach that will unlock more opportunities in advertising and maximise the return on our investments in content through a strengthened, multi-platform approach.”
The market has agreed, with publicly listed Sky TV shares up 14c since the announcement on Tuesday and closing at $3.06 on Friday.
Discovery NZ’s financial statements reveal negative cash flows from operating activities of $46.4m (negative $47.2m in 2023).
As at December 31, 2024, the company had net liabilities of $208.6m ($132.6m in 2023), negative working capital of $207m (negative $124.5m in 2023), cash balances of $26.8m (2023: $13.9m), and bank overdraft balances of $167m (2023: $102.3m).
“The company is undertaking a series of strategic transformation initiatives across its operations to reduce costs in response to the New Zealand macroeconomic environment where there have been significant declines in the advertising market over the past few years,” say notes to the financial statements.
“During 2024, these initiatives included the closure of all of Newshub’s multi-platform news operations and output, a new partnership with Stuff Digital to create a new 6pm news bulletin, increased reliance on global content, and reduced new local programming, predominantly collaboration with local government and other funding partners.
“The reduction in costs associated with these initiatives will be realised during 2025. Further initiatives which the company will focus on in 2025 include [a] reduction in lease expenditure through the termination of the Flower St lease and the signing of a new head office lease, and continued refinement of the cost base.”
The financial statements show the company paid out almost $15m in redundancy and other termination costs last year.
Almost 300 people lost their jobs across Newshub and other departments, including marketing.
The company still employs some 130 staff.
Wage and salary costs fell from $49.8m in 2023 to $36.3m in 2024, according to the financial results.
As Herald business reporter Chris Keall reported this week, Forsyth Barr analysts Aaron Ibbotson and Benjamin Crozier said the Three business had a “chequered financial history” under various names.
“None of its several owners over the past 35 years have managed to turn it into a financial success. Why would it be different this time?” the pair said in a research note.
However, they said Discovery NZ had done the hard restructuring work. Sky’s targets through to 2028 were “realistic” based on information so far.
Ibbotson and Crozier said Sky’s market announcement was “light on detail”. Sky has promised a fuller account after the transaction closes next Friday.
They retained an outperform rating on Sky, increasing its 12-month target price from $3.20 to $3.55.
Meanwhile, as reported by Keall, fund manager Octagon said Discovery TV would be worth 35c per share to its new owner, or just over $48m.
And wealth manager Jarden, which reiterated its overweight rating, lifted its target price from $3.06 to $3.15.
Editor-at-Large Shayne Currie is one of New Zealand’s most experienced senior journalists and media leaders. He has held executive and senior editorial roles at NZME including Managing Editor, NZ Herald Editor and Herald on Sunday Editor and has a small shareholding in NZME.
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