MediaWorks narrows loss to $90m

MediaWorks, which operates TV3, was placed in receivership this week. Photo / Dean Purcell

MediaWorks NZ, the broadcaster whose lenders look likely to seize control, narrowed its annual loss in 2012 after massive writedowns a year earlier.

The group's holding company, GR Media Holdings, reported a net loss of almost $90 million in the 12 months ended August 31, 2012, from $318.4 million a year earlier, according to financial statements lodged with the Companies Office. The year-earlier result included $241.6 million to write down the value of MediaWorks' goodwill, primarily in the TVWorks business.

The Auckland-based broadcaster's cash-paid finance costs were slightly lower at $28.7 million, though its capitalised finance costs jumped by more than 50 per cent to $46.7 million. It booked a $28.8 million impairment charge, writing down the value of TV programme rights that were still to be aired after Sept. 1. It also accelerated its writedown of analogue assets by $3 million ahead of the digital switchover.

Stripping out non-cash costs, earnings before interest, tax, depreciation and amortisation sank 35 per cent to $28.8 million, barely more than the company's borrowing costs. Revenue crept up 0.5 per cent to $259.6 million, while costs of programming and production climbed 9.5 per cent to $128.4 million and sales and marketing spending rose 12 per cent to $61.1 million. Net operating cash flow was $261,000 in the year.

The company said MediaWorks Radio performed strongly, with revenue growth of 1.4 per cent, and EBITDA beating budget.

Auditor PwC gave a disclaimer of opinion on the accounts, which were prepared on a non-going concern basis due to the uncertainty as to whether the broadcaster's lenders would extend their support for the business.

Last week, MediaWorks' lenders appointed Brendon Gibson and Michael Stiassny of KordaMentha as receivers to oversee a restructuring plan where the broadcaster's assets will be placed in a new entity owned by the debt holders.

While the transaction isn't a done deal, with the receivers obliged to entertain all bids to get the best price, it effectively ends Ironbridge's involvement in the business since its debt-funded purchase of CanWest's 70 per cent stake in 2007 valuing the broadcaster at some $741 million.

As part of the restructure prominent Australian businessman Rod McGeoch will chair the company taking over MediaWorks, and former Eyeworks Touchdown boss Julie Christie, best known in New Zealand for a string of reality TV series, will join him on the board.

The deal will see a new capital structure reducing the broadcaster's debt to less than $100 million.

GR Media's financial statements show total borrowings of $496.7 million, including about $25 million of accrued interest, and subordinated and payment in kind shareholder loans of a further $176.8 million, of which $55.7 million was accrued interest.

The insolvency event also means MediaWorks' $172.7 million in programme rights commitments over the coming five years are open to termination.

Last year, the broadcaster said it planned to spend more on local television programmes as it winds down its deal with CBS Broadcasting and stops taking new shows from the most-watched network in the US.