NZ Herald owner NZME has boosted its interim net profit and underlying earnings despite revenue taking a hit from the impacts of Covid-19.
The company's underlying earnings before interest, tax, depreciation and amortisation (ebitda) increased 5 per cent to $28.9m, and it made a net profit of $3.01 million in the six months to June 30, compared to $950,000 for the same period in 2019.
NZME shares jumped 10 per cent to 32c following the announcement.
NZME, which owns the New Zealand Herald, Newstalk ZB, the OneRoof property website and a suite of entertainment radio stations including ZM, The Hits and Hauraki, reported revenue of $149.03m, down from $180.74m in the previous corresponding period.
The company significantly reduced its net debt by $19.5 million over the half year to $55.2 million, representing a net debt to operating ebitda ratio of 1.0 times.
NZME's operating ebitda included $8.6 million the business received from the Government as a wage subsidy.
"We moved swiftly to ensure NZME did not just withstand the impacts but was best placed to quickly implement a number of additional initiatives that helped mitigate Covid-19 impacts on earnings. The Government wage subsidy also helped us retain roles that are now supporting our recovery," chief executive Michael Boggs said while paying tribute to the company's staff.
"They have ensured NZME withstands the extraordinary challenges Covid-19 continues to
pose. They have also remained absolutely committed to NZME's purpose of keeping Kiwis in the know by delivering leading news and information that all New Zealanders can trust."
NZ Herald Premium digital subscriptions continue to grow and now total more than 82,000, including 43,000 paid digital subscribers.
"This further reinforces our belief that now and into the future, New Zealanders are prepared to support quality journalism, delivered by news teams they can trust. We will continue to invest in this growing part of our business with initiatives such as the enhanced NZ Herald app launched in late February," said Boggs.
Chair Barbara Chapman said NZME went into the Covid-19 pandemic in a strong position.
"Continued success against our strategic priorities and effective capital management has
enabled NZME to rebound quickly and deliver a pleasing interim result.
"I am proud that NZME has served as an Essential Service during this unprecedented time,
fulfilling our responsibilities to our audience and advertisers in connecting a growing number of New Zealanders with leading news, quality journalism and entertainment."
Total advertising revenue fell from $130.7m to $102.9m.
While advertising revenue was significantly reduced in April, May and June, a focus on cost management, together with the Government's wage subsidy and Media Relief package, helped mitigate the effects on the group's result.
In terms of the media relief package, NZME benefited from transmission cost relief of $1.7m.
Cost cutting measures, including a reduction in head count contributed to a $24.6m decline in operating expenses.
Actions taken included:
• Temporarily suspended products including a number of newspaper inserted
magazines and community newspapers;
• Ceased broadcasting of Radio Sport;
• Implemented wide scale workforce restructuring, resulting in reduction
of more than 200 positions, representing 15 per cent of the workforce;
• Directors' fees and employee salaries reduced temporarily by 15-20 per cent
on a voluntary basis;
• Accelerated annual leave utilisation;
• Negotiated temporary reductions in key contracts and property leases;
• Reduced overall discretionary spend;
• Significantly reduced capital expenditure for the remainder of 2020.
Growth in radio revenue continued until Covid-19 began to impact advertising revenues towards the end of the first quarter.
Talk radio major market audience share grew 0.8 per cent year-on-year to 14.8 per cent due to the continued success of Newstalk ZB.
Overall radio revenue fell 18 per cent to $43.7m.
"Given the experience of the past month, navigating the Covid-19 recovery is likely to remain a focus for some time. But there will be a recovery. That means we need to continue to be adaptable, look for new opportunities to support our customers, stay focused on costs and continue to deliver the high-quality news, information and entertainment New Zealanders deserve and expect from NZME," said Boggs.
Profit growth and dividend prospect
In its NZX presentation, NZME said the business had seen a stronger than anticipated recovery from Covid-19 but remained cautious regarding the future economic environment.
Advertising revenue was expected to be down 16 per cent year-on-year in the third quarter 2020.
"Based on our current expectation of recovery we expect to deliver a FY 2020 Operating
EBITDA of $60 - $63 million."
That compares with around $65m last year.
"Based on continued improvement in economic conditions, Covid-19 recovery, improved
revenue trends and permanent cost reductions, we would expect profit growth in 2021.
"Based on this outlook and NZME's capital requirements, the Board expects to be able
to consider a dividend payment when facility terms permit, after 30 June 2021."