NZ Herald-owner NZME could be in a position to consider returning dividends to shareholders this time next year on the back of steep cost reductions and prudent debt management.
Chief executive Michael Boggs noted this in his outlook for a business fighting hard against falling advertising revenues affected by the impact of Covid-19.
The market took notice, driving the share price over 40 per cent higher at one stage today following the company's half year result release this morning. The stock was up 13c or 44.8 per cent to 42c at 3.30pm before the stock exchange suffered an outage.
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 a 5 per cent increase in underlying ebitda to $28.9m for the six months to June 30, a period that saw significant advertising revenue decline due to Covid lockdown restrictions.
The company made a net profit of $3.01 million for the half, compared to $950,000 for the same period in 2019, on operating revenue of $157.8m, down 13 per cent on the previous corresponding period.
The operating performance included $8.6 million the business received from the Government as a wage subsidy.
Digital subscriptions for NZ Herald Premium were a standout with the number of paid subscribers doubling in the six month period. Online digital subs now total more than 82,000, including 43,000 paid digital subscribers.
Boggs said the business had seen a stronger than anticipated recovery from Covid-19 but remained cautious regarding the future economic environment.
A decision would be made at the end of September on whether staff who took voluntary 15 per cent pay cuts would be refunded their lost wages, he said.
"I was blown away by the generosity of the people at NZME. By far the majority of people volunteered a 15 per cent pay reduction and I was really pleased to be able to stop that earlier than what we'd anticipated.
"The commitment now is subject to the economic environment and the business conditions, we'd review at the end of September as to whether we can repay some of that money and continue to review it.
"Fundamentally, and we are seeing it right now, there continues to be quite a bit of uncertainty and just want to make sure we take all of that into account when we do that final review."
Advertising revenue was expected to be down 16 per cent year-on-year in the third quarter 2020.
However, the company was still expecting to deliver a full-year operating ebitda of $60-$63m, compared with around $65m last year.
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.
"That puts us in a really strong position," Boggs said.
"Subject to the business environment next year and performance, it gives the board a chance to consider a dividend payment after June 30 next year."
Boggs noted the job losses across the business, which shed operating costs by $24.6m during the period. About one third of that was attributable to staffing costs with some 200 redundancies (around 15 per cent of the company's workforce).
"We think that on an annualised basis across the year our fixed costs are now $20m down than they were at the start of the year."
Boggs said he was heartened by the performance of new business models such as OneRoof and NZ Herald Premium.
NZ Herald Premium digital subscriptions continue to grow and now total more than 82,000, including 43,000 paid digital subscribers.
That was almost double the 46,000 total reported for the December year end.
Digital subscriptions generated $2.4 million revenue in the six months to June, and the annualised run rate works out at just over $7.5m per annum.
"The pleasing thing is we are growing market share across all of our platforms," Boggs said.
"We saw growth in market share in print, radio and digital in the half. That just comes back to the great content that's being produced.
"The audiences are wanting to stay informed at the moment and we have got a great environment for them to come and get quality information that they can trust."
