Media company NZME has reported a net profit of $11.6 million and Ebitda of $54.7 million amid challenging market conditions and says it will launch an online paywall in the second quarter this year.
NZME, which owns the NZ Herald, several radio stations including Newstalk ZB and online resource tools OneRoof, Yudu and Driven, said the result reflected a modest decline in revenue and further investment in growth businesses.
Trading revenue declined 2 per cent in the year to December 2018 to $378.4m while trading Ebitda was down 17 per cent to $54.7m in line with guidance issued in February. Trading ebitda excluded exceptional items of $9.2m, including redundancy costs of $5.2m.
NZME said its advertising revenue faced continued structural pressures in print advertising, intensified by weaker business and consumer confidence, which affected agency advertising demand in radio, digital and print.
Chairman Peter Cullinane said despite the challenging trading conditions, the company's revenue decline slowed, from 4 per cent to 2 per cent.
"We have made significant progress to strengthen the company by investing in a number of promising new revenue opportunities to grow long-term shareholder value. We continue to actively assess opportunities for improvement and growth that arise from the on-going media industry consolidation".
He confirmed no final dividend would be declared as the company sought to strengthen its balance sheet and support growth investment.
The launch of digital subscriptions for premium content was on track for the second quarter (April-June), with "modest revenue expectations" in financial year 2019.
The company did not release details of how much it will charge subscribers to access the paywall, however it did confirm it would adopt the "freemium" model with day-to-day news and current affairs provided free of charge and in-depth analysis and opinion available on subscription.
NZME is targeting 10,000 digital subscribers within the first year with net investment expected to be $1.2m.
The company expects paid subscriptions to make a positive contribution to Ebitda in the second year following launch.
Chief executive Michael Boggs said: "We are pleased with the results given the economic headwinds we faced in our business 2018. Given this backdrop, retaining revenue in print was a standout. We are also excited about the strong audience and listings growth in OneRoof, and its early stage contribution to revenue."
Since its launch in late March 2018, OneRoof had made significant progress, growing real estate listings and audience to contribute $700,000 in revenue in 2018, with $500,000 in the fourth quarter, NZME said.
"Our revenue numbers were encouraging given just how tough some parts of the market were in FY 2018. Spending on growth initiatives continues to impact earnings ahead of revenue generation but these investments offer very exciting prospects as we progress our strategy", Boggs said.
Print revenue was $211.6m in 2018, a decline of 4 per cent.
Radio revenue was affected by weak agency demand, despite direct radio revenue returning to growth in the second half of the year.
NZME maintained its 39% share of the radio advertising market and continued to focus on having the best offer in the market to inform, entertain and attract listeners.
Radio audience share was stable at 35% with NewstalkZB remaining the number one radio station in New Zealand, while iHeart Radio grew its registered users by 18% over the year to more than 831,000.
NZME said it would continue to focus on cost reduction to support investment in digital classifieds and digital subscriptions.
Consequently, net cost reduction is likely to be modest. In line with the capital management policy announced in November 2018, NZME is targeting a reduction in debt of between $10 million and $15 million in FY 2019.