KEY POINTS:
State-owned TVNZ today posted a 15.5 per cent fall in its half year net profit and signalled cost-cutting ahead in response to an anticipated poor second half result.
The state-owned broadcaster is experiencing a dramatic fall in advertising due to haemorrhaging audience viewership.
Its net profit was $19.7
million, down $3.6m on the same period last year.
Chief executive Rick Ellis said the second half was looking weak.
The company has announced redundancies of between 140 and 160 among its 1000-strong staff, many of them in news gathering. Mr Ellis said any new cost cutting would not involve further job cuts but a charge for redundancies would be booked in the second half.
He said TVNZ was undergoing a structural transformation.
"This will, unfortunately, result in significant job losses in the second half of the financial year and that will bring with it restructuring charges which will also fall in the 2006/2007 year."
Traditionally, TVNZ has earned most of its profit in the first half.
"When you combine that with a continuing weak advertising market and fragmentation of audiences, the second half of the financial year is going to be challenging for the company," he said.
"The TVNZ management team will continue with its cost reduction and containment plans."
However, in one hopeful sign, TV One achieved an increase in audience share in December for the first time since 2003.
He said TVNZ was still dealing with the legacy of high cost structures the business created during the boom revenue period of 2002 to 2005 and the falling audience share. These would be purged by the end of the financial year.
The new cost structure would be aligned to the "revenue reality".
In past couple of years, news reader Judy Bailey's $800,000 a year contact and the $400,000 earned by Close-Up presenter Susan Wood have come to an end.
Mr Ellis said that although the second half would be difficult, he was confident of turning the business around in the following two financial years.
However, he noted there was a long lag between improving audience performance and improving revenue.
"The reality of television is that declines can be rapid but recoveries are slow."
He said the reduced first half result was mainly due to a reduction in advertising revenue from July to December.
TVNZ had also had to pay higher interest costs after being forced by Treasury last year to take on more debt and to pay the Government $84.5m in dividends including a special one of $70m.
Operating revenue fell 7.5 per cent to December $205.1m while expenses fell 7.2 per cent to $173.3m. Interest expenses rose more than $2m.
- NZPA