MediaRoom: Herald publisher NZME had a positive story to tell this week after Covid's heavy impact on its businesses last year. Delta could temper its optimism.
New Zealand Herald and Newstalk ZB owner NZME has reported increased revenues and profit for its first six months to June 30 and was edging back to its numbers of the pre-Covid world of 2019 before this Level 4 lockdown.
Comparisons with 2020's performances for the same period are flattering because of the drastic hit to advertising revenues caused by the first year of Covid-19. Overall, NZME's operating revenue was up 9 percent from $157.8m to $172.5m. But when compared back a year further, NZME had just nudged ahead in June of the same month in 2019 in advertising revenue and had been expecting a third quarter about as good as that achieved two years ago.
Now, with two weeks confirmed so far in alert Level 4 lockdown in Auckland and likely weeks to come at lower levels of restriction, those expectations have to be reviewed.
The company reported a $5.6m net profit, up from $3m in its first half in 2020, and increased its earnings before interest, taxation, depreciation and amortisation (Ebitda) to $30.1m from $28.9m (despite the 2020 period having a boost of $8.6m in Government-paid wage subsidy).
NZME has also paid off another large chunk of debt, cutting its total indebtedness by $15.2m to $18.6m. That is a notable achievement, given NZME's debt was more than $106m just three years ago.
It has been able to announce a 3 cent per share dividend for shareholders and, tantalisingly, the board said at the announcement of its first half results that it had been about to approve a capital repayment to shareholders as well but had paused because of the uncertainties of lockdown.
The company took the opportunity in 2020 to cut almost $20m a year from its cost base, including culling or leaving unfilled 200 jobs, the benefit of which will carry through to 2021 and other full years to come.
Given the difficulty judging performance against the catastrophic year of 2020, how does this 2021 result compare with NZME's first half of the year over time? Keep in mind the whole of the mainstream media, and the publishing industry in particular, has been struggling against revenues disappearing to digital channels, including big global platforms, for more than a decade.
- NZME's print advertising revenue has fallen since its first period reported (for 2016) after listing on the NZX - from $65.5m to now sit at $40.3m (when $7m now listed separately for its print real estate section One Roof is included).
- Its circulation revenue (from sales of papers) fell from $43.9m to the equivalent of $35m now (it split how it reports that revenue into $27.2m in print subscriptions and $7.8m in print sales at retail outlets). NZME has this year raised the cover prices of the Herald and its regional papers to recoup some of the revenue lost from falling sales.
- But on the other hand its digital advertising revenue has grown from $20.5m in 2017's first half, to $26.3m now.
- In addition, the NZ Herald online paywall for premium content, introduced in 2019, has seen revenue grow from $200,000 in the first half of 2019 to $5.1m in this half year.
- Its radio business has been resilient, with advertising revenues falling from $53.6m in the first half of 2016 to $49.6m in the period just ended (which was a bounce back from the 2020 low of $43.7m).
- One Roof's digital revenue has increased from its first showing in 2019 at $1.4m to $3.5m now. This year's result was actually harmed by the booming housing market, with houses selling so fast the demand for advertising of them was reduced.
- E-commerce revenue (now listed just as the daily sales site GrabOne) - has fallen from $6.8m in 2016 to $4.0m. (NZME says it will sell GrabOne to Global Market NZ by mid-October, for $17.5m).
Traditional revenue lines fell a combined $38m from 2016 to 2021 - for the first half of the year - and the new, digital revenue lines grew $11.7m roughly in that same period.
So NZME has around $27m less coming in the door in the half year from the comparable period five years ago. That's for a half year period. Factor in the annualised $20m costs savings achieved since last year and put $10m of that saving against that half year revenue drop, plus modest cost savings from previous years, there is still a sizeable gap.
However its strong debt position and stability in radio revenues - added to digital subscription and advertising possibilities - means NZME has positioned itself to deal with inevitable further falls in income from its legacy print publications.
NZME told the market this week that, depending on the level of restrictions arising from the current Covid outbreak, it hoped to improve its Full Year 2021 profit on that of 2020.
It also held out hope of benefiting from any introduction into New Zealand of payments to news creators by the digital giants Google and Facebook.
NZME shares held steady on the NZX after the half year results, at 94c Thursday.
