NZME boosts half year profit, reinstates dividend and sells GrabOne

NZ Herald owner NZME has reported a significant jump in first-half profit, reinstated dividend payments and agreed to sell its GrabOne business and assets for $17.5m.

The company’s underlying earnings before interest, tax, depreciation and amortisation (ebitda) increased 4 per cent to $30.1m in the six months to June 30, while net profit after tax climbed 85 per cent to $5.56m – up from $3m in the same period a year ago.

Total revenue of $172.28m was up 9 per cent on the previous period’s $157.8m.

NZME said its net debt decreased by a further $15.2m during the half year to $18.6m – enabling the board to declare a fully imputed and fully franked dividend of 3c per share. However, given the current Covid situation the company has decided to hold off on a capital return to shareholders.

It’s the first dividend shareholders have seen since the first half of the financial year 2018.

“A rigorous commercial discipline and a continual focus on managing the cost base as business activity recovers has improved NZME’s ongoing capital management performance and has supported the continued strengthening of NZME’s balance sheet,” said NZME chairman Barbara Chapman.

“The board was in a position to approve and announce a capital return to shareholders.
However, given the Covid-19 uncertainties that have emerged in the past week, the board has chosen to pause at this time.”

NZME owns the New Zealand Herald, Newstalk ZB, the OneRoof property website and a suite of entertainment radio stations including ZM, The Hits and Hauraki.

Other highlights included growth of the NZ Herald Premium journalism service – there are now 120,000 digital subscribers, including 67,000 digital-only subscribers and 53,000 print subscribers who have activated digital access – and OneRoof digital revenue, which increased by 145 per cent with OneRoof total revenue up 30 per cent.

Advertising revenue for the first half was 3.2 per cent lower than the first half of 2019. However, for the month of June, revenue was higher than June 2019, NZME said in its presentation.

Commenting on the outlook, Chapman noted cautious optimism despite further disruption to the business caused by Level 4 lockdown.

“We should all be under no illusions that ongoing Covid-19 related issues, such as the
nationwide lockdown currently in place, will continue to impact the recovery,’ said Chapman.

“Our commercial partners remain wary of Covid-19 cases, uncertainty over international travel bubbles and the more recent challenges of labour force shortages and inflationary pressures on their cost bases.

“However, it is in this environment that the NZME business has proven it has the resilience and agility to perform well,” said Chapman.

NZME also announced it had reached an agreement to sell its GrabOne business and assets to Global Marketplace New Zealand Limited (“GMP”) for $17.5 million. The transaction, due to be completed by the end of October, would be payable in cash on completion.

The sale agreement follows NZME’s announcement in November 2020 that GrabOne was not a core strategic focus and that opportunities to divest the ecommerce platform would be explored.

“GrabOne and its dedicated team have been a celebrated and valued part of the NZME family for a decade,” said NZME chief executive Michael Boggs.

Boggs said with advertising adversely impacted by COVID-19 in 2020, NZME’s focus has been on returning advertising revenue to 2019 levels.

“Our commercial partners are rebuilding their investment in advertising after the challenges in 2020”.

“In the first 3 months of this year, advertising revenue was 5.5 per cent down on 2019, in the second quarter we were down just 1 per cent on the same quarter in 2019. And, in June advertising revenue was actually higher than June 2019 which is very pleasing,” said Boggs.

“Emerging from the significant disruption encountered in 2020 NZME has maintained a
steadfast focus on key strategic priorities. This has meant that as New Zealand’s many
commercial sectors are steadily rebuilding their investment in audience engagement, NZME’s advertising revenues continue to approach the levels achieved in 2019, before the pandemic struck.”

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