TVNZ says Government has agreed to chip-in another $30m 'if needed' after it posts $26m loss

Tuesday, 25 August 2020

The Government has agreed to put an extra $30 million into Television New Zealand, if needed, after the company racked up a $26m loss in the year to the end of June, TVNZ has revealed.

Chief executive Kevin Kenrick said TVNZ had been ramping up its expenditure by investing in local content but had been impacted by a sudden reduction in advertising due to Covid-19.

TVNZ had reached an agreement with the Government last year – prior to the pandemic – to suspend paying dividends to the Crown for the foreseeable future.

That dividend decision prompted grumbles from commercial rival MediaWorks, which owns television channel Three, and which subsequently announced plans to sell its television business.

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TVNZ reported stable revenues of $311m in the year to June, thanks to a growth in advertising prior to the pandemic.

But its costs rose by $35m to $321m.

Its net loss of $26m compared with a profit of just under $3m last year.

The biggest contributor to the loss was a $23m write-down in the book value of overseas shows that it had bought and for which it now assumed would attract less advertising.

But it also booked $3.6m in redundancy charges and $3.9m in other one-off costs.

TVNZ’s advertising revenues were down 33 per cent, 27 per cent and 16 per cent respectively in the months of April, May and June, when compared with last year, and the decline in July had been under 10 per cent.

Kenrick said the “share subscription agreement” that could see the Government put up to another $30m into the state-owned broadcaster had been finalised “a couple of weeks ago” and the facility would be in place for a year.

As TVNZ ended the financial year with $53m in cash and had an existing $20m bank facility which it had not drawn down, it did not expect to need the extra support, he said.

“We have got a business plan and a forecast that assumes we don’t need to call on that,” he said.

“Our plan is not to use it” and something “pretty catastrophic” would need to happen for that to change, he said.

But one scenario it had considered was the impact of further lockdowns, he said.

“There are two big issues Covid has thrown up for the media sector.

“One is about the ability to produce content and the other is the reduction in advertising as businesses have been locked down.

“On the production side, two or three weeks ago we would have said New Zealand was in a relatively privileged situation and we might be able to produce content for other markets around the world – where we sit right now we still have reason to be optimistic, but that is more cautious optimism now.”

Kenrick indicated he did not believe it was unfair that TVNZ had access to the extra government support.

Privately-owned media businesses had the ability to raise funding through capital raisings, which Sky TV had done, he said.

“MediaWorks could access its parent company which is a multibillion-dollar global hedge fund, so I think you turn to whoever your shareholder is when you need to strength your capital – ours just happens to be the Government.”

MediaWorks said in early July that it expected to make an announcement on the future of its television business, which includes its Newshub journalism arm, within “weeks”.

Chief executive Michael Anderson said on July 8 that talks had narrowed down to discussions with one party.

A MediaWorks spokeswoman said on Tuesday that those talks were continuing and had not been affected by the move to alert level 3 in Auckland.

There has been speculation an Australian or United States network might buy MediaWorks’ television business.