NZME profit rises despite Covid-19 shrinking business
Tuesday, 25 August 2020
Media company NZME has trebled its interim net profit to $3 million despite reporting a 13 per cent drop in revenues to $158m, which the company said was largely due to the impact of Covid-19.
Government wage subsidies totalling $8.6m helped it to the higher profit and are also included in its revenue numbers.
Chief executive Michael Boggs said it was unlikely to qualify for further wage subsidies based on current expectations.
The company also indicated that less than half of the $24m it achieved in costs savings during the half year were likely to be carried forward permanently.
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Some of those savings resulted from a temporary 15 per cent voluntary pay cut that was agreed to by most staff.
The annualised permanent reduction in its cost base was expected to be $20m a year, it said.
NZME’s operating profit of $29m for the six months to June was up 5 per cent, but again only after the contribution from the subsidies.
NZME shares jumped 45 per cent in the wake of the result to close at a 2020 high of 42 cents.
NZME’s media interests include The New Zealand Herald and about half of the country’s commercial radio stations.
Boggs said any recovery from Covid-19 would not be straightforward.
“Given the experience of the past month, navigating the Covid-19 recovery is likely to remain a focus for some time. But there will be a recovery,” he said.
Chairman Barbara Chapman said advertising and retail circulation revenues came under significant pressure in the second quarter.
But she believed NZME gained market share within the radio, print and digital advertising markets.
Radio revenues fell 18 per cent to $44m over the half year, when compared to 2019, and print revenues were down 22 per cent at $75m, with digital revenues unchanged at $28m.
Print advertising revenues plummeted 31 per cent to $35m.
Total advertising revenues were down 47 per cent, 39 per cent and 23 per cent, respectively, in April, May and June, compared to the same months in 2019.
The company announced in April that it was cutting 15 per cent of its workforce, axing more than 200 jobs. It booked a $7m charge for the restructuring costs.
Large Australian shareholders helped oust its former chairman Peter Cullinane on the day of its annual meeting in June.
Paid subscriptions to the NZ Herald’s online paywall reached 43,000, which is 7000 higher than the figure the company last reported in early June.
Another 39,000 get access to the paywall at no extra cost as part of their newspaper subscription.
NZME said it expected its total advertising revenues would be down 16 per cent, year-on-year, in the three months to the end of September, but it expected to be able to “consider a dividend payment” after June next year.