Half Year 2018 Results Presentation For the six months ended 30 June 2018 23 August 2018
DISCLAIMER The information in this presentation is of a general nature and does not constitute financial product advice, investment advice or any recommendation. Nothing in this presentation constitutes legal, financial, tax or other advice. This presentation constitutes summary information only, and you should not rely on it in isolation from the full detail set out in the Consolidated Interim Financial Statements. This presentation may contain projections or forward-looking as stated throughout this presentation refers to revenue prior statements regarding a variety of items. Such projections or to adjustments for the adoption of NZ IFRS 15. Please refer to forward-looking statements are based on current expectations, note 2.1.1 of the Consolidated Interim Financial Statements for estimates and assumptions and are subject to a number of the period ended 30 June 2018 and pages 30 to 31 for a more risks and uncertainties. There is no assurance that results detailed reconciliation. You should not consider any of these in contemplated in any projections or forward looking statements isolation from, or as a substitute for, the information provided in this presentation will be realised. Actual results may differ in the unaudited Consolidated Interim Financial Statements for materially from those projected in this presentation. the six months ended 30 June 2018. No person is under any obligation to update this presentation at any time after its release to you or to provide you with While reasonable care has been taken in compiling this further information about NZME Limited. presentation, none of NZME Limited nor its subsidiaries, directors, employees, agents or advisers (to the maximum A number of unaudited non-GAAP financial measures are used extent permitted by law) gives any warranty or representation in this presentation, which are outlined in the supplementary (express or implied) as to the accuracy, completeness or information to the presentation. The Group adopted NZ IFRS 15 reliability of the information contained in it nor takes any – Revenue from Contracts with Customers on 1 January 2018 responsibility for it. The information in this presentation has not without restating the H1 17 comparatives. Trading Revenue been and will not be independently verified or audited. Page 2
AGENDA 05 H1 18 Results Summary 07 Operational Priorities 08 Channel Results 15 Digital Classifieds 19 Monetising Our Content 21 H1 18 Financials 26 Outlook 28 Q&A 29 Supplementary Information Page 3
NZME REACHES 80% 1 OF NEW ZEALANDERS PRINT 1.3 Million weekly readers 1 CHINESENZHERALD.CO.NZ A B I L I T A P I E S C RADIO MARKETPLACES EXPERIENTIAL 2.0 N T E N T + C O H DATA & C A E N R N O E DIGITAL INSIGHTS C L S CLASSIFIEDS Million NEWS CREATIVE weekly listeners 2 NATIVE PRINT RADIO CONTENT CONTENT CREATION ENT. SPORT EVENTS AUDIENCE TARGETING DIGITAL BRAND DIGITAL Unique audience of VIDEO & ENGAGEMENT PRODUCTION 2.4 DIGITAL MARKETING STRATEGY SERVICES & PLANNING Million per month 1 EVERY MINUTE, EVERY HOUR, EVERY DAY... Page 1 Nielsen CMI May Fused Q2 17 - Q1 18 (population 10+ years) 2 GfK Radio Audience Measurement, Commercial Stations, NZME and Partners. Cumulative Audience T2 2018. 4
NZME H1 18 RESULTS SUMMARY Statutory NPAT Trading Revenue1 $3.7m $185.7m H1 17 $7.8m 53% H1 17 $191.0m 3 3% Interim Dividend Trading EBITDA1 Fully Imputed $23.2m 2.0cps 2 H1 17 $28.2m 18% Scheduled for payment on 26 October 2018 1 Trading measures are non-GAAP measures that are explained and reconciled in the supplementary information on pages 30-31. 2 A supplementary dividend of 0.3529 cents per share will be payable to shareholders who are not tax resident in New Zealand and who hold less than 10% of the shares in NZME Limited. 3 H1 17 Page Trading revenue includes other income. 5
NZME INVESTING FOR THE FUTURE • Trading revenue declined just 3% H1 18 H1 17 $m % Change in H1 18 compared to H1 17 reflecting Trading 1 Trading 1 continuation of industry headwinds, Trading Revenue 185.7 191.0 (3%) to a degree moderated by ongoing market share gains and strong digital growth. Total Costs excluding Digital Classifieds Costs 2 (159.4) (162.8) (2%) • Excluding the investment in the Digital EBITDA from underlying business 26.3 28.2 (7%) Classified platforms, underlying EBITDA Costs associated with Digital Classifieds (3.1) - declined $1.9m in H1 18 vs H1 17. Trading EBITDA 23.2 28.2 (18%) • Focus on business efgiciency contributed to a $3.4m reduction in underlying costs. • In line with the strategy to develop and grow new revenue streams three new Digital Classified businesses were launched in March 2018 incurring costs of $3.1m. The majority of this investment has been in people, marketing, data and technology licensing. • We are still early days for these platforms, but encouraged by operational progress and audience growth. 1 Trading measures are non-GAAP measures that are explained and reconciled in the supplementary information on pages 30-31. 2 Total Costs excluding Digital Classifieds Costs is a non-GAAP measure that shows the Trading Costs for H1 18 of $162.5m (as reconciled on page 30) less the Costs associated with the Digital Classified platforms launched in H1 18. For H1 17, these costs are the same as Trading Costs as reconciled on page 31. Page 6
NZME H1 18 OPERATIONAL PRIORITIES Continued audience • Total audience 3.3m growth and engagement • 10% YoY growth in NZ Herald weekly brand audience 1 and 8.5% increase in engagement on nzherald.co.nz 2 • Radio audience stable • Strong audience growth in the new Digital Classifieds Return advertising revenue • Advertising revenue in H1 impacted by declining business confidence to growth • Increasing or maintaining share across all channels in all measurable markets • Digital revenue growth ofgset ~70% of the print advertising decline in H1 • Improved trends in radio revenue Efgective cost and capital • $3.4m decrease in costs 3 management • Cost out initiatives in H1 will benefit H2 performance Develop our talent and • New prime time shows launched on ZM (“Bree & Clint” Drive show) people and Coast (“Jase & Bernie” Breakfast show) • Building the profile of journalists ahead of paid content launch • Board renewal completed - two new directors appointed • $3.1m opex invested in launching three new Digital Classifieds Grow new revenue streams • Initial reception and engagement positive, but still early days • Paid subscription capability on nzherald.co.nz on track for end of H2 Stufg Merger • Appeal heard in Court of Appeal in June 2018. Judgement expected in H2 1 Nielsen CMI Q2 17 – Q1 18 AP 15+. 2Nielsen Market Intelligence, Domestic Trafgic, 2018. 3 Trading Costs excluding Digital Classifieds Costs. Page 7
CHANNEL RESULTS Page 8
NZME H1 18 MARKET COMPARABLES MAINTAINING OR GROWING ACROSS ALL CHANNELS Digital & 16% e-Commerce H1 17 14% Print Display & Mobile Revenue NZME +20% NZME Ad Revenue -8% YoY to Q1 18 YoY in H1 18 Market +13% 1 28% 56% Stufg Ad Revenue -20%3 YoY to Q1 18 YoY H1 18 comparative H1 17 28% H1 17 58% NZME > Market NZME Circulation -4% Revenue YoY H1 18 Radio & Stufg Circulation -8%3 Experiential Revenue Agency Revenue YoY H1 18 comparative NZME > Market NZME Flat YoY in H1 18 Market Flat 2 Print YoY in H1 18 Radio & Experiential NZME = Market Digital & e-Commerce 1 IAB / PwC New Zealand Q1 2018 Interactive Advertising Spend Report; digital excluding search and directories, and social media (NZ market only). 2 SMI New Zealand Agency Page Advertising Expenditure Report June 2018. 3Faifax Media Limited Full Year 2018 and Half Year 2017 Reports. 9
NZME PRINT • Print advertising revenue continues to decline H1 18 H1 17 % Change NZME Print Revenue ($m) at historical rates. Advertising Revenue 55.5 60.2 (8%) • Growth continues in readership and audience. Circulation Revenue 40.4 41.9 (4%) • Circulation volume decline has been largely ofgset by increases in yield. Cover price increase Other Revenue 1 7.7 8.4 (9%) implemented across all titles on 1 July 2018. Total Print Revenue 103.6 110.6 (6%) • Other revenue includes printing and distribution services provided to Stufg NZ and other third parties. 1 Other Revenue consists of External printing & distribution revenue of $4.3m (H1 17: $4.6m) and Other revenue of $3.4m (H1 17: $3.8m) as disclosed in note 2.1 of the Consolidated Interim Financial Statements for the period ended 30 June 2018. Page 10
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