Full Year 2018 Results PRESENTATION For the year ended 31 December 2018 19 February 2019
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 Financial Statements. This presentation may contain are explained and reconciled in the projections or forward-looking Supplementary Information on pages statements regarding a variety 34 and 35. Please also refer to Note of items. Such projections 2.1.1 of the Consolidated Financial or forward-looking statements are Statements for the year ended based on current expectations, 31 December 2018 for a more detailed estimates and assumptions and reconciliation. You should not consider are subject to a number of risks and any of these in isolation from, uncertainties. There is no assurance or as a substitute for, the information that results contemplated in any provided in the audited Consolidated projections or forward looking Financial Statements for the year statements in this presentation will ended 31 December 2018. be realised. Actual results may difg er materially from those projected in this While reasonable care has been presentation. No person is under any taken in compiling this presentation, obligation to update this presentation none of NZME Limited nor its at any time after its release to you subsidiaries, directors, employees, or to provide you with further agents or advisers (to the maximum information about NZME Limited. extent permitted by law) gives any warranty or representation (express NZME adopted NZ IFRS 15 – Revenue or implied) as to the accuracy, from Contracts with Customers completeness or reliability of the on 1 January 2018 without restating information contained in it nor takes the FY17 comparatives. Various trading any responsibility for it. The information measures are referred to throughout in this presentation has not been, this presentation. These trading and will not be, independently verified measures are non-GAAP measures that or audited. 2
24 AGENDA 18 04 FY18 Results Summary and FY18 Operational Priorities 06 Market Dynamics 11 Channel Results 17 FY18 Financials 22 FY19 Strategic Priorities and Outlook 31 Q & A 32 Supplementary Information 3
NZME FY18 RESULTS SUMMARY Statutory NPAT Trading Revenue $11.6m $378.4m FY17 $20.9m 44% FY17 $387.7m 2% Trading EBITDA Trading NPAT $18.9m Results impacted by $54.7m Pro-active investment in Digital Classifieds FY17 $26.7m 29% FY17 $66.2m 17% Agency market headwinds Trading Earnings Per Share Final Dividend 9.6cps nil FY17 13.6cps 29% FY18 total dividends 2 cents per share 4
NZME FY18 ACHIEVEMENT OF OPERATIONAL PRIORITIES • NZ Herald audience at an all time high with a daily brand audience of more than 1 million (up 5% YoY). 1 Continued audience • Engagement on nzherald.co.nz continues to grow with ongoing focus on premium content. Online engagement growth and grew during the year, reaching 3 minutes 16 seconds. 2 engagement • NZME has maintained audience share in a growing radio market. 3 • NZME advertising revenue declined by 4% in FY18 impacted by significant headwinds in the New Zealand Agency Return advertising advertising market across all channels. revenue to growth • Strong growth in Print travel segment. • Direct radio revenue in growth in H2. • $3.7m decrease in underlying costs, driven by ongoing efficiency measures. Efgective cost and • Capital management review finalised. Debt refinanced and extended to 2022. capital management • NZME targeting debt reduction of $10-$15m per annum from FY19 to bring leverage to between 1.0 and 1.5 times Trading EBITDA. • Continued to further develop the profile of the journalism team ahead of the launch of digital subscriptions. Develop our talent • Refresh of NewstalkZB talent line up. and people • Improvement in staff engagement metrics year on year. Grow new revenue • OneRoof revenue $0.7m for FY18 since March 2018 launch, $0.5m generated in Q4. streams • Digital subscriptions launching in Q2 19. Stufg merger & • Stuff merger opportunity was about efficiency and growth. Industry consolidation • Continue to actively assess value-adding opportunities to take advantage of industry consolidation. 1 Nielsen CMI Q4 17 – Q3 18 AP 15+, represents a combination of Print readership and Digital audience. 2 Nielsen Market Intelligence, Domestic Trafgic, 2018. 3 GfK Radio Audience Measurement, Commercial Stations, NZME and Partners. Total Market Share T4 2018, AP 18-54. 5
MARKET DYNAMICS
NZME’S AUDIENCE REACH IS 3.3 MILLION 1 80% OF NEW ZEALANDERS Print 1.3 Million Weekly readers 1 Radio 2.0 Million Weekly listeners 2 Digital Unique audience of 2.5 Million per month 1 1 Nielsen CMI October Fused Q4 17 - Q3 18 (population 10+ years). 2 GfK Radio Audience Measurement, Commercial Stations, NZME and Partners. Cumulative Audience T4 2018. 7
NZME FY18 PERFORMANCE AGAINST THE MARKET Trading Revenue Digital $378.4m Display & Mobile Revenue $60.0m NZME 3% 16% FY17 $387.7m 2% YoY to Q4 18 FY17 15% Market 5% 1 YoY to Q4 18 NZME < Market $106.8M $211.6m Print 28% 56% Advertising Revenue Radio FY17 28% FY17 57% Advertising Revenue NZME -6% YoY to Q3 18 NZME -3% YoY to Q3 18 Market -16% 3 YoY to Q3 18 Market -3% 2 YoY to Q3 18 NZME > Market NZME = Market 1 IAB / PwC New Zealand Q4 18 Interactive Advertising Spend Report; digital excluding search and directories, and social media (NZ market only). 2 PwC Radio Performance Comparison Report, Q3 18. 3 PwC NPA Quarterly Performance Comparison Report, Q3 18. 8
AGENCY MARKET DECLINED IN FY18 • Agency represents approximately 30% Total Agency Demand YoY Growth % 1 of NZME’s Print and Radio revenues and 20% 50% of Digital revenues. 15% • The Agency market declined 4.2% in 2018, 10% YoY growth impacting all advertising channels except 5% for Outdoor, which grew only 0.5% YoY. 0% • The market was particularly challenged -5% in H2, reflecting trends in New Zealand business confidence. -10% -15% • Print Agency market experienced the greatest decline, down 22% YoY. Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Australia New Zealand NZ trend New Zealand Business Confidence 2 Net Index (% expecting improvement 30 minus % expecting deterioration) 20 10 0 -10 -20 -30 -40 -50 -60 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 1 Standard Media Index 2 ANZ Business Outlook. 9
New Zealand’s Prime Minister, Jacinda Ardern, guest editing The New Zealand Herald sufg rage edition, September 2018
CHANNEL RESULTS
NZME PRINT • Total Print revenue decline improved in FY18 NZME Print ($m) FY18 FY17 % Change to -4% (FY17: -7%). Print revenue decline slowed in H2 18, helped to some extent by an extra Advertising Revenue 114.2 121.0 (6%) week’s trading. Circulation Revenue 81.5 83.3 (2%) • Growth in the travel category, assisted by the cruise ship industry, helped ofg set the decline Other Revenue 1 15.9 17.0 (6%) in Agency advertising revenue. Total Print Revenue 211.6 221.3 (4%) • Circulation revenue benefited from the additional week in FY18. Adjusting for this, circulation revenue Direct Print Costs (72.9) (75.9) (4%) declined approximately 4% in FY18. Print Contribution 138.7 145.4 (5%) • Subscriber numbers continued to decline at modest rates, to a degree ofg set by yield improvements. • Other revenue is primarily third party print and distribution, which remains in decline. • Direct print costs declined by 4%, reflecting lower volumes and the ongoing benefits from plant upgrades. We continually evaluate our Print portfolio to ensure that each publication remains a net contributor to the business. • Direct costs include printing costs, distribution costs, agency commission, and occupancy costs. • Readership remained at strong levels and NZ Herald daily brand audience exceeded 1 million across FY18. 12 12
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