KEEPING KIWIS in the KNOW NZME LIMITED ANNUAL REPORT for the Year Ended 31 December 2020
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For personal use only KEEPING KIWIS IN THE KNOW NZME LIMITED ANNUAL REPORT For the year ended 31 December 2020 2 NEW ZEALAND MEDIA AND ENTERTAINMENT For personal use only ANNUAL REPORT 2020 3 CONTENTS. 4 Operational Highlights 6 2020 Financial Results Summary 8 Chairman’s Report 10 Chief Executive Officer’s Report 12 Financial Results and Divisional Commentary 16 Our Sustainability Commitment 28 The Board 30 The Executive Team 32 Corporate Governance 43 Statutory Disclosures 48 Consolidated Financial Statements 99 Independent Auditor’s Report 107 Directory This annual report is dated 23 February 2021 and is signed on behalf of the Board of Directors by: For personal use only Barbara Chapman Carol Campbell Chairman Director 4 NEW ZEALAND MEDIA AND ENTERTAINMENT OPERATIONAL HIGHLIGHTS For personal use only ANNUAL REPORT 2020 5 AUDIO 9 NewstalkZB 35.8% Audio brands #1 commercial radio network radio audience market and ZB’s Mike Hosking share2 Breakfast Show the most popular Breakfast show1 2.0 million ZM Breakfast 40.4% weekly listeners1 #1 breakfast show for 25 to 54 radio revenue market share year old New Zealanders2 for 12 months to Dec 20203 Growth to 1.1 million registered users (up 12%) and 5.2 million average iHeartRadio monthly listening hours (up 35%), growing revenue 45% PUBLISHING 32 1.4 million 54.1% print publications across weekly readers5 print readership market share5 New Zealand4 1.9 million 585,000 47.1% NZ Herald weekly brand average issue readership5 print advertising revenue audience5 market share for 12 months to Dec 20206 17 2.6 million websites extending digital digital users per month across reach NZME titles5 24.3% digital display advertising revenue market share for 1.8 million 102,000 nine months to Sept 20208 monthly unique audience subscribers access NZ Herald on nzherald.co.nz7 Premium including 53,000 paid digital subscribers ONEROOF 19 89.0% 53% real estate publications, including of nationwide residential growth in digital classifieds seven OneRoof Local magazines for-sale real estate listings9 revenue on oneroof.co.nz to $4.3 million for the 12 months to Dec 20 (compared to the For personal use only 460,000 #1 12 months to Dec 19) monthly unique audience on residential for-sale real estate oneroof.co.nz7 listings site in Auckland for the majority of 20209 1 GfK, RAM, Commercial Radio Stations, Total NZ S4 2020, Cummulative Audience (%), AP10+. Rounded up from 1.985 million. 2GfK, RAM, Commercial Radio Stations, Total NZ S4 2020, Market Share (%), NZME including partners, 25 - 54. 3PwC Radio advertising market benchmark report, 12 months to 31 December 2020 vs 12 months to 31 December 2019. Note: report excludes independent broadcasters. 4Print publications include 7 Metro and Regional newspapers, 17 Community newspapers and 8 Newspaper Inserted Magazine. 5Nielsen CMI Fused Q3 19 – Q2 20, November 2020, AP15+. 6PwC NPA quarterly performance comparison report, December 2020. 7Nielsen Online Ratings, December 2020. 8IAB digital advertising revenue – General Display, IAB NZ Digital advertising revenue report, Q3 2020. 9OneRoof’s listings as a percentage of residential for-sale real estate listings on trademe.co.nz. 6 NEW ZEALAND MEDIA AND ENTERTAINMENT 2020 FINANCIAL RESULTS SUMMARY $331.2m $67.3m $22.0m Operating Revenue1 Operating EBITDA1 Operating NPAT1 2019 $371.7m 11% 2019 $65.7m 3% 2019 $17.3 m 27% 11.1cps $14.2m Operating EPS1 Statutory NPAT1 2019 8.8cps 26% 2019 ($165.2)m 109% Reader Revenue Cost Net Debt Growth 2% Savings 14% Down $40.9m Significant growth in Ongoing focus on cost Net debt reduction For personal use only digital subscriptions management and swift to $33.8 million and revenue offsetting the actions taken to mitigate leverage ratio reduced decline in print reader the impacts of Covid-19 to 0.6 times EBITDA2 revenue year-on-year. on the business. (excluding NZ IFRS 16). 1 Operating results presented include the impact of NZ IFRS 16, however exclude exceptional items to allow for a like for like comparison between 2019 and 2020 financial years. 2 Operating results presented and used in these calculations exclude the impact of NZ IFRS 16 and exclude exceptional items. Please refer to pages 35-36 of the NZME 2020 Full Year Results Presentation for a detailed reconciliation. Operating and statutory results include $8.6 million (net) of Covid-19 government wage subsidy received in H1 2020. ANNUAL REPORT 2020 7 For personal use only 8 NEW ZEALAND MEDIA AND ENTERTAINMENT CHAIRMAN’S REPORT Kia ora and welcome to the New Zealand Media and Entertainment Annual Report for the year ended 31 December 2020. 2020 will leave an indelible mark on the NZME’s platforms, which have been a leadership team confident to make history of our company, on New Zealand experiencing some of the highest audience difficult but necessary decisions, and a and indeed the world. engagement levels in years. team with the capability to execute swiftly. On February 28, as Covid-19 arrived on As New Zealand went into Covid-19 This response has meant NZME has New Zealand’s shores, we faced into a lockdown, the brakes were applied to the returned an Operating Earnings before period of uncertainty the likes of which New Zealand economy and the impact on we have never before experienced. businesses advertising was significant. Interest, Tax, Depreciation and Amortisation (“EBITDA”)1 growth of 3% in 2020 to In the face of this incredible disruption NZME’s leadership responded with a set $67.3 million, despite an overall decrease in we can all be very proud of how NZME’s of initiatives aimed at making sure the revenue of 13% for the year. people and its leadership responded to business was protected from the worst the challenges of the Covid-19 pandemic. of the revenue impacts of Covid-19. During 2020, NZME maintained its focus on effective capital management. This resulted in a significant reduction in net debt to THE ADVERSITY CAUSED BY COVID-19 $33.8 million at 31 December 2020, down REVEALED IN NZME A RESILIENT, ROBUST, from $74.7 million as at 31 December 2019. Whilst 2020 will primarily be remembered RESOLUTE AND EMPATHETIC CHARACTER. for Covid-19, a number of transformational initiatives aimed at accelerating NZME’s Reducing costs across the business and momentum in key strategic priorities were NZME’s response was swift, focussed and continuing our focus on debt reduction delivered on. These included a new audio delivered with purpose. From the outset, were both aimed at providing certainty strategy focused on audience and revenue and consistently throughout, we took a for shareholders and our people. people first perspective, ensuring NZME growth, and ongoing investment in the staff were kept safe and well informed. As we have stated previously, the audience engagement and subscriber government wage subsidy supported growth across NZME’s flagship news Simultaneously our business continuity the production of quality journalism and plan was deployed ensuring we continued website, nzherald.co.nz. OneRoof achieved broadcasting during an extremely difficult to operate as an Essential Service during growth in listings, audience2 and revenue. period and helped NZME retain roles that the lockdown periods. This kept our For personal use only are now supporting the delivery of our In November 2020 NZME introduced audiences informed and engaged with purpose of keeping Kiwis in the know. investors and analysts to refreshed guiding news and information they could trust and have confidence in. This also ensured The adversity caused by Covid-19 revealed principles and strategic priorities that the our commercial partners and advertisers in NZME a resilient, robust, resolute Board will employ to maximise value creation continued to reach their customers through and empathetic character. It revealed for our customers and shareholders. 1 Operating results presented include the impact of NZ IFRS 16, however exclude exceptional items to allow for a like for like comparison between 2019 and 2020 financial years. Please refer to pages 35-36 of the NZME 2020 Full Year Results Presentation for a detailed reconciliation. Operating and statutory results include $8.6 million of Covid-19 government wage subsidy received in H1 2020. 2 Nielsen Online Ratings, December 2020. ANNUAL REPORT 2020 9 These principles are a relentless focus on always putting our Customers First; we Dividend Policy will be dedicated to a premium Win with NZME intends to pay dividends of 30-50%of Free Cash Flow subject to being within Quality approach; we will drive Digital its target leverage ratio and having regard to NZME’s capital requirements, operating Acceleration delivering world class digital performance and financial position. NZME’s Target Leverage Ratio is 0.5 to 1.0 times experiences for our customers; we will rolling 12 month EBITDA1 (pre NZ IFRS 16). Full dividend policy is available at: continually seek out new opportunities to www.nzme.co.nz/investor-relations/dividends/ deliver Audience Expansion; and we will strive for Top Performance, measured I am confident our business will continue We are pleased to welcome New Zealand against industry and sector competitors to respond successfully as the ongoing tech entrepreneur Guy Horrocks to the and against the performance of the publicly impacts of the of the Covid-19 pandemic board of NZME in 2021. Guy brings a listed company environment. will be felt throughout 2021 and beyond. background in successfully growing With these guiding principles in mind, digital businesses, strong capability in the Based on current performance and NZME’s we also reset our focus on NZME’s key commercialisation of data, and a focussed strategic priorities, evolving each against improved capital position, the Board entrepreneurial mindset to our Board. a set of measurable targets to be achieved For personal use only expects to be able to return to payment by 2023.