Landscape for NZX Media Stocks Amid COVID-19- New Zealand Media and Entertainment slashes the equivalent of 15 percent of workforce and CEO takes 20% pay cut

Landscape for NZX Media Stocks Amid COVID-19- New Zealand Media and Entertainment slashes the equivalent of 15 percent of workforce and CEO takes 20% pay cut

NZME Limited (NZX: NZM) happens to be an integrated media company in New Zealand. The company was demergered from its parent, APN News & Media in the month of June 2016. From June 27, 2016, the company has been listed on NZX under the code “NZM.”

The coronavirus pandemic is disturbing every industry and the media sector is not an exception. The coronavirus has created both challenges and opportunities for the media sector. Many of the most important broadcast content (for example live sports) has been cancelled or postponed.

Many of the media houses have flourished as their addressable market is larger, or they have scaled up their operations to stay competitive.

Coronavirus is having a significant influence on media consumption, supply, and advertising all around the world. Advertising expenditure has come under substantial pressure. Some of the sectors are stopping the advertising and few campaigns are now being considered improper because of social distancing.

Potential Impacts on Entertainment and Media

There is a significant rise in demand for content, but there are also hurdles in production and advertising revenue. Movie theatres, concert venues, theme park and museums are all closed, and sporting events have been cancelled, which could impact the revenue. Many musicians are moving online and are dependent on streaming platforms as live shows are stopped.

NZME Slashes Workforce by 15%

The company is operating effectively with most staff operating from home. However, several of the company’s people are needed to operate from the company’s premises to make sure its core business remains to operate effectively.

The company has implemented several programs to reduce costs and capital expenditure throughout the business. All operating expenses have been evaluated with a stance to reducing overall costs and cash outflows.

Some of the measures include the following:

  • The company has applied for and received the government wage subsidy for all eligible employees;
  • The company has also reduced directors’ fees and CEO salary by 20% from March 2020;
  • It has implemented a wide scale workforce restructuring project, causing in the decrease of over 200 positions, including redundancies and removal of vacant positions across the business, reflecting over 15% of NZME’s workforce;
  • Requested employees to take annual leave;
  • Reduced planned capital expenditure for the remainder of 2020.


Reduced Outlook for FY20

As the country is in Alert Level 4 lockdown, the company is expecting April 2020 advertising revenues to be around 50% lower as compared to April 2019. The company’s revenue is expected to be significantly down on the corresponding period in 2019. The cost saving initiatives would partially offset the anticipated revenue declines.

Operating EBITDA Stood at $50.6 million, down 7% YoY

For the full year ended 31st December 2019, the company reported operating revenue of $371.7 million (excluding impact of NZ IFRS 16 and exceptional items), down by 4% and operating EBITDA of $50.6 million, down by 7% against FY18.

The company added that challenging advertising market affected print and digital advertising, together with declines in the print circulation revenue. In the year ended 2019, the company posted statutory net loss after tax amounting to $165.2 million, while in 2018, the company posted net profit after tax of $11.6 million. As per the release, in the year ended 2019, the cost savings along with increased efficiencies delivered reduction in the operating expenses of 4% when compared to pcp (or previous corresponding period).

Radio audience market share increased to 35.9% in December 2019 and radio revenue market share increased to 39.5% for 12 months to December 2019. The operating NPAT stood at $19.7 million, and operating EPS stood at 10.0 cents in FY19, up by 4% as decrease in operating revenue was offset by the cost savings and lower depreciation charge in the period.

Results Summary (Source: Company’s Reports)

Segmental Performance of the Company

The company’s print revenue segment reported total revenue of $192.4 million, down by 9%. Print advertising revenue stood at $102.2 million, down by 10%. But it was better than the market which declined by 13.7%.

Radio revenue stood at $110.9 million, which witnessed a small increase of 2% as compared to previous year. The company expanded its New Zealand radio advertising revenue market share from 39.0% in the 12 months to December 2018 to 39.5% for the 12 months to December 2019.

The digital revenue stood at $60.4 million in FY19, marginally up from $60.0 million in FY18. Digital advertising was affected by the drop in the total digital display agency advertising market of 2.4% in the year ended December 2019. However, the decline in digital advertising revenue was compensated by $2.3 million rise in digital classified revenue from OneRoof and DRIVEN.

Stock Performance

The stock of NZME closed the day’s trading at NZ$0.200 per share on 14th April 2020, an increase of 8.11% on an intraday basis. The company has a market capitalisation of $39.311 million. In the span of previous 52 weeks, the stock price of the company has witnessed a fall of 61.39%.  

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