ANNUAL REPORT
NZME LIMITED
For the year ended 31 December 2016
1
FY16 Results Summary
Chairman's Letter – Firm Foundations
Audiences Captured
CEO's Letter – Business
Transformation Continues
NZME at the Centre of
What New Zealanders Want
New Initiatives & Development
CFO's Letter – Performance You Can Count On
Our People
Our Communities & the Environment
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The NZME Board
The NZME Executive Team
Corporate Governance
Statutory Information
Proposed NZME / Fairfax NZ Merger
Non-GAAP Measures Explained
Consolidated Financial Statements
Independent Auditor's Report
Directory
This annual report is dated 31 March 2017
and is signed on behalf of the Board of Directors by:
Sir John Anderson
Director
Carol Campbell
Director
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37
38
45
100
106
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2
STATUTORY NPAT
$74.5m
▲ 74% FY15 $42.9
TRADING REVENUE1
TRADING EBITDA1
$407.4m
▼ 6% FY15 $433.0m
$71.9m
0% FY15 $71.8m2
PRO FORMA EPS1
14.2cps
PRO FORMA NPAT1
$27.8m
1% FY15 $27.5m
FINAL DIVIDEND FULLY IMPUTED
6.0cps3
SCHEDULED FOR PAYMENT ON 28 APRIL 2017
FULL-YEAR DIVIDENDS 9.5cps
4
FY16
Results
Summary
(1) Trading Revenue, Trading EBITDA, Pro forma NPAT and Pro forma EPS are non-GAAP
measures that are explained and reconciled on pages 38-43 (2) The FY15 NZME
segment result in the APN FY15 financial statements was $74.9m, this has been
adjusted for $3.1m of standalone costs incurred in H2 16 to provide a like-for-like
comparison. (3) A supplementary dividend of 1.06 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.
5
Firm Foundations
I n our first full-year result since
the listing of NZME on 27 June
2016, I am pleased to report
the company generated stable
earnings from its integrated media
and entertainment business, despite
the challenges faced in advertising
markets. This result has enabled the
Board to declare a fully-imputed final
dividend of 6.0 cents per share to be
paid in April, making 9.5 cents per
share in dividends for the full year.
The creation of NZME brought
together major New Zealand
Publishing, Radio and e-Commerce
businesses into a single and unique
multi-platform media company.
NZME is now an audience-centric
business focusing on the pillars of
News, Sport and Entertainment.
“With exceptional
content and distribution
capability, we are
uniquely positioned”
We are very proud to be a pure
New Zealand integrated media and
entertainment company, with local
management that understands
our audience of 3.2 million Kiwis1.
Bringing Print, Radio and Digital
together under a single roof allows
us to leverage revenue opportunities
from cross-platform advertising and
achieve significant operational and
cost efficiencies.
Following completion of the
integration, we now have a more
efficient and agile business. We aim
to take advantage of exciting new
opportunities to entertain
and connect New Zealanders and
engage audiences for our
advertising customers.
6
Our focus on business performance,
investment in people and talent, and
delivering efficiencies has enabled
our company to better the market in
Print advertising revenue decline and
Digital advertising revenue growth2.
In addition, our total audience grew
5% in FY161.
Given challenging advertising
markets, in which some segments
of advertising declined by more than
15%2, we were pleased that we
held Trading3 EBITDA stable on the
previous year.
While Trading3 revenue declined
6% for the year, the improvement in
the second half was encouraging,
suggesting our initiatives are
starting to bear fruit. In delivering
stable EBITDA, cost reduction was
important and will continue to be
a focus for NZME and, indeed, the
whole industry.
As we face an increasingly
fragmented media market, the
proposed merger with Fairfax New
Zealand (“Fairfax”) remains a priority.
The transaction if approved will
underwrite the competitiveness of
New Zealand content generation
and delivery. As part of the process
to obtain regulatory approval for the
transaction, we have made extensive
submissions and participated in a
conference with the New Zealand
Commerce Commission (“NZCC”).
The NZCC is due to respond with a
final determination by 2 May 2017.
If the determination is positive we
will seek to complete the transaction
as soon as practicable. We will
consider our options if the merger is
not approved.
NZME’s mission is to be at the centre
of what New Zealanders want by
sharing great stories, entertaining,
engaging and connecting with all
New Zealanders. Our company has
highly experienced, dedicated and
talented management and staff,
ably led by CEO Michael Boggs who
joined NZME in March 2015 and
was appointed as CEO in April 2016.
They continue to create and deliver
premium innovative content and
experiences to New Zealanders.
After working in a senior finance
capacity with NZME in FY16, we were
very pleased to see Mike Moran
appointed as Chief Financial Officer
in February 2017. Previously a Partner
at Deloitte, Mike has more than 15
years of international experience in
assurance and advisory.
The Board would like to thank our
employees, who in the last 12 months
have worked extremely hard to
complete the demerger from APN,
a complex business integration, and
our listing on the stock exchange.
These processes have been achieved
whilst continuing to build and excite
our audience in order to grow the
business and deliver solid financial
performance and returns
for shareholders.
“Our focus has enabled
your company to better
the market”
With exceptional content and
distribution capability, we are
uniquely positioned to take
advantage of many opportunities
for realising the shareholder value
we see in this exciting and dynamic
industry.
Sir John Anderson
Chairman
(1) Nielsen CMI, November fused database: Last twelve months Q4 15 – Q3
16 (population 10 years +). Based on unduplicated weekly reach of NZME
newspapers, radio stations, and monthly domestic unique audience of
NZME’s Digital channels. (2) PwC NPA Quarterly performance comparison
report Q4 2014 – Q4 2016. IAB / PwC New Zealand Q3 2016 Interactive
Advertising Spend Report; Digital excluding search and directories, and
social media (NZ market only). (3) The FY15 and FY16 Statutory Results are
not reflective of the NZME business going forward due to the impact of
the demerger, tax payments, business closures and divestments. Trading
EBITDA and Pro forma NPAT more appropriately reflect the company in its
new structure. Reconciliation between Statutory, Trading and Pro forma
financial measures can be found on pages 38-43.
7
Audiences Captured
On a typical day, by 9am 73%1 of New Zealanders have
read, watched, listened to, or otherwise engaged with NZME.
Amanda
Linnell
Managing
Editor
NZME REACHES:
84%
of the
North Island1
87%
of
Auckland1
68%
of the
South Island1
Our national and local presence allows us to offer
advertisers broad access to their target markets.
(1) Nielsen CMI, November fused database: Q4 15 – Q3 16 (population 10 years +). Based on unduplicated weekly
reach of NZME newspapers, radio stations, and monthly domestic unique audience of NZME’s Digital channels.
Jared
Savage
Investigative
Journalist
Liam Dann
NZ Herald Business
Editor at Large
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9
Business
Transformation
Continues
Since joining NZME in March
2015, I have driven the ongoing
business transformation to
become an integrated media and
entertainment business and we have
continued to realise the efficiencies
created by this change. We believe
there is further significant medium
term opportunity to deliver synergies
from this multi-platform approach.
While we will never be comfortable
with a revenue decline we were
pleased to deliver a stable Trading1
earnings outcome for shareholders
in FY16 given the challenges faced in
advertising markets.
Trading1 EBITDA, which we think
reflects the company today, was
stable compared to FY15. A 6%
reduction in costs contributed to this
result, primarily driven by business
transformation and integration.
Trading1 revenue was down 6%, but
with an improved performance in the
second half, reflecting strong growth
in Digital and a slowing rate of decline
in Print and Radio. We performed
better than the industry in several of
our key advertising markets.
My executive team and I have
established a clear strategy for NZME.
We have a framework for growing
our business that focuses strongly
on financial performance but also
fosters innovation.
At the time of our interim results
in August last year, we identified
seven key priorities that we believe
will deliver improved shareholder
value. Already we have made
good progress on these priorities
by growing audience, slowing the
decline in Print revenue, returning
Radio agency revenue to growth,
driving strong Digital revenue growth,
achieving major cost savings,
developing talent and progressing
the proposed merger with Fairfax.
NZME grew audience reach by 5% in
the year across its news, sport and
entertainment brands to 3.2 million
Kiwis2. Digital audience growth was
particularly strong at 19%2 in the
year, driven by successful product
development and initiatives. In a
typical day, by 9am 73% of Kiwis
have read, watched, listened to, or
otherwise engaged with NZME2.
We continue to transform NZME
to lift performance, grow audience
and optimise our products. In Print
we stabilised circulation and grew
readership with strategies such as
the relaunch of the Herald on Sunday
lifestyle magazine, to focus on Travel,
a stronger commercial proposition.
The New Zealand Herald is the
country’s leading newspaper and
our most important Print masthead.
We are focussed on extending its
readership and ensuring it remains
the number one choice for Print
readers and advertisers.
In Radio, improvements in the agency
sales model resulted in a return to
agency revenue growth. Agency
sales are via The Radio Bureau, a joint
venture with Mediaworks, and our
new Direct Agency Sales team, which
has shown considerable growth year
on year.
We continue to focus on direct revenue
growth and launched a new breakfast
show for The Hits in Auckland, with
high profile talent; Sarah Gandy, Sam
Wallace and Toni Street in February
this year. Newstalk ZB has the largest
share of any commercial station in New
Zealand3, showcasing New Zealand’s
number one breakfast host, Mike
Hosking. We are looking to replicate
the success of our strongest stations
across the portfolio.
Our fantastic home-grown content
has been very well received and
helped us lift video streams within
NZME’s platforms by 69% in the last
year4, which is important as it’s one
of the strongest areas of growth
in Digital advertising. This has
contributed to strong Digital revenue
growth of 24%1 in the year, largely
driven by mobile and video growth
across nzherald.co.nz, supported
We continue to transform
NZME to lift performance,
grow audience and optimise
our products
by exciting new platforms such as
watchme.co.nz.
Following the success of NZ Herald
Focus (news video show) in our
digital division, NZ On Air has funded
production of our new regional video
service, Local Focus, and our first
long-form documentary video
“Under the Bridge”.
We will also launch a redesigned
nzherald.co.nz website in 2017.
The new site will utilise the highly
regarded Washington Post content
management system and other
publishing tools. This development
will move us from an old-world,
desktop-driven, text-first platform to
a mobile and social-first, multimedia,
agile, future-proof platform.
We have delivered very strong growth
in our social network following, which
brings over 40% of our audience to
our platforms, reinforcing our content
branding. We have also implemented
a data lake, consolidating our
registered user databases across our
platforms, to offer new cross-platform
content and audience leverage to
serve and grow our audience.
NZME aims to be at the centre
of what New Zealanders want by
sharing great stories, entertaining,
engaging, and connecting all New
Zealanders. To achieve this we are
focused on the four medium term
pillars of the business: our audience;
revenue; being agile, and our people.
growing audience reach, retaining
revenue in print and ensuring radio
returns growth. We want to grow new
revenue streams across the company
whilst managing costs and capital well.
Developing our people and talent will
remain fundamental to our success.
We are determined to make further
progress in these areas in the current
year as we see them as key drivers of
shareholder value.
I would like to echo the Chairman’s
comments about the efforts of our
dedicated employees. It has been
a year of enormous change for the
industry and NZME. Management
and staff have responded to this
challenge, implemented our plans
and delivered solid operating
and financial outcomes. This is a
testament to their hard work and
diligence under sometimes testing
circumstances.
I also thank our amazing New
Zealand audiences, our suppliers,
business partners, advertising
customers and shareholders for their
continuing support.
With our unique multi-channel,
integrated media offering combined
with some of New Zealand’s leading
brands and talent, we have an
exciting opportunity ahead of us.
Looking forward, we aim to improve
shareholder value through further
Michael Boggs
Chief Executive Officer
(1) The FY15 and FY16 Statutory Results are not reflective of the NZME business going forward due to the impact of the demerger, tax payments, business
closures and divestments. Trading EBITDA and Pro forma NPAT more appropriately reflect the company in its new structure. Reconciliation between
Statutory, Trading and Pro forma financial measures can be found on pages 38-43. (2) Nielsen CMI, November fused database: Last twelve months Q4
15 – Q3 16 (population 10 years +). Based on unduplicated weekly reach of NZME newspapers, radio stations, and monthly domestic unique audience of
NZME’s digital channels. Note: Most recent data point available is last twelve months to Q3 16. (3) GfK - Radio Trended Network Data, Commercial Major
Markets 2016, Station Share (%), All 10+, Mon-Sun 12mn-12mn. Note: T1 2014 – T2 2015 conducted by previous provider TNS, T1, T2, T3 2016 conducted by
current provider GfK. (4) Brightcove analytics, January 2015 - December 2016.
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NZME at the Centre of
What New Zealanders Want
FOCUSED
ON
HOW WE’RE
DOING IT
INITIATIVES
Audience
Audience-centric, content-
driven media business
Revenue
Customer-focussed
revenue business
Listening
To our customers and
providing unique solutions
Simplifying
How our customers engage
with us and each other
Expanding
Our content and delivery to
reach more New Zealanders
Leverage insights to
maximise audience
targeting and engagement
Enhance regional
content and expand
Digital verticals
Proactively optimise
existing products, e.g.
new Radio breakfast shows
Invest in new
revenue streams
Leveraging
Our brands, data capabilities
and integration
Launch new content
management system and
redesigned nzherald.co.nz
Agility
A future-focused, innovative
and agile business
Developing
Innovative ways to connect
buyers and sellers
Leverage data to maximise
Digital revenue
People
Home of the best talent
Enabling
The best people with the
right tools
Develop our leadership,
talent, Digital, social and
data skill-sets
Simplify and enhance
our sales and customer
relationship systems
Sharing great stories, entertaining, engaging and connecting all New Zealanders.
New Initiatives & Development
• Create Me – maximises the integrated, multi-platform sales
proposition, delivering revenue growth via Video, Branded Content,
and Experiential products.
• WatchMe – unique video-on-demand platform showcasing NZ
video content, utilising influential talent.
• NZ Herald Focus – Digital video news show that meets the growing
consumer demand for mobile video content.
• Driven Digital platform – user generated classifieds and auto
listings, consistently hosting over 20,000 listings.
• Herald Homes App – enhances NZME’s real estate Print assets with
direct access to additional Digital content.
• KPEX – joint venture trading desk for Digital advertising, between
four New Zealand media businesses (NZME, Fairfax NZ, Mediaworks
and TVNZ).
• Ratebroker.co.nz – a joint venture mortgage, finance and insurance
aggregator platform enabling consumers to easily purchase these and
other future services directly online.
• RestarantHub.co.nz – a joint venture table management and online
restaurant booking platform.
• Chinese New Zealand Herald – a joint venture which has created a
Chinese language version of nzherald.co.nz.
• Events – NZME ran 25 events in FY16, including the new
Live Well Festival and the PwC Herald Talks series.
• iHeartRadio – new App launched in early 2017 with a registration
wall and enhanced user functionality.
• iHeart concerts – held in FY16 included Broods, Delta Goodrem,
Temper Trap, Cold War Kids, 5th Harmony and Shihad.
• WTV, Humm FM and Radio Wanaka – expanded Radio
via exclusive commercial Radio partnerships.
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13
Performance You Can Count On
Since joining NZME I have been
focused on providing value
to our shareholders and we
have delivered a stable result for the
company, allowing us to pay a total
dividend of 9.5 cents per share for
the year.
As has been widely described,
the media sector faces significant
headwinds in several advertising
markets, particularly Print advertising,
which represented 30% of our
revenue in FY16. However, other
segments, such as Digital advertising,
are growing strongly.
As the CEO and Chairman have
detailed, NZME’s strategy is to
maintain our traditional sources of
revenue and pursue growth in Digital,
while at the same time managing
costs to maximise efficiency and
support returns.
“We have a prudent
and sustainable
capital structure
that will support
implementation of
our strategy”
Maintaining a strong and flexible
balance sheet and effective capital
management underpins our ability to
manage growth and risks and deliver
attractive shareholder returns.
We believe we made significant
progress on this strategy in
FY16. Trading1 EBITDA was stable
compared to FY15, supported by
strong growth in Digital revenue and
a 6% reduction in costs, primarily
driven by business transformation
and integration.
Group Trading1 revenue declined
6% in the year, reflecting strong
growth in Digital and a slowing
rate of decline in Print and Radio.
The revenue decline slowed in the
second half of the financial year as
a number of our initiatives began to
take effect. After adjusting for the
impact of divestments and business
closures, Pro forma1 Group revenue
declined 4%.
Given the significant changes to
our company structure brought
about by the demerger, there
is material divergence between
our statutory reported financial
measures, and those that reflect
NZME as it stands, which we refer
to as our Trading1 result.
On pages 40-41 you will see the
reconciliation between statutory
GAAP measures and our Trading1
result. We think the Trading1 result
more appropriately reflects the
company’s performance. Page 42
shows the reconciliation of Pro
forma1 results, which is essentially
the Trading1 result adjusted for
standalone costs yet to be incurred,
and earnings from divested
businesses in FY16.
One of our key priorities has been
to slow the decline in Print revenue
and, in this area, we are having some
success. Trading1 revenue in Print
declined 9%, however, adjusting for
divestments and business closures,
our Pro forma1 Print revenue was
down only 6% to $237.7 million.
This represents 59% of Group Pro
forma1 revenue. Given the reported
15% decline in the print advertising
market2, we are encouraged
by this result.
Radio and Experiential contributed
28% of FY16 NZME Trading1 revenue,
and at $114.8 million was 4% lower
than FY15. Radio agency revenue
returned to growth in the second half
as ongoing benefits of an improved
agency sales model were realised.
Direct Radio revenues were
maintained in Auckland, however
some regional markets remain
challenged. Returning total direct
Radio revenue to growth will be a
focus for FY17.
Other Radio revenues, including
iHeartRadio and NZME Events, grew
3% year-on-year to $6.2 million in
FY16. Further growth is expected
in FY17 with the expansion of the
PwC Herald Talks speaking series to
Wellington and Christchurch, and
expanding the Viva Sessions. A new
iHeartRadio app was launched in
Early 2017 with a registration wall,
enhanced user functionality and
improved advertising targeting.
NZME achieved strong Digital
revenue growth of 24% in FY16,
against market growth of 16%3,
largely driven by mobile and Video
advertising revenue growth. Total
programmatic revenue grew
65% year-on-year driven by the
performance of KPEX, a joint venture
trading desk for Digital advertising,
between four New Zealand
media businesses (NZME, Fairfax,
Mediaworks and TVNZ).
E-Commerce revenue from GrabOne
decreased 19% in FY16, however the
decline softened in H2 for 2016 due
to continued focus on improving
user experience, and evolving from
a pure "daily deals" site to an
"always-on" model.
Continued focus on cost management
led to a 6% reduction in costs year-
on-year. The transformation and
integration of Publishing, Radio and
e-Commerce was the primary driver of
the reduction in people costs. We also
made important savings in print and
distribution costs, agency
commissions, which are
in-line with the revenue
decline, and marketing.
We continue to explore future cost-
saving opportunities and are currently
implementing a new CRM system,
along with new planning, booking and
scheduling tools, to help us better
understand our customers and better
manage the sales pipeline. This is not
only expected to reduce people and
content costs, but also drive revenue
growth across platforms.
We are also in the process of
improving our Print plant technology,
which will reduce both paper and ink
waste as well as people cost due to
enhanced automation of the printing
process. Further savings are likely due
to the instalment of the Washington
Post software as the time to produce
a piece of content will reduce
significantly, touch less hands, and
be easier to use across our assets
without incurring incremental cost.
Capital expenditure requirements are
relatively low. We spent just under
$15 million in FY16 and we expect to
spend a similar amount in the current
year. This allows us to maintain and
upgrade our systems and invest
in content and some new
business initiatives.
Pro forma1 EPS
was 14.2 cents,
supporting the final
dividend of 6.0 cents to be
paid on 28 April 2017. The 9.5
cents declared for the year is in
line with dividend policy of 60-80%
of Pro forma1 NPAT.
Net debt as at 31 December 2016
was $95.9 million with an interest
rate of 3.8%. The company has
healthy cash flow, sound liquidity
and undrawn bank facilities of
$48.0 million. We have a prudent
and sustainable capital structure that
will support our business needs and
implementation of our strategy.
Mike Moran
Chief Financial Officer
(1) The FY15 and FY16 Statutory Results are not reflective of the NZME business going forward due to the impact of the demerger, tax payments, business
closures and divestments. Trading EBITDA and Pro forma NPAT more appropriately reflect the company in its new structure. Reconciliation between Statutory,
Trading and Pro forma financial measures can be found on pages 38-43. (2) PwC NPA Quarterly performance comparison report Q4 2014 – Q4 2016. (3) IAB /
PwC New Zealand Q3 2016 Interactive Advertising Spend Report; digital excluding search and directories, and social media (NZ market only).
14
15
Fletch, Vaughan
+ Megan
6AM - 10AM WEEKDAYS
MIKE HOSKING
NZ’S NUMBER ONE
BREAKFAST HOST1
6AM - 8:30AM WEEKDAYS
(1) Gfk Radio Audience Measurement
Total NZ 2/2016 All 10+ Mon-Fri
6am-8.30am, % share
16
Stace
& Flynny
3PM – 7PM WEEKDAYS
MATT HEATH
JEREMY WELLS
6AM – 10AM
WEEKDAYS
17
Our People
Whether they’re fronting our brands, selling our
advertising products, driving new initiatives, or helping
to run our business, it’s crucial our people share a
common purpose.
We work hard to ensure everyone at NZME understands
and is aligned with our company's strategic goals
(what needs to be achieved) and our values (how these
should be achieved).
OUR VALUES
Our senior leaders are tasked with translating
our strategic goals and providing support to
ensure all employees are engaged. As part of
this, our people have set KPIs that are aligned
to the strategic goals and our NZME values of
being Connected, Curious and Confident.
Our people live and breathe our values of being "Connected, Curious and Confident". As
an incentive we’ve set in place a dedicated values-based reward and recognition initiative
– the three-tiered Reward Me programme. A "Shout Outs" nominations process allows
staff to acknowledge their colleagues, while each quarter we gather to announce
our "NZME Champions", recognising those who have gone above and beyond in
displaying our values. Finally at the end of the year we crown a select few who
have consistently excelled in demonstrating our values – our "NZME Legends".
Before we act, we seek to understand:
• We engage the right people
• We share ideas
• We listen carefully to our colleagues,
audiences and customers
• Once we’ve made a decision, we all pull
together to get it done
Then we dig deeper and ask questions:
• We get to the heart of the matter
• We live and breathe it. We take ownership.
• We try new things and new ways of working
• We see bridges not barriers, and where
necessary challenge the status quo
• We go the extra mile to discover
• And we make it fun
In delivering what we do, we boldly step up,
speak out and give it our best shot:
• We live outside our comfort zone
• We tell it like it is. What we say, we do.
• We keep it simple and get to the point
• We solve any issues at the source
• We persevere to make it happen
18
HEALTH AND SAFETY
In 2016, we transformed the way we
approached safety and wellbeing
across NZME with the introduction of
our two programmes Safeguard Me
and Better Me.
role-based targeted wellbeing
programs, fatigue management
and an even bigger year of
Better Me programs.
WELLNESS WEEKS
Our existing paper-based safety
system was replaced with a
comprehensive online tool allowing
people to report safety incidents
digitally regardless of their location.
We conducted a comprehensive risk
analysis across each department,
enabling us to introduce more
effective safety and risk management
practices. As a result we achieved
a 20% decrease in injuries requiring
medical attention.
NZME is proud to celebrate the
achievement of the Tertiary
Level rating under the Accident
Compensation Corporation’s
Workplace Safety Management
Practices Auditing Standards,
meaning our business
operates a continuous
improvement
framework for
workplace health and
The Wellness Committee hosted two
wellness weeks: one in April 2016 and
another in October 2016.
A variety of guest speakers shared
simple and achievable personal
strategies that our people could
incorporate into their day-to-day lives
to help improve their financial, mental
and personal health.
We also shared the personal success
stories of NZME people who had
made lifestyle changes that impacted
positively on their own overall health
and fitness.
Outside of Auckland, our network
of wellness representatives helped
establish and personalise Wellness
Week as appropriate for their sites,
including a swim challenge, a walking
bus through a local art exhibition,
blood donations and providing free
healthy snacks throughout the week.
people who are LGBTTI (lesbian,
gay, bisexual, transgender, takatāpui
and intersex).
NZME signed up as a Mayor’s
Youth Employment Pledge Partner
in Auckland to encourage youth
employment. We had stands at
JobFest (where over 300 youths
registered for jobs at NZME, over 40
left their CVs, and six participated in
face-to-face interviews) and Festival
of the Future (where we interviewed
over 30 prospective candidates).
The charts below and over the page
demonstrate our demographic
breakdown as at 31 December 2016:
Gender / Level
Male
45%
Male
47%
Male
47%
Female
55%
Female
53%
Female
53%
safety management.
DIVERSITY
Executive
Senior
Staff
Additionally Safeguard Me and
associated leadership training was
At NZME we believe that everyone
should be free to be themselves.
rolled out, upskilling over 2,000
leaders and employees on recent
changes in Health and Safety
Legislation and the Safeguard Me
reporting system.
We also welcomed Better Me, NZME’s
wellness program focused on giving
our people the tools to maintain a
healthy lifestyle – both inside and
outside of work. Last year Better Me
included a host of New Zealand’s
most inspiring health and wellness
professionals coming in and sharing
their views on how best to maintain
great health and wellbeing.
In 2017 we plan on keeping up the
pace with key initiatives including
We believe that a diverse workforce
is essential for us to deliver our
strategic objectives. For NZME,
diversity means the competitive
value in the difference of our people
in relation to gender, ethnicity, sexual
orientation, age, disability, religion or
cultural background.
We have a formal diversity policy
that is available to our people and
the public on our website and in
December 2016 we received 72
nominees to join our new Diversity
Committee. We are signed up and in
the certification process for Rainbow
Tick, to be an employer of choice for
Leadership
Team
Age Group
55+
17%
<25
10%
45-54
21%
25-34
27%
35-44
25%
19
Our People (continued)
Ethnicity
including undeclared
Ethnicity
excluding undeclared
Undeclared
43%
European
45%
European
79%
Asian
9%
MELA
1%
Other
1%
Pacific
People 2%
Maori
3%
Asian
5%
MELA
2%
Other
2%
Pacific
People 3%
Maori
5%
Contract Type
Full Time
70%
Part Time
8%
Casual
18%
500
400
300
200
100
0
Contractor
4%
Length of Service
<1Y
1Y-2Y
3Y-5Y 6Y-10Y 11Y-15Y 16Y-20Y 21Y-30Y 30+Y
2016 AWARDS
NZME is proud to be the home of New Zealand’s best
talent. We have several opportunities each year to
celebrate our people and many of our colleagues are
put forward to be recognised for their efforts locally and
internationally – from the Canon Media Awards,
the Radio Awards, PANPA, INMA, Pride in Print, to the
TVNZ Marketing Awards.
In 2016, NZME won the Media Business of the Year
award at the CAANZ Beacons Awards.
We also had a record number of 38 finalists at the Canon
Media Awards, where we took home 20 awards, including
Newspaper of the Year – 30,000-plus (The New Zealand
Herald), Photographer of the Year (Stephen Parker), Best
Editorial Campaign or Project (The Forgotten Millions) and
Best Sports Site (nzherald.co.nz/sport).
In 2016 we also won 21 awards at the NZ Radio Awards,
including Station of the Year (Newstalk ZB), The “Blackie”
Award (Hauraki Breakfast) and Best Community
Campaign (NZBCF Pink Star Walk).
20
Our Communities
& the Environment
W e support a safe
community and in 2016
we championed a number
of issues across our network – notably
the #StopTheHate cyberbullying
and #BetterThanThis domestic
violence campaigns.
The New Zealand Herald also
spearheaded a campaign for World
Vision called The Forgotten Millions
which reported the heartbreaking
stories from those affected by the
Syrian crisis, making the humanitarian
catastrophe instantly accessible for all.
NZME supports a number of
charitable organisations both at
a national and local level via its
Marketing Partnerships programme.
Spanning arts, sport, culture, health
& youth sectors, NZME brands
support The Halberg Sports
Awards, the NZ Pride Parade, the
Auckland Rescue Helicopter
and The Starship Foundation.
“We are gold
standard at reducing
waste, working
efficiently and
minimising harm”
As part of our commitment to
diversity, we support and sponsor
New Zealand Asian Leaders (“NZAL”)
whose mission is to promote,
educate and build a critical mass
of current and emerging leaders.
We’re also partners in publishing the
Chinese New Zealand Herald.
In support of Te Reo we promoted
Māori Language Week across our
assets, and as part of our Hauraki 50th
anniversary celebrations supported
our team to be trained on proper
Māori pronunciation.
During the year we also supported
other initiatives, such as Shine (fund
raising for education), World Aids Day
and SPCA collections.
Throughout the country, NZME people
are supported and encouraged to
contribute to worthy causes. Our
Print and Production team received
paid volunteer days this year to raise
funds for the Auckland City Mission
and regularly participate in charitable
street collections.
Our talent regularly appear and
participate in a multitude of events
including local fun runs, the SkyCity
Stair Climb, and regional Relay for
Life events which raise money for the
Blood and Leukemia Foundation.
We care about keeping our beautiful
country clean. We’re one of the largest
Print companies in New Zealand and
NZME Print has an Enviro-Mark Gold
certificate which means we are gold
standard at reducing waste, working
efficiently and minimising harm to the
environment and our people.
Green Star is a tool that rates and
communicates the sustainability of
New Zealand’s commercial buildings.
Our new building at NZME Central
has achieved a 5 Green Star Rating
– New Zealand Excellence. NZME
Central also won the “best of the best”
Supreme Award in the prestigious
Property Council New Zealand Rider
Levett Bucknall Property Industry
Awards 2016 .
21
The NZME Board
SIR JOHN ANDERSON
Independent Chairman
CAROL CAMPBELL
Independent Director
PETER CULLINANE
Independent Director
Sir John has extensive commercial
experience having held several
senior positions in the New
Zealand banking and finance
industry. Formerly the Chief
Executive Officer of the ANZ
National Bank, Sir John is a director
of T&G Global Limited (Deputy
Chairman). Sir John is a Fellow of
Chartered Accountants Australia
and New Zealand, Fellow of the
Institute of Financial Professionals
New Zealand, Fellow of the
Institute of Directors and a Life
Member of the Australian Institute
of Banking and Finance.
Carol is a chartered accountant and
a member of Chartered Accountants
Australia and New Zealand. Carol is
a director of The Business Advisory
Group, a chartered accountancy
practice, where she advises privately
owned businesses. Prior to that, she
was a partner at Ernst & Young for
over 25 years. Carol has extensive
financial experience and a sound
understanding of efficient board
governance. Carol is a director of
NZ Post Limited, Kiwibank Limited,
Kingfish Limited, Marlin Global
Limited, Barramundi Limited, NPT
Limited, T&G Global and a number of
other private companies and is chair
of Ronald McDonald House Charities.
As the former Chief Operating
Officer of Saatchi & Saatchi
(Worldwide), and its Chief
Executive Officer (New Zealand)
and Chairman (Australasia) for
over eight years prior, Peter
is widely respected in global
advertising and marketing and
has extensive knowledge and
expertise in both Australasian
and global markets. Peter was
appointed to the APN Board in
November 2013. Peter is also the
founder and Chairman of Lewis
Road Creamery Limited. Peter
was previously on the Board of
WPP AUNZ Limited and SKYCITY
Entertainment Group.
If the proposed merger with Fairfax NZ is approved, two further Board appointments will be made.
22
23
24
25
The NZME Executive Team
SHAYNE CURRIE MANAGING EDITORJournalist for 25 years, in NZ and New York, he has overseen major change and innovation in newsrooms. 2016: 10-week scholarship at Cambridge University UK, studying audience patterns in the digital age.MIKE MORAN CHIEF FINANCIAL OFFICERPreviously a partner at Deloitte with over 15 years’ international experience in assurance and advisory. Initially joined NZME on an interim basis just prior to demerger from APN before joining permanently in February 2017.MATT WILSON CHIEF OPERATING OFFICER (Acting)Over two decades at NZME with leadership roles in finance, sales, circulation, print and operations. Developed NZME’s distribution services business.MICHAEL BOGGS CHIEF EXECUTIVE OFFICERPreviously held transformational finance, sales and operational executive roles in financial services, telco and consumer goods. Former CFO of NZME. 2014 CFO of the Year.LAURA MAXWELL CHIEF COMMERCIAL OFFICERJoined NZME in 2013. Previous General Manager of Yahoo! NZ. Over 20 years experience in media. Current Chair of the NZ Interactive Advertising Bureau. DEAN BUCHANAN GROUP DIRECTOR ENTERTAINMENTOver two decades of experience in developing world-class content and talent in New Zealand and internationally. Previous Managing Director, NZME Radio.MICHELLE HAMILTON GROUP DIRECTOR CULTURE & PERFORMANCEPrevious General Manager, Culture at TRN. HR and Employee BrandManager at Event Cinemas, andeight years at SkyCity in various senior leadership roles.ALLISON WHITNEY LEGAL COUNSEL & COMPANY SECRETARYJoined NZME in 2013 with over 15 years’ legal experience both in-house and in private practice, including six years as in-house counsel to a London-based international media group.SARAH JUDKINS CHIEF STRATEGY OFFICERLed the 2015 transformation and integration of the Publishing, Radio and Digital businesses into NZME. 20 years’ experience providing strategic and transformation advice to a wide range of businesses across NZ and Asia.SARAH WOOD GENERAL MANAGER, GRABONEOver 15 years of commercial experience in media, marketing and business management. US-based consultancy experience in brand and business transformation.LIZA MCNALLY CHIEF MARKETING OFFICER20 years’ marketing and sales experience in the media industry. Previously held senior management roles at News Corp Australia. Corporate Governance
1. GOVERNANCE
FRAMEWORK
As described in note 6.1 of the
consolidated financial statements,
on 11 May 2016, APN News & Media
Limited (“APN”), the then ultimate
parent entity of the Company
announced a demerger of 100%
of the Group to APN shareholders
(“Demerger”), subject to a majority
shareholder vote held on 16 June
2016. The Demerger was approved
by the requisite majority of APN
Shareholders and all other conditions
precedent to the Demerger were
satisfied or waived. The Demerger
was completed on 29 June 2016.
On 27 June 2016 the Company was
listed on the NZX Main Board and as
a Foreign Exempt Listing on the ASX
(both under the ticker code "NZM").
The ASX Foreign Exempt Listing
category is based on a principle of
substituted compliance recognising
that, for secondary listings, the
primary regulatory role and oversight
rests with the home exchange
and the supervisory regulator in
that jurisdiction. As such, NZME is
required to comply with a limited
set of ASX Listing Rules.
The Company’s corporate
governance framework, as
described in this section, therefore
primarily takes into consideration
Authority’s Corporate Governance
in New Zealand Principles and
Guidelines (“FMA Guide”). The
corporate governance framework
and other information as described
herein, reflects the framework that
was implemented following the
demerger from APN.
The Board considers that the
corporate governance practices
it adopted and followed do not
materially differ from those required
by the NZX Code and the FMA Guide.
2. CONSTITUTION
The Company’s constitution
(“Constitution”) is filed on the
Companies Office website (http://
www.companies.govt.nz/co/1181195).
The Constitution specifies that the
maximum number of directors (other
than alternate directors) is eight. As at
31 December 2016, the Company had
3 directors.
The Constitution contains, amongst
other things, the requirements
regarding appointment and rotation
of directors, filling vacancies on
the Board, meetings of the Board
and Board committee proceedings,
and appointing alternate directors.
The Constitution also requires the
Company to comply with the NZX
Listing Rules for so long as it is listed
on the NZX.
contemporary standards in New
Zealand, incorporating the
3. CHARTERS AND
POLICIES
NZX Corporate Governance
Best Practice Code
(“NZX Code”) and
the New Zealand
Financial
Markets
The following charters and policies
have been adopted by the Company
and are available on the Company’s
website under the Corporate
Governance section (http://www.
nzme.co.nz/corporate-governance/):
• Code of Conduct and Ethics
• Diversity Policy
• Editorial Code of Ethics
• Fraud Policy
• Market Disclosure Policy
• Whistleblower Policy
• Securities Trading Policy
• Audit & Risk Committee Charter
• Governance & Remuneration
Committee Charter
• Risk Management Policy
The Company’s Code of Conduct
and Ethics governs the Company
and its subsidiaries’ commercial
operations and the conduct of
Directors, employees, consultants
and all other people when they
represent the Company and its
subsidiaries, together with the
Company. The current Code of
Conduct and Ethics was adopted
on 27 June 2016 and is available via
the Company’s website. Reporting of
breaches of the Code is encouraged
and steps for doing so are set out in
the Code of Conduct and Ethics and
the Whistleblower Policy.
The Board of the Company has
certain expectations of the Group
in relation to its interactions with
customers, shareholders, employees
and the broader community.
The Code of Conduct and Ethics
comprises certain fundamental
principles and demonstrates the
high standards of conduct
expected of NZME.
Separate policies (as listed above)
applicable to the Company are
also relevant to the conduct of
Company including policies dealing
with securities trading and inside
information, market disclosures,
whistle blowing, diversity, fraud,
editorial ethics and other matters.
4. THE BOARD OF
DIRECTORS
4.1 Role Of The Board
The business and affairs of the
Company is managed under the
direction and supervision of the
Board. The Directors acknowledge
their duty to act in good faith and in
the best interest of the Company. The
Board is therefore responsible to the
shareholders for the performance of
the Company, including determining
the Company’s objectives and
the strategies to achieve those
objectives. The Board meets at
regular intervals, and as otherwise
required, to ensure that the Board
is able to exercise its duties and
perform its functions appropriately.
4.2 Director Independence
& Profile
All of the Company’s directors
are independent directors for the
purposes of the NZX Listing Rules.
The profile for each Director is
available on the Company’s website
(http://www.nzme.co.nz/corporate-
governance/board-members/)
and on page 25 of this Annual
Report. Details regarding Directors’
remuneration is available in section 1
of the Statutory Information section
on page 32 of this report. Also
refer to the Statutory Information
section for further information
regarding the date of appointment
and remuneration of each Director.
The roles of the Chairman and Chief
Executive Officer are exercised by
different persons.
4.3 Nomination & Appointment
Directors are appointed by the
Company’s shareholders, with
rotation and retirement being
determined by the Constitution.
The Board may appoint Directors
to fill casual vacancies. Directors
appointed to fill casual vacancies
are required to retire and stand
for election at the first annual
shareholders meeting after their
appointment. The Governance
& Remuneration Committee
recommends to the Board
potential candidates for
appointment as Directors.
4.4 Induction & Access To
Information & Advice
New Directors are provided with
information about the Company,
its operations and the environment
and markets in which it operates in a
personalised induction to meet the
particular needs of each individual
Director. All Directors have access
to the advice and assistance of
the Company Secretary on the
Board’s affairs and governance
matters. In addition, all Directors may
access such information and seek
independent advice as they consider
necessary to fulfil their duties and
responsibilities.
4.5 Skills & Experience
The Governance & Remuneration
Committee reviews, and makes
recommendations to the Board
regarding, the composition of the
Board on an ongoing basis to ensure
that it is comprised of members
who provide the required breadth
and depth of experience and
knowledge to achieve the objectives
of the Board. It also considers and
recommends to the Board the
appointment of additional Directors
to provide the expertise to achieve
the strategic and economic goals of
the Company.
4.6 Directors & Officers Insurance
In accordance with Section 162 of
the Companies Act 1993 and the
Company’s Constitution, NZME has
indemnified and arranged insurance
for all Directors and executive
officers to the extent permitted
by law for liabilities arising out of
the performance of their normal
duties as Directors and officers. The
total amount of insurance contract
premiums was $149,000.
27
26
Corporate Governance (continued)
5. BOARD COMMITTEES
The Board has two standing
Committees, the Audit & Risk
Committee and the Governance &
Remuneration Committee, to assist in
carrying out its responsibilities. Both
Committees operate under Board
approved charters. The Board may
establish other committees from time
to time to deal with specific projects
or matters relating to the Company’s
various activities.
5.1 Audit & Risk Committee
The Committee consist of at least
three non-executive directors, with
the majority being also independent
directors (one of whom must
have an accounting and financial
background). The functions of the
Committee are to:
• Review, consider and if necessary,
investigate any reports or findings
arising from any audit function
either internally or externally;
• Evaluate financial information
submitted to it, along with relevant
policies and procedures; and
• Assess the effectiveness of risk
management throughout
the Group.
The Committee is also responsible
for communicating and engaging
with the external auditors and
for oversight and review of the
risk management framework. For
further information, also refer to the
Committee’s charter filed on the
Company’s website.
For the year ended 31 December
2016, all the Directors were members
of the Audit & Risk Committee and it
was chaired by Carol Campbell.
independent review of the Group’s
risk management framework,
including:
• Review and approval of the risk
management policy;
• Receiving and considering reports
on risk management;
• Assessing the effectiveness of the
Group’s responses to risk; and
• Providing the Board with regular
reports on risk management.
The Group has a formal Risk
Management Policy and is
committed to the consistent,
proactive and effective monitoring
and management of risk throughout
the organisation, in accordance
with best practice and the NZME
Risk Management Framework and
Guidelines.
The Board is ultimately responsible
for the effectiveness, oversight
and implementation of the Group’s
approach to risk management.
The Audit & Risk Committee is
responsible for the oversight and
independent review of the NZME
Risk Management Framework and
Guidelines, and assisting the Board to
discharge its oversight responsibility
for risk management.
The Chief Executive Officer (“CEO”)
is responsible for:
• The management of strategic,
operational and financial risks of
the Group;
• Continually monitoring the Group’s
progress against financial and
operational performance targets;
• The day-to-day identification,
assessment and management of
risks applicable to the Group;
5.1.1 Risk management
The Audit & Risk Committee is
responsible for the oversight and
• Implementation of risk management
controls, processes and policies
and procedures appropriate
for the Group;
• Driving a culture of risk
management throughout
the Group.
The NZME Risk Committee acts as a
governance forum to assist the NZME
CEO and the Group Executive in
fulfilling their corporate governance
responsibilities. This Committee
provides assurance that the following
aspects are managed appropriately:
• Strategic and Operational Risk
Management;
• Work, Health and Safety matters;
• Legal, regulatory and policy
compliance;
• Technology and Security matters;
• Business Continuity Planning.
During the year the Group had a Risk
& Compliance Manager that was
responsible for providing guidance
where required and developing tools,
templates and policies that facilitate
the identification, management and
reporting of risk and support the
overall Risk Management Framework
and Guidelines. Subsequently the
Group appointed a Head of Risk,
Compliance and Financial Reporting.
The Group is an integrated media
and entertainment company and
is subject to diverse types of risk
including, but not limited to legal
and regulatory compliance, financial
and market, government policy
and political, reputation and
brand, operational risks and
trading conditions.
The Group recognises that in order
to achieve its strategic objectives it
must be willing to take and accept
informed risks. Risks relating to
innovation, attracting and retaining
talent, and content to drive
audiences and address the needs of
advertisers are encouraged within
policy are separate from, and in
addition to, the legal prohibitions in the
Financial Markets Conduct Act 2013 on
insider trading.
7. DIVERSITY
The Group believes that a diverse
workforce is essential for it to be able
to deliver its strategic objectives and
continue to meet its responsibilities
to its customers, its employees, the
communities in which it works,
and its shareholders.
For the Group, diversity means
the competitive value in the
differences of its people in relation
to gender, race, ethnicity, sexual
orientation, age, disability, religion
or cultural background.
The Group’s full Diversity Policy is
available on it’s website. It is the Board’s
view that the Group is currently
operating in accordance with, and
applying the principles of, the policy.
The table below includes the
quantitative breakdown as to the
gender composition of NZME’s
Board and OfficersA.
defined parameters. However in
doing so, it is not acceptable to trade
off financial or strategic returns by
compromising compliance with the
law, the safety of our people, or our
reputation as a responsible corporate
citizen and provider of news, sport
and entertainment. When setting the
appetite for taking and accepting
risk, the Group also considers the risk
posed by inaction in what is a fast-
paced and disrupted market.
which reflect contemporary standards
in New Zealand, incorporating
principles and guidelines issued by
the Financial Markets Authority and
the NZX. For further information, also
refer to the Committee’s charter filed
on the Company’s website.
For the year ended 31 December
2016, all the Directors were members
of the Governance & Remuneration
Committee and it was chaired by
Peter Cullinane.
6. REPORTING,
DISCLOSURE AND
SECURITIES TRADING
The Board has policies and procedures
in place to keep investors and staff
informed of material information
about the Company and to ensure
compliance with the continuous
disclosure obligations under the
Financial Markets Conduct Act
2013 and the NZX Listing Rules.
The Board also has a Securities
Trading Policy setting out the details
of the Company’s trading policy
and guidelines and containing
certain restrictions on dealing in the
Company’s quoted financial products.
The requirements imposed by the
The Group’s approach to risk
management is assessed at
least annually by the Audit & Risk
Committee of the Board in order to
make a recommendation to the full
Board on the appropriateness of
NZME’s Risk Management Framework
and Guidelines. The NZME Risk &
Compliance Manager (and going
forward reports to the Head of Risk,
Compliance and Financial Reporting)
reports to the NZME Risk Committee
and Audit & Risk Committee on
progress of the implementation of
the Risk Management Framework
and Guidelines.
5.2 Governance &
Remuneration Committee
The Governance & Remuneration
Committee ensures that remuneration
policies and practices are consistent
with the strategic goals of the Group
and are relevant to the achievement
of those goals. The Committee also
reviews the remuneration of the
CEO and remuneration packages
of executives reporting directly
to the CEO.
As at
31 Dec 2016
31 Dec 2015
Board
OfficersA
Male
Female
Male
Female
2
2
1
0
5
B
6
B
If the proposed merger with Fairfax NZ is approved, two further Board
appointments will be made.
The Governance & Remuneration
Committee also makes
recommendations to the full Board
regarding the composition of the
Board, filling of vacancies, appointing
additional Directors to the Board,
and to review and adopt corporate
governance policies and practices
(A) The term ‘Officer’ is defined in the NZX Listing Rules as a person, however designated, who
is concerned or takes part in the management of the Issuer’s business, but excludes (i) a person
who does not report directly to the Board or (ii) a person who does not report directly to a person
who reports to the Board. NZME has interpreted this to mean the Chief Executive and any person
reporting to the Chief Executive or the Board directly. The numbers above therefore include the
CEO and other members of the Group Executive Team. (B) Prior to the Demerger from APN and
the listing of the Company (see note 6.1 of the Consolidated Financial Statements) the Company
was a subsidiary of the APN group with reporting lines to executives at the APN level. Given the
significance of the Internal Restructuring prior to the Demerger and that individuals currently
classified as Officers reported to other group entities rather than the Board, no comparative
information has been provided for Officers as at 31 December 2015.
28
29
Statutory Information
2. DIRECTORS’ INTEREST IN NZME SHARES
Ordinary shares held by Directors and parties associated with them are as follows:
1. DIRECTORS’ REMUNERATION
Directors are remunerated in the form of directors’ fees as set out in the table below. As set out in the Explanatory
Memorandum for the Demerger of NZME by APN, the fees for Independent Directors are fixed as a total pool of
$900,000 per annum. The fees paid to each Director depends on the duties of the Director, including committee work.
Current fees per annum are as follow:
Chairman of the NZME Board
Membership of the NZME Board
Chair of NZME Board Committees
Membership of NZME Board Committees
FEES ($)
150,000
100,000
20,000
10,000
Sir John Anderson
Carol Campbell
Peter Cullinane
31 DEC 2016
NUMBER
114,286
50,000
68,286
All of the above mentioned shares were issued when the Company listed on 27 June 2016.
3. INTERESTS REGISTER
The general disclosures of interests made by Directors of Company during the accounting period, pursuant to section
140(2) of the Companies Act 1993, are shown below.
DIRECTOR
COMPANY
POSITION
Sir John Anderson
NPT Limited
Chairman
(resigned effective 17 March 2017)
Chairman
(resigned effective 31 March 2017)
Fees paid for the year ended 31 December 2016 (in $)
Steel & Tube Holdings Limited
DATE
APPOINTEDA
CHAIRMAN
OF THE
BOARD
BOARD
MEMBER
COMMITTEE
CHAIR
COMMITTEE
MEMBER
TOTALB
Sir John AndersonC
24 June 2016
75,000
-
10,000
85,000
Carol CampbellD
24 June 2016
Peter CullinaneE
24 June 2016
-
-
50,000
50,000
10,000
10,000
5,000
5,000
Total fees paid
65,000
65,000
215,000
(A) Refer to Note 6.1 of the consolidated financial statements for further information regarding the Demerger of NZME from APN. Prior to the Demerger,
the Company was a wholly owned subsidiary of APN and no director received any remuneration from the Company for services as a director. (B) In
addition to the fees noted in the table above, Directors are also entitled to be reimbursed for all reasonable travel, accommodation, and other costs
incurred by them in connection with their attendance at NZME Board or shareholder meetings or otherwise in connection with NZME business. The fees
above exclude any such reimbursements. (C) Sir John Anderson is the Chairman of the NZME Board and a member of the Audit & Risk and Governance &
Remuneration Committees. (D) Carol Campbell is a member of the NZME Board, Chair of the Audit & Risk Committee and a member of the Governance
& Remuneration Committee. (E) Peter Cullinane is a member of the NZME Board, Chair of the Governance & Remuneration Committee and a member of
the Audit & Risk Committee.
Prior to the Demerger, Michael Boggs (now CEO) and Ciaran Davis (APN CEO) were directors of NZME Limited. They
resigned as directors on 24 June 2016. Ciaran Davis was remunerated by APN and did not receive any remuneration for
his services as a director of the Company. Michael Boggs did not receive remuneration for his services as a director of
NZME Limited, but received the following remuneration as an employee during the year:
SALARYA
BONUSB
BENEFITSC
TOTAL
T&G Global Limited
Deputy Chairman
Commonwealth Bank of Australia
Director
(resigned effective 11 November 2016)
Peter Cullinane
APN News & Media Limited
Independent Director and Chairman
of the Remuneration Committee
Lewis Road Creamery
Chairman and Owner
WPP AUNZ Limited
Director
(resigned effective 16 December 2016)
Carol Campbell
The Business Advisory Group Ltd
Director and Owner
NZ Post Limited
Kiwibank Limited
Kingfish Limited
Marlin Global Limited
Barramundi Limited
NPT Limited
T&G Global Limited
Director
Director
Director
Director
Director
Director
Director
Michael Boggs
701,488
138,425
25,197
865,111
Ronald McDonald House Charities
Chair
Michael Boggs held 50,000 shares in the Company as 31 December 2016.
(A) Salary includes normal basic salary and paid leave. (B) Bonus payments are those paid during the current accounting period and excludes any bonus
accrual not yet paid. (C) Benefits relate to company contributions for KiwiSaver.
The Interests Registers also includes, pursuant to section 140(1) of the Companies Act 1993, an entry for each director
regarding the approval of the directors’ remuneration at the 27 June 2016 Board meeting. It also contains an entry for Sir John
Anderson declaring an interest in the banking facility agreement between NZME Ltd and Commonwealth Bank of Australia
and ASB Bank Limited. Sir John was at the time a director of Commonwealth Bank of Australia and abstained from voting on
this matter.
30
31
Statutory Information (continued)
4. DIRECTORS OF SUBSIDIARY COMPANIES
As at 31 December 2016, Michael Boggs (CEO) and Sarah Judkins (Chief Strategy Officer) were directors of the
wholly owned subsidiaries listed in Note 6.3 of the consolidated financial statements, other than NZME Australia Pty
Limited. Michael Boggs (CEO) and Mark O’Sullivan (a professional director resident in Australia) were directors of
NZME Australia Pty Limited as at 31 December 2016. Sarah Judkins was also a director of Chinese New Zealand Herald
Limited, Restaurant Hub Limited, Eveve New Zealand Limited and Ratebroker Limited and a trustee of the Auckland
Arts Festival. Michael Boggs is also a trustee of the Herald Foundation. Other than Mark O’Sullivan who received
$4,693 for his services as a director of NZME Australia Pty Limited, they did not receive any fees or other benefit for
their services as directors to any of these companies. Michael Boggs and Sarah Judkins receive remuneration as
employees of the Company which are not related to their duties as directors of these companies. Ciaran Davis was
a director of the wholly owned subsidiaries listed in note 6.3 of the financial statements (other than NZME Finance
Limited) and ceased to hold office as a director of these companies on 24 June 2016. Jeffrey Howard was a director of
NZME Finance Limited and ceased to hold office on 24 June 2016.
5. SHAREHOLDER INFORMATION
5.1 Substantial shareholders
The following information is given pursuant to Sub-Part 5 of Part 5 of the Financial Markets Conduct Act 2013.
According to notices given to the Company, the substantial security holders in the Company are note below:
As at 31 December 2016
Morgan Stanley & Co International Plc
Forager Funds Management Pty Ltd
Allan Gray Australia Pty Ltd
UBS Group AG
Perpetual Limited and subsidiaries
Westpac Banking Corporation
DATE OF
SUBSTANTIAL
SECURITY NOTICE
NUMBER OF
SHARES HELD
% OF SHARES
HELD
14/11/16
14/11/16
26/10/16
26/10/16
25/10/16
12/10/16
11,770,521
13,460,256
23,395,418
10,160,574
19,088,528
11,024,388
6.01
6.87
11.94
5.18
9.74
5.62
The total number of ordinary shares issued by the Company as at 31 December 2016 was 196,011,282. The Company
did not have any other quoted voting products.
32
5.2 Top 20 shareholders
As at 28 February 2017
New Zealand Central Securities Depository Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
UBS Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Ltd
Bnp Paribas Nominees Pty Ltd
Bond Street Custodians Limited
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited A/C 2
Citicorp Nominees Pty Limited
Forsyth Barr Limited
Abn Amro Clearing Sydney Nominees Pty Ltd
Pax Pasha Pty Ltd
Aust Executor Trustees Ltd
Bnp Paribas Noms Pty Ltd
Richard Ewan Bromley Mews & Wee Khoon Mews
Warbont Nominees Pty Ltd
Leveraged Equities Finance Limited
5.3 Spread of quoted security holders
As at 28 February 2017
RANGE OF SECURITIES HELD
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
Above 100,000
Total
NUMBER OF
INVESTORS
% OF TOTAL
INVESTORS
3,994
1,235
291
375
58
5,953
67.09
20.75
4.89
6.30
0.97
100
NUMBER OF
SHARES HELD
% OF SHARES
HELD
30,856,633
28,059,439
24,906,435
24,181,659
20,379,642
10,516,975
7,792,745
5,663,111
2,769,405
2,695,936
2,676,141
2,592,243
2,065,706
1,519,231
1,411,880
1,059,634
715,012
554,025
448,746
435,000
SHARES
HELD
1,118,659
2,842,334
2,159,022
11,189,975
178,701,292
196,011,282
15.74
14.32
12.71
12.34
10.4
5.37
3.98
2.89
1.41
1.38
1.37
1.32
1.05
0.78
0.72
0.54
0.36
0.28
0.23
0.22
% OF SHARES
ISSUED
0.57
1.45
1.10
5.71
91.17
100
33
Statutory Information (continued)
6. EMPLOYEE REMUNERATION
7. OTHER INFORMATION
The Group paid remuneration including benefits in excess of $100,000 to employees (other than directors) during the
year ended 31 December 2016. The salary banding for these employees are disclosed in the following table (bands with
zero number of employees have been excluded):
REMUNERATION AMOUNT
EMPLOYEES
REMUNERATION AMOUNT
EMPLOYEES
$100,000 - $110,000
$110,001 - $120,000
$120,001 - $130,000
$130,001 - $140,000
$140,001 - $150,000
$150,001 - $160,000
$160,001 - $170,000
$170,001 - $180,000
$180,001 - $190,000
$190,001 - $200,000
$200,001 - $210,000
$210,001 - $220,000
$220,001 - $230,000
$230,001 - $240,000
$240,001 - $250,000
$250,001 - $260,000
$260,001 - $270,000
$270,001 - $280,000
$280,001 - $290,000
90
68
63
34
22
22
20
10
5
12
8
8
13
2
4
3
6
1
3
$290,001 - $300,000
$300,001 - $310,000
$310,001 - $320,000
$320,001 - $330,000
$330,001 - $340,000
$340,001 - $350,000
$370,001 - $380,000
$380,001 - $390,000
$390,001 - $400,000
$410,001 - $420,000
$430,001 - $440,000
$450,001 - $460,000
$480,001 - $490,000
$510,001 - $520,000
$530,001 - $540,000
$600,001 - $610,000
$860,001 - $870,000
$1,020,001 - $1,030,000
3
2
5
4
1
2
1
2
1
1
2
1
1
2
1
1
1
1
Total number of employees that were paid remuneration of $100,000+
426
The remuneration above include all remuneration paid to permanent employees, including fixed remuneration,
employer KiwiSaver contributions, medical aid contributions, bonuses, commission, settlements and redundancies.
7.1 Waivers from the NZX
The Company did not receive any waivers from any of the NZX Listing Rules during the year.
7.2 Donations
In accordance with section 211(1)(h) of the Companies Act 1993, NZME notes that the Group made donations
of $5,047 during the year ended 31 December 2016.
7.3 Credit rating
As at the date of this Annual Report, NZME did not have a credit rating.
7.4 Exercise of NZX disciplinary powers
For the year ended 31 December 2016, the NZX did not exercise any of its disciplinary powers under Rule 5.4.2
of the NZX Listing Rules in relation to the Company.
7.5 Auditors
Refer to note 2.2.4 of the consolidated financial statements for fees paid to the auditors, PricewaterhouseCoopers, for
the year ended 31 December 2016.
The Audit & Risk Committee Charter requires the Committee to assess the following:
• The independence of the auditor;
• The ability of the auditors to provide additional services which may be occasionally required;
• The competency and reputation of the auditors;
• The projected audit fees; and
• Review the appointment, performance and remuneration of external auditors.
The Audit & Risk Committee also monitors and approves any services provided by the auditors other than in their
statutory role and receives confirmation from the auditors as to their independence from the Company. The Audit &
Risk Committee in conjunction with management also monitors and approves any service provided by the auditors
other than in their statutory role. This is undertaken on a service by service basis and assesses whether the service
is permissible under Professional and Ethical Standard 1 ("PES 1") issued by the New Zealand Auditing and Assurance
Standards Board, ensuring that any potential threat to independence is identified and appropriate safeguards to
eliminate the threat or reduce the threat to an acceptable level are established. The Audit & Risk Committee receives
an annual confirmation from the auditor as to their independence from the Group. The auditor is also required to
provide the Audit & Risk Committee with a detailed analysis of fees relating to non-audit services provided during the
year, including a description of potential threats to their independence and the applicable safeguards implemented by
the auditor to either mitigate those threats or reduce them to an acceptable level as required by PES 1. The Audit & Risk
Committee takes the nature of the services provided, the quantum of the fee, the reason for the additional services
and whether the services are likely to be one-off or repetitive in nature into consideration when evaluating
and concluding on auditor independence.
For the year ended 31 December 2016, given the nature of the services provided and based on the Committee’s
continuous monitoring of auditor independence, the Audit & Risk Committee do not believe that the non-audit
services provided by the auditors compromised their objectivity and independence.
7.6 Direct director appointments under the Company Constitution
Rule 3.3.8 of the NZX Listing Rules allow a company to include in its Constitution a right for a product holder to appoint
a director to the Board under certain circumstances. As at 31 December 2016, none of the Directors were appointed
pursuant to Rule 3.3.8.
34
35
Proposed NZME /
Fairfax NZ Merger
PROCESS UPDATE
• The merger remains subject to regulatory
and shareholder approval.
• The New Zealand Commerce Commission (“NZCC”)
released a draft determination in November 2016. Its
preliminary view was to decline the application.
• A public hearing was held in December 2016 where
interested parties, including NZME and Fairfax NZ,
presented their arguments for or against the
merger to the NZCC.
• We subsequently announced that NZME and Fairfax NZ
Limited have received, and agreed to, requests from
the NZCC to extend the target date for the NZCC's
final decision on the proposed merger. The final
determination is now expected to be made by
2 May 2017.
NEXT STEPS
•
•
In the event that the merger is approved by the NZCC
in May, NZME will seek to complete the transaction as
soon as practicable.
In the event that the merger is declined by the NZCC,
the parties will consider their next steps (a decision by
the NZCC to not approve the merger can
be appealed).
MERGER CONSIDERATION1
Cash consideration
Shares issued to Fairfax NZ
Total shares on issue post Merger
Fairfax NZ shareholding post Merger
$55.0m
136.2m
332.2m
41%
(1) The final consideration is subject to pre and post merger completion adjustments as disclosed in the NZME market announcement dated 7 September 2016.
36
37
Non-GAAP Measures Explained
The Statutory Result, including the segment note, as reported in the Consolidated Financial Statements for the year
ended 31 December 2016 is not reflective of the NZME business going forward, due to the impact of the demerger, tax
payments, and the inclusion of the previous ownership interest in the Australian Radio Network. In order to show what
the result would look like for NZME on a standalone basis, we have presented a number of non-GAAP measures which
are further explained and reconciled to the GAAP figures in this supplementary information. This presentation should
be read in conjunction with NZME’s Consolidated Financial Statements.
REVENUE RECONCILIATION
Print Revenue
As disclosed in Note 2.4 of the Consolidated Financial Statements, the Group has one reportable segment, but
discloses revenue for three channels. The commentary included in this annual report discusses certain components
of revenue in further detail and also includes references to Trading Revenue and Pro-Forma Revenue. These items are
explained and reconciled to Revenue as disclosed in Note 2.4 below:
Radio & Experiential Revenue
NZME RADIO & EXPERIENTIAL REVENUE ($M)
Radio & Experiential Revenue1
Other Revenue (incl. iHeart and Events)
Total Trading Revenue2
FY16
108.7
6.2
114.8
FY15
114.2
6.0
120.2
% CHANGE
(5%)
3%
(4%)
(1) Radio & Experiential Revenue includes agency, direct and experiential revenue streams. (2) Trading Revenue is a non-GAAP measure that is explained
and reconciled in this section of the Annual Report. There were no adjustments for Radio & Experiential revenue. This is therefore also the Radio &
Experiential revenue as disclosed in note 2.4.2 of the consolidated financial statements.
NZME PRINT REVENUE ($M)
Advertising Revenue
Circulation Revenue
Other Revenue
Total Pro forma Revenue1
Magazines Revenue2
Revenue from Divestments3
Total Trading Revenue1
Acquired & Non-Trading items4
Print Revenue per Financial Statements5
FY16
132.7
86.1
18.9
237.7
-
2.6
240.4
(1.2)
239.1
FY15
147.8
87.0
18.8
253.5
5.9
5.4
264.8
(2.8)
262.0
(10%)
(1%)
1%
(6%)
(100%)
(51%)
(9%)
(57%)
(9%)
% CHANGE
NZME DIGITAL & E-COMMERCE REVENUE ($M)
Digital & e-Commerce Revenue
Digital Revenue
e-Commerce Revenue
Total Trading Revenue1
FY16
38.2
14.0
52.2
FY15
30.7
17.3
48.0
% CHANGE
24%
(19%)
9%
(1) Trading Revenue is a non-GAAP measure that is explained and reconciled in this section of the Annual Report. There were no
adjustments for Radio and Experiential revenue. This is also the Digital and e-Commerce revenue as disclosed in note 2.4.2 of the
consolidated financial statements.
(1) Pro forma and Trading Revenue are non-GAAP measures that are reconciled in the table above. (2) Relates to the unprofitable Pacific Magazines
licensed business closed in September 2015. $5.3m of FY16 revenue was previously classified as circulation, and $0.6m as advertising revenue.
(3) Revenue from divestments relates to revenues received from the Wairarapa Times Age sold in June 2016 (FY16 $2.3m), and Whakatane News
sold in August 2016 (FY16 $0.3m). (4) See reconciliation on pages 40-41. (5) Agrees to Print Revenue in 2.4.2 of the consolidated financial statements.
38
39
Non-GAAP Measures Explained (continued)
NZME FY16 TRADING RECONCILIATION TO FINANCIAL STATEMENTS
NZME FY15 TRADING RECONCILIATION TO FINANCIAL STATEMENTS
$M
Revenue
Other Income
Total Revenue & Other Income
Costs
EBITDA
Depreciation and amortisation
EBIT
Net interest expense
NPBT
Tax
Profit from
discontinued operations
Statutory NPAT
NZME
TRADING
RESULT1
NZME
RELATED
EXCEPTIONALS
ACQUIRED &
NON-TRADING
ITEMS2
FINANCIAL
STATEMENTS3
407.4
2.4
409.7
(337.8)
71.9
(23.8)
48.1
-
1.3
1.3
(13.0)
(11.6)
-
(11.6)
(1.2)
0.4
(0.8)
(12.8)
(13.6)
-
(13.6)
406.1
4.1
410.2
(363.6)
46.6
(23.8)
22.8
(9.3)
13.5
(64.0)
125.1
74.5
$M
Revenue
Other Income
Total Revenue & Other Income
Costs
Adj. to FY15 for standalone costs
EBITDA
Depreciation and amortisation
EBIT
Net interest expense
NPBT
Tax
Profit from discontinued operations
Statutory NPAT
NZME TRADING
RESULT1
NZME RELATED
EXCEPTIONALS
ACQUIRED &
NON-TRADING
ITEMS2
FINANCIAL
STATEMENTS3
433.0
0.5
433.6
(358.6)
(3.1)
71.8
(23.7)
48.2
-
0.4
0.4
(15.5)
-
(15.1)
-
(15.1)
(2.8)
0.6
(2.3)
(26.6)
3.1
(25.7)
-
(25.7)
430.2
1.5
431.7
(400.7)
-
31.0
(23.7)
7.3
(18.8)
(11.5)
1.2
53.2
42.9
(1) The NZME Trading Result comprises Trading Revenue, Trading Other Income, Trading Costs, Trading Earnings Before Interest, Tax, Depreciation and
Amortisation (Trading EBITDA) and Trading Earnings Before Interest and Tax (Trading EBIT) which are non-GAAP measures. The NZME Trading Result
for FY16 shows NZME on a standalone basis for the full year by including the Educational Media business for a full year (which is only included for the
second half of the year in the Consolidated Financial Statements as it was acquired as part of the demerger), and excluding exceptional items (separately
disclosed on page 43) and without adjusting for earnings from businesses divested during the year (Wairarapa Times Age and Whakatane News) which
are also included in the Consolidated Financial Statements. (2) Acquired and non-trading items include Revenue of $1.2 million and Costs of $0.8 million
relating to the Educational Media business, which is offset by Masthead Royalty charges of $12.2 million incurred in H1 and other overhead costs previously
paid for by other entities in the Group prior to the demerger. (3) Revenue of $406.1 million agrees to Total revenues from external customers excluding
revenue from shared service centre in Note 2.4.2 of the Consolidated Financial Statements. Other revenue of $4.1 million consists of dividend income,
rental income from sub-leases, revenue from shared service centre, interest income and gain on disposal of properties from the same note.
All other items agree to the Consolidated Income Statement.
(1) The FY15 NZME segment result in the APN FY15 accounts was $74.9m, this has been adjusted in the Trading Result for $3.1m of standalone costs
incurred in H2 16 to provide a like for like comparison. The NZME Trading Result comprises Trading Revenue, Trading Other Income, Trading Costs,
Trading Earnings Before Interest, Tax, Depreciation and Amortisation (Trading EBITDA) and Trading Earnings Before Interest and Tax (Trading EBIT) which
are non-GAAP measures. The NZME Trading Result for FY15 shows NZME on a standalone basis for the full year by including the Educational Media
business for a full year (acquired as part of the demerger), and excluding exceptional items (separately disclosed on page 43) and without adjusting
for earnings for business closures during the year (Pacific Magazines) which are also included in the Consolidated Financial Statements. (2) Acquired
and non-trading items include Revenue of $2.8 million and Costs of $1.8 million relating to the Educational Media business, which is offset by Masthead
Royalty charges of $22.8 million incurred in H1 and other overhead costs previously paid for by other entities in the Group prior to the demerger.
(3) Revenue of $430.2 million agrees to Total revenues from external customers excluding revenue from shared service centre in Note 2.4.2 of the
Consolidated Financial Statements. Other revenue of $1.5 million consists of dividend income, rental income from sub-leases, interest income and
gain on disposal of properties from the same note. All other items agree to the Consolidated Income Statement.
40
41
Non-GAAP Measures Explained (continued)
NZME FY16 & FY15 TRADING TO PRO FORMA RECONCILIATION
NZME FY16 & FY15 RELATED EXCEPTIONALS
NZME RELATED EXCEPTIONALS ($M)
Redundancies1
Costs in relation to one-off projects2
Business and property divestments3
Asset write downs4
NZME Related Exceptionals
FY16
(6.0)
(6.9)
1.3
-
(11.6)
FY15
(7.2)
(5.3)
0.4
(3.0)
(15.1)
(1) Redundancy costs relate to ongoing restructuring and integration. (2) Costs in relation to one-off projects are largely due to the
proposed Fairfax merger and ongoing integration programmes. (3) In FY16 the profit on business divestments of $1.3m related to the
disposal of the Wairarapa and Whakatane Publishing businesses, offset by a minor loss on sale of property. (4) Asset write downs in
FY15 relate to co-location as part of the NZME Central integration.
$M
Trading EBITDA1
Standalone costs yet to be incurred2
Trading EBITDA1 after standalone costs
Earnings from divestments
Pro forma EBITDA
Depreciation and amortisation
Pro forma EBIT
Interest expense3
Pro forma NPBT
Tax4
Pro forma NPAT
Earnings per share (cps)
Final dividend (cps)
FY16 PRO FORMA
RESULT1
FY15 PRO FORMA
RESULT1
71.9
(4.3)
67.6
(0.4)
67.2
(23.8)
43.4
(4.2)
39.2
(11.4)
27.8
14.2
6.0
71.8
(4.3)
67.5
-
67.5
(23.7)
43.9
(5.5)
38.4
(10.7)
27.5
14.0
(1) The NZME Pro forma result comprises Pro forma Earnings Before Interest, Tax, Depreciation and Amortisation (Pro forma EBITDA), Pro forma Earnings
Before Interest and Tax (Pro forma EBIT), Pro forma Net Profit Before Tax (Pro forma EBIT) and Pro forma Net Profit After Tax (Pro forma NPAT) which are
non-GAAP measures. The NZME Pro forma Result for FY 16 shows what NZME would look like if only the continuing operations were included. It therefore
starts with the Trading Result (explained and reconciled on pages 40 and 41) and is further adjusted to exclude the divestments of Wairarapa Times Age
and Whakatane News from the FY16 result, and to include a full year equivalent of additional standalone costs (costs that NZME incurs as a standalone
listed entity that it did not have before the demerger). The FY15 Pro forma result is per the Explanatory Memorandum for the Demerger of NZME by
APN published on 11 May 2016. (2) Standalone costs yet to be incurred has been estimated based on the standalone costs disclosed in the Explanatory
Memorandum for the Demerger of NZME by APN published on 11 May 2016 and taking into consideration the actual standalone costs incurred during H2.
(3) Net interest expense has been calculated at NZME’s current interest rate payable of 3.8% p.a. (4) Tax payable has been calculated indicatively utilising
NZME’s current effective tax rate of 29%.
42
43
Consolidated
Financial
Statements
for the year ended 31 December 2016
44
45
Contents
Directors’ Statement
CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2016
Directors’ Statement
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements*
Basis of Preparation
Group Performance
Operating Assets and Liabilities
Capital Management
Taxation
Group Structure and Investments in Other Entities
Other Notes
Independent Auditors’ Report
47
48
49
50
51
52
53
56
62
72
84
88
97
100
* In an attempt to make these financial statements easier to read, the notes to the financial statements have been grouped into
seven sections; aimed at grouping items of a similar nature together. The Basis of Preparation section presents a summary of
material information and general accounting policies that are necessary to understand the basis on which these consolidated
financial statements have been prepared. Accounting policies specific to a particular note are included in that note and are
shaded for ease of reference. Key judgments and estimates relevant to a particular note are also included in the relevant
note, and are clearly marked as such. A summary of the key judgments and estimates are also included under the Basis of
Preparation section on pages 53-55.
The Directors are pleased to present
the consolidated financial statements
of NZME Limited (the”Company”) and its
subsidiaries (together the “Group”) for the
year ended 31 December 2016, incorporating
the consolidated financial statements and the
auditor’s report.
The Directors are responsible, on behalf of the
Company, for presenting these consolidated
financial statements in accordance with applicable
New Zealand legislation and generally acceptable
accounting practices in New Zealand in order to
present consolidated financial statements that present
fairly, in all material respects, the financial position of
the Group as at 31 December 2016 and the results of
the Group’s operations and cash flows for the year
then ended.
The consolidated financial statements for the Group as
presented on pages 46 to 99 are signed on behalf of
the Board of Directors, and are authorised for issue on
the date below.
For and on behalf of the Board of Directors
Sir John Anderson
Director
Carol Campbell
Director
Date: 23 February 2017
46
47
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
NOTE
2016
$’000
CONTINUING OPERATIONS
Revenue
Finance and other income
Total revenue and other income
Expenses from operations before finance costs, depreciation,
amortisation
Depreciation & amortisation
Finance costs
Profit / (loss) from continuing operations before income
tax expense
Income tax expense
Profit / (loss) from continuing operations for the year
2.1
2.1
2.1
2.2.1
2.2.2
2.2.3
5.1
DISCONTINUED OPERATIONS
Profit / (loss) after tax from discontinued operations
6.1.1
Profit / (loss) for the year
PROFIT / (LOSS) FOR THE YEAR IS ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests
Profit / (loss) for the year
407,856
2,340
410,196
(363,553)
(23,845)
(9,300)
13,498
(64,050)
(50,552)
125,095
74,543
60,618
13,925
74,543
2015
$’000
430,198
1,544
431,742
(400,726)
(23,683)
(18,808)
(11,475)
1,207
(10,268)
53,165
42,897
24,735
18,162
42,897
NOTE
4.2
4.2
Profit for the year
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Items that will not be reclassified to profit or loss
Revaluation of freehold land and buildings
Exchange and other differences applicable
to non-controlling interests
Other comprehensive income, net of tax
Total comprehensive income
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO
OWNERS OF THE COMPANY:
Continuing operations
Discontinued operations
-
(14,683)
30,163
104,706
105,464
(758)
104,706
(10,038)
115,502
105,464
2016
$’000
74,543
2015
$’000
42,897
44,846
3,606
NOTE
CENTS
CENTS
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
Earnings per share from continuing operations
attributable to the ordinary shareholders of the company
Basic / diluted earnings per share
2.3
(28.0)
(6.6)
Earnings per share from profit for the year (continuing
and discontinued operations) attributable to the ordinary
shareholders of the Company
Basic / diluted earnings per share
2.3
30.9
12.6
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
48
356
7,110
11,072
53,969
28,697
25,272
53,969
(8,951)
37,648
28,697
49
CONSOLIDATED BALANCE SHEET
as at 31 December 2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
NOTE
4.7
3.3
3.1
3.2
6.4.3
5.2
3.4
4.5
3.4
4.5
5.2
4.1
4.2
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Tax receivable
Total current assets
NON-CURRENT ASSETS
Intangible assets
Property, plant and equipment
Other financial assets
Deferred tax assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Interest bearing liabilities
Current tax provision
Total current liabilities
NON-CURRENT LIABILITIES
Trade and other payables
Interest bearing liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Total Company interest
Non-controlling interests
Total equity
2016
$’000
2015
$’000
GROUP
Attributable to owners of the Company
NOTE
SHARE
CAPITAL
RESERVES
RETAINED
EARNINGS
TOTAL
$’000
$’000
$’000
$’000
NON-CON-
TROLLING
INTERESTS
$’000
TOTAL
EQUITY
$’000
16,242
53,631
2,226
-
72,099
329,776
75,677
5,988
-
411,441
483,540
66,379
-
2,800
69,179
13,423
112,168
3,211
128,802
197,981
285,559
360,363
(5,198)
(69,606)
285,559
-
285,559
11,065
409,870
2,956
770
424,661
597,100
99,216
128,386
46,065
870,767
1,295,428
426,197
1,257
1,620
429,074
13,934
184,500
36,096
234,530
663,604
631,824
360,363
(34,992)
104,584
429,955
201,869
631,824
Balance at 1 January 2015
360,363
(38,616)
79,511
401,258
190,736
591,994
Profit for the year
Other comprehensive
income
Total comprehensive
income
Transfers within equity
4.2
Equity transactions with
non-controlling interests
Balance at
31 December 2015
-
-
-
-
-
-
24,735
24,735
18,162
42,897
3,962
-
3,962
7,110
11,072
3,962
24,735
28,697
25,272
53,969
(338)
338
-
-
-
-
-
-
(14,139)
(14,139)
360,363
(34,992)
104,584
429,955
201,869
631,824
Balance at 1 January 2016
360,363
(34,992)
104,584
429,955
201,869
631,824
Profit for the year
Other comprehensive
income
Total comprehensive
income
Transfer from asset
revaluation reserve
Transfer from transaction
with non-controlling
interest reserve
Dividends paid
Transactions with
non-controlling interests
Share based payments
expense
Acquisitions and
divestments of subsidiaries
and operations
Balance at
31 December 2016
4.2
4.2
4.4
4.2
6
-
-
-
-
-
-
-
-
-
-
60,618
60,618
13,925
74,543
44,846
-
44,846
(14,683)
30,163
44,846
60,618
105,464
(758)
104,705
(464)
464
(14,732)
14,732
-
-
(198,118)
(198,118)
-
-
-
-
-
(198,118)
-
-
-
(3,630)
(3,630)
144
-
144
-
-
144
-
(51,886)
(51,886)
(197,481)
(249,367)
360,363
(5,198)
(69,606)
285,559
-
285,559
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
50
51
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.0 BASIS OF PREPARATION
NOTE
2016
$’000
2015
$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest paid
Income taxes paid
Net cash inflows / (outflows) from operating activities
4.7
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Payments for intangible assets including software
Acquisition of controlled entities, net of cash acquired
6.2
Proceeds from sale of property, plant and equipment
581,485
(488,558)
141
223
(8,811)
(22,798)
61,682
(11,549)
(4,407)
-
2,251
Proceeds from divestment of subsidiaries, net of their cash,
as part of internal restructure
6.1.3
95,936
Payments for investment in other entities
Net loans repaid / (advanced) to other entities
Net cash inflows / (outflows) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Loans advanced / (repaid) by related parties
Proceeds from borrowings
Repayments of borrowings
Payments for borrowing cost
Dividends paid to Company’s shareholders
Net payments to non-controlling interests
Net cash inflows / (outflows) from financing activities
(848)
2,278
83,661
(55,958)
54,000
(127,242)
(400)
(6,860)
(3,630)
(140,090)
742,182
(609,375)
4,031
277
(10,838)
(5,359)
120,918
(27,008)
(9,622)
(82,871)
868
-
-
480
(118,153)
45,752
42,000
(79,222)
-
-
(16,671)
(8,141)
Net increase / (decrease) in cash and cash equivalents
5,253
(5,376)
Cash and cash equivalents at beginning of the year
Effect of exchange rate changes
11,065
(76)
Cash and cash equivalents at end of the year
4.7
16,242
16,367
74
11,065
The Consolidated Statement of Cash Flows includes cashflows from continuing and discontinued operations. Refer to
Note 6.1.3 for further information on cash flows from discontinued operations. The above Consolidated Statement of
Cash Flows should be read in conjunction with the accompanying notes.
52
1.1 REPORTING ENTITY AND STATUTORY BASE
NZME Limited (NZX:NZM, ASX:NZM), formerly “Wilson
& Horton Limited”, is a for-profit company limited by
ordinary shares which are publicly traded on the NZX
Main Board and the Australian Securities Exchange as a
Foreign Exempt Listing. NZME Limited is incorporated
and domiciled in New Zealand. It is registered under the
Companies Act 1993 and is a FMC reporting entity under
Part 7 of the Financial Markets Conduct Act 2013. The
entity’s registered office is 2 Graham Street, Auckland,
1010, New Zealand.
NZME Limited (the “Company” or “Parent”) and
its subsidiaries’ (together the “Group”) principal
activity during the financial year was the operation
of an integrated print, radio and digital media and
entertainment business.
1.2 GENERAL ACCOUNTING POLICIES
These consolidated financial statements have been
prepared in accordance with New Zealand Generally
Accepted Accounting Practice (“NZ GAAP”). They comply
with New Zealand equivalents to International Financial
Reporting Standards (“NZ IFRS”) and other applicable
Financial Reporting Standards, as appropriate for for-
profit entities. The consolidated financial statements also
comply with International Financial Reporting Standards
(“IFRS”). The consolidated financial statements have also
been prepared in accordance with Part 7 of the Financial
Markets Conduct Act 2013 and the NZX Listing Rules.
The principal accounting policies adopted in the
preparation of the financial statements are either set out
below, or in the note to which it relates. These policies
have been consistently applied to all the years presented,
unless otherwise stated. These consolidated financial
statements are presented for the Group.
These consolidated financial statements were approved
for issue by the Board of Directors on 23 February 2017.
1.2.1 Basis of measurement
These financial statements have been prepared under the
historical cost convention with the exception of certain
items for which specific accounting policies
are identified.
1.2.2 Comparatives
Certain prior period information has been re-presented
consistent with current year disclosures to provide more
meaningful comparison. The comparatives for the current
period have been re-presented for the effects of the
application of NZ IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations following the disposal
of the Group’s interest in the Australian Radio Network
(including Brisbane FM Radio Pty Ltd, Radio Perth
96FM Pty Limited and Emotive Pty Limited), The Level
3 Partnership and The Level 4 Partnership (“Disposed
Entities”). Refer to note 6.1 “Demerger from APN”. The
nature of the re-presentation is as follows:
• All income and expense items relating to the Disposed
Entities have been removed from the individual line
items in the income statement. The post-tax profit/
(loss) of the Disposed Entities is presented as a single
amount in the line item entitled “Profit/(loss)
from discontinued operations”; and
• The net cash flows attributable to the operating,
investing and financing activities of the Disposed
Entities are each disclosed in the notes to the
financial statements.
1.2.3 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of
the Group’s entities are measured using the currency of
the primary economic environment in which the entity
operates (functional currency). The consolidated financial
statements are presented in New Zealand dollars, which
is the Company’s functional and the Group’s presentation
currency, and rounded to the nearest thousand,
except where otherwise stated.
Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of
such transactions and from the translation at the year-
end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in
the income statement, except when deferred in other
comprehensive income as qualifying cash flow hedges
and qualifying net investment hedges. Non-monetary
items that are measured at fair value in a foreign currency
are translated using the exchange rates at the date when
the fair value was determined. Translation differences on
assets and liabilities carried at fair value are reported as
part of the fair value gain or loss. Non-monetary items
that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate
at the date of the transaction.
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
based on the information received as at that date, it
should decline the proposed merger between NZME
and Fairfax NZ. The purpose of the Draft Determination
is to elicit further submissions and evidence to assist
the NZCC in making a Final Determination.
On 28 November 2016 NZME announced that it had
filed a joint submission with Fairfax NZ to the NZCC in
response to the issues raised in the Draft Determination.
The NZCC held a conference on 6 & 7 December 2016
to consider matters relating to the merger to assist the
NZCC in making a Final Determination on the merger.
The NZCC is due to make a Final Determination on the
proposed merger on or before 15 March 2017.
1.4.3 Taxation
On 23 June 2016, the Company and APN reached a
binding heads of agreement with the Inland Revenue
Department (“IRD”) to settle the Mandatory Convertible
Note transaction, the Branch financing transaction,
non-resident withholding tax and thin capitalisation
issues, and a further matter that was under review by
the IRD. Refer to note 5.3 for further details.
Group companies
The result and financial position of all the Group entities
that have a functional currency different from the
presentation currency are translated into the
presentation currency as follows:
• Assets and liabilities are translated at the closing rate
at the date of the balance sheet;
• Income and expenses are translated at average
exchange rates; and
• All resulting exchange differences are recognised
as a separate component of equity.
On consolidation, exchange differences arising from
the translation of any net investment in foreign entities,
and of borrowings and other currency instruments
designated as hedges of such investments are taken
to equity. When a foreign operation is sold or a
partial disposal occurs, a proportionate share of such
exchange differences is recognised in the income
statement as part of the gain or loss on disposal.
Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the
closing rate.
1.2.4 Goods and Services Tax (‘GST’)
The income statement has been prepared so that all
components are stated exclusive of GST. All items in
the balance sheet are stated net of GST, with exception
of receivables and payables, which include GST
invoiced. On the statements of cash flows receipts
from customers and payments to suppliers are shown
inclusive of GST.
1.3 SIGNIFICANT ACCOUNTING ESTIMATES
AND JUDGEMENTS
The preparation of the consolidated financial statements
requires the use of certain significant judgements,
accounting estimates and assumptions, including
judgements, estimates and assumptions concerning
the future. The estimates and assumptions are based
on historical experiences and other factors that are
considered to be relevant. The resulting accounting
estimates will by definition, seldom equal the related
actual results and are reviewed on an ongoing basis.
The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying
amounts of the assets and liabilities within the next
financial year are discussed in further detail in the
notes to the consolidated financial statements to which
they relate. A list of those areas of significant estimation
or judgement and a reference to the notes containing
further information is provided below:
Areas of significant accounting
estimates or judgements
Impact of Performance Rights on earnings
per share
Determination of number of segments
Intangible assets with indefinite useful lives
Assumptions used in testing for impairment
of indefinite life intangible assets
Controlled entities
NOTE
2.3
2.4
3.1
3.1.1
6.3
1.4 SIGNIFICANT CHANGES IN THE CURRENT
REPORTING PERIOD
1.4.1 Demerger from APN News & Media Limited
The Company completed its demerger from APN News
& Media Limited (“APN”) on 29 June 2016, marking the
creation of a standalone NZ Group focused on the
operation of an integrated print, radio and digital
media and entertainment business.
NZME shares were distributed to eligible APN
shareholders at a ratio of one NZME share for every
one APN share. Refer to note 6.1 and NZME NZX
announcements on 27 June 2016 and 29 June 2016 for
further details.
1.4.2 Proposed Merger with Fairfax New Zealand
Limited
As noted in the combined NZME Limited and Fairfax
Media Limited announcement dated 22 August 2016,
Fairfax New Zealand Limited (“Fairfax NZ”) and NZME
Limited received and agreed to a request from the New
Zealand Commerce Commission (“NZCC”) to extend the
date for the NZCC’s decision on the proposed merger of
the two businesses until 15 March 2017.
On 7 September 2016 NZME Limited and Fairfax NZ
announced the signing of a merger implementation
agreement to effect the merger of NZME Limited and
Fairfax NZ.
Overseas Investment Office (“OIO”) consent to the
merger was obtained on 22 September 2016.
On 8 November 2016 the NZCC issued a Draft
Determination setting out its preliminary view that,
54
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.0 GROUP PERFORMANCE
2.1 REVENUE AND OTHER INCOME
FROM CONTINUING OPERATIONS
Advertising revenue
Circulation and subscription revenue
Services revenue
Other revenue
Revenue from continuing operations
Dividends
Rental income from sub-leases
Profit / (loss) on disposal of properties and businesses
Other income
Interest income – related parties
Interest income – other entities
Finance income
Total finance and other income
Total revenue and other income
2016
$’000
295,141
86,782
12,206
13,727
407,856
141
586
1,320
2,047
91
202
293
2,340
410,196
2015
$’000
314,655
93,582
11,826
10,135
430,198
267
521
441
1,229
-
315
315
1,544
431,742
2.2 EXPENSES
2.2.1 Expenses from operations before finance costs, depreciation, amortisation
FROM CONTINUING OPERATIONS
Employee benefits expense
Production and distribution expense
Selling and marketing expense
Rental and occupancy expense
Masthead license fees
Costs in relation to one-off projects
Redundancies and associated costs
Asset write-downs and business closures
Repairs and maintenance costs
Travel and entertainment costs
Other
2016
$’000
161,610
82,301
45,840
23,711
12,216
6,946
6,009
-
6,166
4,086
14,668
2015
$’000
164,621
99,394
50,220
23,785
22,853
5,312
7,178
3,028
5,771
3,892
14,672
Total expenses from operations before finance costs,
depreciation, amortisation
363,553
400,726
FROM DISCONTINUED OPERATIONS (REFER TO NOTE 6.1.1)
Total revenue and other income
127,542
252,019
Accounting policies
Revenue is measured at the fair value of consideration received or receivable. Amounts disclosed as revenue are
net of returns, rebates and taxes paid.
The Group recognises revenue when:
·
·
·
the amount of revenue can be reliably measured;
it is probable that the economic benefits will flow to the Group; and
the criteria for revenue recognition has been satisfied.
Advertising revenue is recognised when the advertisement is published or broadcast, when the coupon is sold,
or over the period the advertisement is displayed.
Circulation and subscription revenue is recognised when the publication is purchased or on a straight-line basis
over the subscription period.
Services revenue is recognised by reference to the stage of completion of the transaction, when it can be
measured reliably. Services revenue includes printing and production and revenue generated by the shared
services centre.
Other revenue includes revenue from events, recycling of waste, distribution charges and digital design
and is recognised when the event occurs, the product is delivered or the goods are sold.
56
2.2.2 Depreciation & amortisation
FROM CONTINUING OPERATIONS
Depreciation
Amortisation
Total depreciation & amortisation
2.2.3 Finance cost
FROM CONTINUING OPERATIONS
Interest and finance charges – related parties
Interest and finance charges – other entities
Borrowing cost amortisation
Total finance cost
2016
$’000
16,173
7,672
23,845
2,765
6,482
53
9,300
2015
$’000
14,023
9,660
23,683
6,305
12,503
-
18,808
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.2.4 Fees paid to auditors
Fees paid to the Group’s auditors, PricewaterhouseCoopers, consist of:
Audit or review of financial statementsA
Other services
Other assurance servicesB
Tax servicesC
Other servicesD
Total other services
2016
$’000
2015
$’000
454
6
1,057
1,231
2,294
379
64
750
93
907
Total fees paid to auditors
2,748
1,286
(A) Includes the fee for both the audit of the annual financial statements and the independent review of the interim financial statements. (B) Includes
regulatory and other assurance services, including New Zealand circulations. (C) Includes services relating to transactional advice, tax compliance
services, tax pooling services and services relating to the IRD settlement (refer to note 5.3). (D) Includes due diligence and advisory services relating
to the proposed merger with Fairfax New Zealand Limited of $1,224,179 in 2016 and other advisory services.
2.3 EARNINGS PER SHARE
Significant Judgement
Under the Group’s Total Incentive Plan (“TIP”) as discussed in Note 4.3, Performance Rights were issued to certain
participating employees that will convert into fully paid ordinary shares. Under the TIP, the Company would either
repurchase those shares from the market or issue new shares. Any new shares issued would have a dilutive effect
on the Earnings Per Share calculations noted below. It is currently the intention of the Company to repurchase
shares from the market and not to issue new shares.
RECONCILIATION OF EARNINGS USED IN CALCULATING BASIC / DILUTED
EARNINGS PER SHARE (“EPS”)
Profit / (Loss) from continuing operations attributable to owners of the parent entity
(54,884)
(12,913)
2016
$’000
2015
$’000
Profit from discontinuing operations attributable to owners of the parent entity
Profit / (Loss) attributable to owners of the parent entity used in calculating EPS
115,502
60,618
37,648
24,735
2016
NUMBER
2015
NUMBER
WEIGHTED AVERAGE NUMBER OF SHARES
Weighted average number of shares in the denominator in calculating basic EPSA
196,011,282
196,011,282
Adjusted for calculation of diluted EPS
-
-
Weighted average number of shares in the denominator in calculating diluted EPS 196,011,282 196,011,282
BASIC / DILUTED EARNINGS PER SHARE
From continuing operations attributable to owners of the parent entity
From discontinuing operations attributable to owners of the parent entity
Total basic / diluted earnings per share attributable to owners of the parent entity
2016
CENTS
2015
CENTS
(28.0)
58.9
30.9
(6.6)
19.2
12.6
(A) Due to the share consolidation in the current period (refer to note 4.1), the number of ordinary shares outstanding during the year ended
31 December 2015 was retrospectively adjusted.
58
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounting policies
Basic earnings per share (from continuing operations)
Basic earnings per share is determined by dividing:
·
·
the profit or loss attributable to owners of the Company; by
the weighted average number of ordinary shares outstanding during the financial year, adjusted for
bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share (from continuing operations)
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking
into account:
·
·
the after-tax effect of dividends, interest and other changes in income or expense associated with
dilutive potential ordinary shares; and
the weighted average number of additional ordinary shares that would have been outstanding assuming
the conversion of all dilutive potential ordinary shares.
(Note that there are no dilutive potential ordinary shares in 2016 (2015: nil)).
Basic / dilutive earnings per share (from discontinued operations)
Basic / dilutive earnings per share (from discontinued operations) are calculated on the same basis as the
policies described above, except that net profit or loss attributable to the owners of the Company is replaced
with profit or loss from discontinued operations attributable to the owners of the Company.
2.4 SEGMENT INFORMATION
2.4.1 Determination and description of segments
Following the demerger and internal restructure which resulted in the Company being listed as a separate standalone
entity, the segmental reporting was revised to align to the format that is used to report to the Chief Operating Decision
Maker. The corresponding information for 2015 has been re-presented.
Significant Judgement
The Group has one reportable segment – being “Integrated Media and Entertainment”. All significant operating
decisions are based upon analysis of NZME as one operating segment. The Executive Team and the Board of
Directors have been identified as the Chief Operating Decision Maker. The Group’s major products and services
are split by channel only at the revenue level into Print, Radio & Experiential and Digital & e-Commerce which
is the way in which revenue is reported to the Chief Operating Decision Maker. Although the Group operates
in many different markets within New Zealand, for management reporting purposes the Group operates in one
principle geographical area being New Zealand as a whole.
Integrated Media and Entertainment incorporates the sale of advertising, goods and services generated from the
audiences attached to the Group’s media platforms. Discontinued operations have been presented in Note 6.1.
2.4.2 Segment revenues and results
The segment information provided to the Directors and Executive Team for the year ended 31 December 2016
is as follows:
REVENUES FROM EXTERNAL CUSTOMERS BY CHANNEL
Print
Radio & Experiential
Digital & e-Commerce
2016
$’000
239,127
114,849
52,153
2015
$’000
262,006
120,173
48,019
Total revenues from external customers excluding revenue
from shared service centre
406,129
430,198
Dividend income
Rental income from sub-leases
Expenses from operations before finance costs, depreciation,
amortisation and exceptional items
141
586
267
521
(338,382)
(362,355)
Total Segment Adjusted EBITDAA
68,474
68,631
Revenue from shared services centre
Depreciation and amortisation
Interest income
Finance cost
EXCEPTIONAL ITEMS
Gain on disposal of properties and businessesB
Masthead royalty chargesC
Redundancies and associated costsD
Costs in relation to one off projectsE
Asset write downsF
Profit / (Loss) before tax from continuing operations
1,727
(23,845)
293
(9,300)
1,320
(12,216)
(6,009)
(6,946)
-
13,498
-
(23,683)
315
(18,808)
441
(22,853)
(7,178)
(5,312)
(3,028)
(11,475)
(A) Adjusted Earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA) from continuing operations and before exceptional items,
is a non-GAAP measure that represents the Group’s total segment result and is regularly monitored by the Chief Operating Decision Maker. (B) Gains on
disposal of properties is the gain on sale of the Wairarapa Times Age, Whakatane News offset by loss on sale of property in Nelson in 2016, and the gain
on sale of a property in Invercargill, New Zealand in 2015. (C) Costs charged from a subsidiary company of APN for use of NZ publishing mastheads. On
24 June 2016, the Group acquired certain NZ publishing mastheads on normal commercial terms from this subsidiary company of APN (refer to note
3.1). As a result, masthead royalty charges have not been incurred by the Group from 24 June 2016 onwards. (D) The redundancies and associated costs
relate to the restructuring and integration of the New Zealand operations. (E) The costs related to one off projects refers primarily to costs of external
consultants assisting with the listing, integration and co-location of NZME and the proposed merger with Fairfax New Zealand. (F) The asset write downs
includes a write off of leasehold improvements in the Group as a result of the office co-location.
As the Group has one operating segment, the assets and liabilities as reported on the consolidated balance sheet are
also the segment assets and liabilities, and the income tax expense in the consolidated income statement is also the
segment income tax.
60
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.0 OPERATING ASSETS & LIABILITIES
3.1 INTANGIBLE ASSETS
Significant Judgement
The Directors have determined that Masthead Brands and Brands have indefinite lives and are therefore not
amortised. Refer to the accounting policies below for further information.
AT 1 JANUARY 2015
Cost
Accumulated amortisation
and impairment
GOODWILL
SOFTWARE
$’000
$’000
MASTHEAD
BRANDS
$’000
RADIO
LICENCES
$’000
BRANDS
TOTAL
$’000
$’000
165,848
37,140
15,830
401,447
59,079
679,344
(95,614)
(28,609)
(15,830)
(30,245)
-
(170,298)
GOODWILL
SOFTWARE
$’000
$’000
MASTHEAD
BRANDS
$’000
RADIO
LICENCES
$’000
BRANDS
TOTAL
$’000
$’000
FOR THE YEAR ENDED 31 DECEMBER 2016
Opening net book amount
81,392
AdditionsA
Disposals
Divestment of subsidiaries
and operationsB
Acquisition of controlled entities
Amortisation
Foreign exchange differences
-
-
(10,804)
-
-
195
11,271
4,286
-
-
-
(4,721)
34
-
445,358
59,079
597,100
146,976
-
-
-
-
-
-
-
(390,454)
-
(3,422)
(9,414)
-
-
-
-
-
-
151,262
-
(401,258)
-
(8,143)
(9,185)
Net book value
70,234
8,531
FOR THE YEAR ENDED 31 DECEMBER 2015
Opening net book amount
70,234
Additions
Disposals
Acquisition of controlled entities
Amortisation
Foreign exchange differences
Net book value
AS AT 31 DECEMBER 2015
Cost
Accumulated amortisation
and impairment
-
-
11,237
-
(79)
81,392
8,531
9,622
(189)
-
(6,707)
14
11,271
177,006
46,587
(95,614)
(35,316)
Net book value
81,392
11,271
-
-
-
-
-
-
-
-
-
-
-
371,202
59,079
509,046
Net book value
70,783
10,870
146,976
42,068
59,079
329,776
371,202
59,079
509,046
Cost
166,397
49,309
146,976
77,457
59,079
499,218
AS AT 31 DECEMBER 2016
-
-
72,408
(3,889)
5,637
-
-
-
-
-
9,622
(189)
83,645
(10,596)
5,572
445,358
59,079
597,100
479,492
59,079
762,164
(34,134)
-
(165,064)
445,358
59,079
597,100
Accumulated amortisation
and impairment
(95,614)
(38,439)
-
(35,389)
-
(169,442)
Net book value
70,783
10,870
146,976
42,068
59,079
329,776
(A) Prior to the implementation of the demerger, the Group acquired certain NZ publishing Masthead Brands on normal commercial terms from a
subsidiary company of APN News & Media Limited (“APN”). These Masthead Brands were purchased for consideration of $146,976,000 together with
a termination amount in regard to the masthead license of $2,065,575, which was incurred as the Group early terminated the masthead licences
agreement with APN. (B) The Company completed its demerger from APN on 29 June 2016. Refer to Note 6.1 for further details around assets
disposed and acquired as part of the Internal Restructure.
Accounting policies
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired business at the date of the acquisition. Goodwill is not amortised but rather is
subject to periodic impairment testing.
Software
Costs incurred in developing systems, acquiring software and licences are capitalised to software. Costs
capitalised include materials, services, payroll and payroll related costs of employees involved in development.
Amortisation is calculated on a straight line basis over the useful life of the asset (typically 3 to 10 years).
Radio licences
Commercial radio licences are accounted for as identifiable assets and are brought to account at cost. The
current New Zealand radio licences have been renewed to 31 March 2031 and are being amortised on a straight
line basis to that date.
Masthead Brands
Masthead Brands, being the titles, logo’s and similar items of the integrated media assets of the Group are
accounted for as identifiable assets and are brought to account at cost. The Directors believe the mastheads
have indefinite lives as there is no foreseeable limit over which the mastheads are expected to generate net
cash inflows for the Group. Accordingly, Masthead Brands are not amortised but are tested for impairment each
year (refer to note 3.1.1 below).
62
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.1.2 Impact of reasonably possible change
in key assumptions
The forecasts are sensitive to certain key assumptions,
particularly forecast print and digital revenues. If the
ratio of the growth in digital revenue as compared to the
decline in print revenue reduced by 8% over the period
of forecast, and no other mitigation activities were
taken into account, then the recoverable amount would
be equal to the carrying amount of the CGU and any
further fall in this ratio would result in impairment.
Based on all available information the Directors do
not consider this to be a reasonably possible scenario.
Accordingly, based on the assessment performed,
there is no impairment.
Accounting policies
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment and whenever there is an indication that they may be impaired. Intangible assets that
are subject to amortisation are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount may exceed its recoverable amount. An impairment charge is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units). Currently, the
group has only one CGU, being Integrated Media and Entertainment. Non-financial intangible assets, other than
goodwill, that suffer impairment are reviewed for possible reversal of the impairment at each reporting date.
Accounting policies (continued)
Brands
Brands are accounted for as identifiable assets and are brought to account at cost. The Directors have
considered the geographic location, legal, technical and other commercial factors likely to impact the assets’
useful lives and consider that they have indefinite lives. Accordingly, Brands are not amortised but are tested for
impairment each year (refer to note 3.1.1 below).
3.1.1 Year-end impairment review
Significant Judgement
As disclosed in note 2.4 the Directors have determined that, following the demerger and internal restructure,
the Group has one reportable segment – being “Integrated Media and Entertainment”. The Directors have also
determined that this is the only cash generating unit (“CGU”) for impairment testing because this is the lowest
level for which there are separately identifiable cash inflows which are largely independent of the cash inflows
from other assets or groups of assets. Accordingly all goodwill and intangibles with indefinite useful lives are
allocated to one CGU. This note also includes details of certain key estimates and assumptions made during the
impairment testing calculations.
A comprehensive impairment review was conducted at 31 December 2016. The recoverable amount of the CGU
(which includes goodwill and indefinite life intangible assets) is determined based on the higher of fair value less costs
to sell and value in use calculations using management budgets and forecasts. The recoverable amount of the CGU
is compared against the carrying value of the CGU to determine whether there has been an impairment.
Key estimates and assumptions
2016
Post-tax
discount rate
2016
Long-term
growth rate
2015
Post-tax
discount rate
2015
Long-term
growth rate
Integrated Media and Entertainment CGU
9.5%
0%
A
B
Year 1 cash flows:
Based on Board approved annual budget.
Years 2 to 5 cash flows
Revenue forecasts are prepared based on management’s current expectations, with consideration given to
internal information and relevant external industry data and analysis. In particular:
·
·
·
Print revenues are forecast to decline in line with recent experience and industry trends.
Digital revenues are forecast to grow based on recent experience and industry trends.
Radio and experiential revenues are forecast to grow based on management expectations of
performance as a result of investment in key initiatives.
Expenses are forecast based on management expectations, with consideration given to internal information
and relevant external data.
(A) Prior to the Demerger from APN, the Group undertook impairment testing for four CGU’s. The post-tax discount rate used in those calculations ranged
from 10% to 10.5%. (B) Prior to the Demerger from APN, the Group undertook impairment testing for four CGU’s. The long-term growth rate used in those
calculations ranged from 0% to 2.5%.
64
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.2 PROPERTY, PLANT AND EQUIPMENT
AT 1 JANUARY 2015
Cost or fair value
Accumulated depreciation and impairment
Net book amount
YEAR ENDED 31 DECEMBER 2015
Opening net book amount
Additions
Acquisitions of controlled entity
Disposals
Depreciation
Revaluations
Foreign exchange differences
Net book amount
AS AT 31 DECEMBER 2015
Cost or fair value
Accumulated depreciation and impairment
Net book amount
YEAR ENDED 31 DECEMBER 2016
Opening net book amount
Additions
Disposals
Divestment of subsidiaries and operationsA
Depreciation
Transfers and other adjustmentsC
Foreign exchange differences
Net book amount
AS AT 31 DECEMBER 2016
Cost or fair value
Accumulated depreciation and impairment
Net book amount
(Footnotes on the next page)
66
FREEHOLD
LANDB
$’000
BUILDINGSB
$’000
PLANT AND
EQUIPMENTC
$’000
TOTAL
$’000
(A) The Company completed its demerger from APN News & Media Limited (APN) on 29 June 2016. Refer to Note 6.1 for further details around assets
disposed and acquired as part of the Internal Restructure. (B) Freehold land and buildings are held at fair value based on independent valuations. If land
and buildings were stated on the historical cost basis, the net book value of land would have been $658,270 (2015: $939,270) and the net book value of
buildings would have been $688,435 (2015: $1,039,690). The last revaluation was performed for the year ended 31 December 2015. (C) Included in plant
and equipment is capitalised work in progress with a net book value of $7,285,650 (2015: $25,460,875) which is transferred to the relevant asset category
(including software) once the project is complete. Transfers and other adjustments primarily comprise of transfers from work in progress during the year.
All transfers from work in progress in 2015 related to plant and equipment and are therefore reflected in the plant and equipment additions.
3,105
-
3,105
3,105
-
-
(341)
-
224
2
2,990
2,990
-
2,990
2,990
-
(752)
(1,133)
-
302
(26)
1,381
1,381
-
1,381
1,514
(357)
1,157
1,157
31
-
(771)
(290)
375
(22)
480
398,812
403,431
(311,571)
(311,928)
87,241
91,503
87,241
27,399
426
91,503
27,430
426
(2,365)
(3,477)
(17,308)
(17,598)
-
353
599
333
95,746
99,216
480
404,483
407,953
-
(308,737)
(308,737)
480
95,746
99,216
480
1,576
(98)
(714)
(2,217)
13,335
(17)
12,345
14,562
(2,217)
12,345
95,746
10,160
(172)
99,216
11,736
(1,022)
(14,928)
(16,775)
(15,832)
(18,049)
(12,701)
(322)
61,951
936
(365)
75,677
386,520
402,463
(324,569)
(326,786)
61,951
75,677
Accounting policies
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate
their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:
Furniture and fittings
Buildings
Leasehold improvements
Motor vehicles
Plant & equipment
3 to 25 years
10 to 25
3 to 25 years
5 to 10 years
3 to 25 years
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet
date. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are
included in the income statement.
Land and buildings are shown at fair value, based on periodic valuations (at least every 3 years) by external
independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of
revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the
revalued amount of the asset. Increases in the carrying amounts arising on revaluation of land and buildings
are credited to revaluation reserves in equity. To the extent that the increase reverses a decrease previously
recognised in the income statement, the increase is first recognised in the income statement. Decreases that
reverse previous increases of the same asset are first charged against the revaluation reserves directly in equity
to the extent of the remaining reserve attributable to the asset. All other decreases are charged to the
income statement.
Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying
amount or recognised as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be reliably measured.
All other repairs and maintenance are charged to the income statement during the financial period in which
they are incurred.
Impairment of assets
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. Assets that are subject to depreciation are tested
for impairment whenever changes in circumstances indicate that the asset’s carrying amount may exceed its
recoverable amount. An impairment charge is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. Assets that suffer an impairment are reviewed for possible reversal of the
impairment at each reporting date.
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.3 TRADE AND OTHER RECEIVABLES
3.4 TRADE AND OTHER PAYABLES
Trade receivables
Provision for impairment
Amounts due from related companies (note 7.1.2)
Other receivables and prepayments
Total current trade and other receivables
Movements in the provision for impairment are as follows:
Balance at beginning of the year
Provision for impairment expense
Receivables written off
Provision for impairment
2016
$’000
45,043
(1,042)
44,001
750
8,880
53,631
2,146
596
(1,700)
1,042
2015
$’000
96,382
(2,146)
94,236
304,931
10,703
409,870
1,805
1,356
(1,015)
2,146
CURRENT PAYABLES
Lease liability
Amounts due to related companies (note 7.1.2)
Employee entitlements
Trade payables and accruals
Total current trade and other payables
NON-CURRENT PAYABLE
Lease liability
Employee entitlements
Total non-current trade and other payables
2016
$’000
833
2,654
7,104
55,788
66,379
13,423
-
13,423
2015
$’000
833
322,304
11,302
91,758
426,197
12,859
1,075
13,934
Refer to note 4.8 for information regarding risk exposure, note 4.9 for further fair value considerations and note
4.6 for lease commitments.
3.3.1 Classification
Trade receivables are amounts due from customers for
goods sold or services performed in the ordinary course
of business. Receivables and other financial assets are
classified as subsequently measured at amortised cost
on the basis of both the Group’s business model for
managing the financial assets and the contractual cash
flow characteristics of the financial asset. Loans to related
parties are unsecured, interest bearing and repayable at
call. If collection of the amounts is expected in one year
or less they are classified as current assets.
3.3.2 Fair values of trade and other receivables
Due to the short-term nature of the current receivables,
their carrying amount is considered to be the same as
their fair value.
3.3.3 Impairment and risk exposure
The maximum exposure to credit risk at the reporting
date is the higher of the carrying value and fair value of
each receivable. The Group does not hold any collateral
as security. Refer to note 4.8.3 for credit risk and note
4.9 for fair value information.
Accounting policies
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
Receivables are monitored on an individual basis and the company considers the probability of default upon
initial recognition of the receivable and throughout the period and provides for receivables expected to be
impaired. The amount of loss is recognised in the income statement within other expenses. When a trade
receivable is uncollectible, it is written off against the provision account for trade receivables. Subsequent
recoveries of amounts previously written off are credited against other income in the income statement.
68
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.5 NET TANGIBLE ASSETS
Net tangible assets per share is a non-GAAP measure that is required to be disclosed by the NZX Listing Rules.
The calculation of the Group’s net tangible assets per share and its reconciliation to the consolidated balance
sheet is presented below:
AS AT 31 DECEMBER
Total assets
Less intangible assets
Less total liabilities
Net tangible assets
Number of shares issued (in thousands)A
Net tangible assets per share
2016
$’000
2015
$’000
483,540
(329,776)
(197,981)
(44,217)
196,011
($0.23)
1,295,428
(597,100)
(663,604)
34,724
196,011
$0.18
(A) Due to the share consolidation in the current period (refer to note 4.1), the number of ordinary shares outstanding during the year ended
31 December 2015 was retrospectively adjusted to enhance comparability. Had the shares outstanding as at 31 December 2015 of 378,550,000
been used, the net tangible assets per share as at 31 December 2015 would be $0.09.
Accounting policies
Trade and other payables
Trade payables, including accruals not yet billed, are recognised when the Group becomes obliged to make
future payments as a result of a purchase of assets or services. Trade payables are carried at amortised cost
which is the fair value of the consideration to be paid in the future for goods and services received. Trade
payables are unsecured and are generally settled within 30 to 45 days.
Leases
Finance leases are leases of property, plant and equipment where the Group, as lessee, has substantially all
the risk and rewards of ownership. Finance leases are capitalised at the lease’s inception at the lower of the fair
value of the leased property and the present value of the minimum lease payments. A corresponding liability
is also established and each lease payment is allocated between the liability and finance charges. The interest
element is charged to the income statement over the period of the lease. Leased assets are amortised on a
straight line basis over the term of the lease, or where it is likely that the Group will obtain ownership of the
asset, the life of the asset. Leased assets held at balance date are amortised over the shorter of the estimated
useful life or the lease term. The Group does not currently have any material finance leases.
Operating leases are other leases under which all the risks and benefits of ownership are effectively retained by
the lessor. Operating lease payments, excluding contingent payments are charged to the income statement
on a straight line basis over the period of the lease, net of lease incentives, which are classified as payables and
amortised over the life of the associated lease.
Lease incentives are presented as part of the lease liabilities and are recognised in the income statement on a
straight line basis over the lease term.
Employee entitlements
Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be wholly
settled within 12 months from the reporting date are recognised in payables and accruals in respect of
employees’ services up to the reporting date and are measured at the amounts expected to be paid when the
liabilities are settled. Amounts to be settled more than 12 months after the reporting date are recognised as a
non-current payable. Liabilities for non-accumulating sick leave are recognised when the leave is taken and
measured at the rates paid or payable.
Short-term incentive plans
A liability for short-term incentives is recognised in trade payables when there is an expectation of settlement
and at least one of the following conditions is met:
·
·
·
there are contracted terms in the plan for determining the amount of the benefit;
the amounts to be paid are determined before the time of completion of the financial statements; or
past practice gives clear evidence of the amount of the obligation.
Liabilities for short-term incentives are expected to be settled within 12 months and are recognised at the
amounts expected to be paid when they are settled.
Refer to note 4.3 for disclosures relating to share based payments, note 7.1.1 for key management
compensations and note 6.1 for further information on the demerger.
70
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.0 CAPITAL MANAGEMENT
4.1 SHARE CAPITAL
AUTHORISED, ISSUED
AND PAID UP SHARE CAPITAL
2016
NUMBER
2015
NUMBER
2016
$’000
2015
$’000
Balance at the beginning of the period
378,550
378,550
360,363
360,363
Shares consolidated as part of the demergerA
(182,539)
-
-
-
Balance at the end of the period
196,011
378,550
360,363
360,363
(A) On demerger, NZME shares were distributed to eligible APN shareholders at a ratio of one NZME share for every one APN share. Also refer to note
6.1 for further details on the demerger.
Accounting policies
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
4.2 RESERVES
SHARE BASED PAYMENTS RESERVE
Balance at the beginning of the year
Share based payment expense
Balance at end of the year
ASSET REVALUATION RESERVE
Balance at beginning of the year
Revaluation of freehold land and buildings
Transfer to foreign currency translation reserve
Transfer to retained earnings due to asset disposals and discontinued operations
Balance at end of year
FOREIGN CURRENCY TRANSLATION RESERVE
Balance at beginning of the year
Foreign exchange transfers
Net exchange difference on translation of foreign operations
Total movement for the year
Balance at end of year
TRANSACTIONS WITH NON-CONTROLLING INTERESTS RESERVE
Balance at beginning of the year
Transfer to retained profit relating to discontinued operations
Balance at end of year
Total reserves
72
2016
$’000
2015
$’000
-
144
144
1,186
-
-
(464)
722
-
-
-
1,185
356
(17)
(338)
1,186
(44,537)
(48,160)
44,844
2
44,846
17
3,606
3,623
309
(44,537)
8,359
(14,732)
(6,373)
8,359
-
8,359
(5,198)
(34,992)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.2.1 Nature and purpose of reserves
Share based payments reserve
The share based payments reserve is used to
recognise the fair value of the performance rights
issued but not yet vested as described in note 4.3.
Asset revaluation reserve
The asset revaluation reserve is used to record
increments and decrements on the revaluation of non-
current assets, as described in note 3.2. The balance
standing to the credit of the reserve may be used to
satisfy the distribution of bonus shares to shareholders
and is only available for the payment of cash dividends
in limited circumstances as permitted by law. In the
4.3 SHARE BASED PAYMENTS
event of the sale of an asset, the revaluation surplus is
transferred to retained earnings.
Foreign currency translation reserve
Exchange differences arising on translation of any
foreign controlled entities are taken to the foreign
currency translation reserve, as described in the basis
of preparation.
Transactions with non-controlling
interests reserve
This reserve is used to record the differences
described in note 6.4.1 of the basis of preparation
which may arise as a result of transactions with
non-controlling interests that do not result
in a loss of control.
2016
2015
AVERAGE PRICE
PER RIGHT
(CENTS)
NUMBER OF
RIGHTS
AVERAGE PRICE
PER RIGHT (CENTS)
NUMBER OF
RIGHTS
As at 1 January
Granted
Forfeited
Exercised
-
0.58
-
-
-
745,301
-
-
As at 31 December
0.58
745,301
-
-
-
-
Share rights outstanding at the end of the year have the following expiry date and fair value at grant date:
PERFORMANCE RIGHTS
GRANT DATE
VESTING DATE
VALUE OF RIGHT
AT GRANT DATE
(CENTS)
20 December 2016
31 Dec 2017
0.58
As at 31 December
Share based payment expense recognised
in the current period (refer to note 4.2)
Weighted average remaining contractual life of rights outstanding at
the end of the period
2016
$’000
432
432
144
2016
12 months
-
-
-
-
“2015
$’000”
-
-
-
2015
none
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.3.1 Background
Long-term incentive plans - performance rights
(pre-Demerger)
Share-based compensation benefits were provided
to employees by APN News & Media Limited (“APN”)
prior to the demerger via a Long-term Incentive (“LTI”)
plan. The fair value of rights granted under the LTI plan
is recognised as an employee benefit expense with a
corresponding increase in equity of APN prior to the
demerger. The fair value is measured at grant date and
recognised over the period during which the employee
becomes unconditionally entitled to the rights.
Total incentive plan (“TIP”) (post-Demerger)
As described in the Explanatory Memorandum for the
Demerger of NZME by APN, the Group has now adopted
an executive incentive structure similar to that used by
APN. The TIP is designed to align the reward outcomes
with the shareholders’ interest and to support the
achievement of the Group’s business strategy and was
approved by the Board on 20 December 2016. Under
the TIP, and at the absolute discretion of the Board, the
CEO and other executive key management personnel
are eligible to participate in the TIP. Eligible participants
have a target award opportunity, which varies between
50% and 100% of fixed remuneration, depending on
the participant’s role and responsibilities. A new TIP
opportunity will be offered at the commencement
of each financial year. The award is dependent on
performance over a one year period (“performance
period”) and there is no opportunity for retesting.
Performance is formally evaluated on the date that
the full year financial performance is announced
to the market.
Performance measures
•
Financial performance conditions (75%): Performance
will be measured against earnings before interest, tax,
depreciation and amortisation (“EBITDA”). This portion
is determined based on actual EBITDA against
budgeted EBITDA on the following scale:
% of EBITDA
• < 95%
• > 95% to 100%
• > 100% to 110%
% of target
opportunity awarded
0%
Pro-rata vesting between
25% and 100%
Pro-rata vesting between
100% and 150%
• Non-financial performance conditions (25%):
Performance will be measured against specific
measures, as determined for each participant at
the commencement of the performance period.
Awards under the TIP are granted to participants
following the assessment of performance. To the
extent the performance measures are met:
•
•
50% of awards are made in cash; and
50% of awards are granted in rights to acquire
fully paid ordinary shares in the Company for $nil
consideration (“Rights”).
The performance period for the 2016 awards is a 6
month period which commenced on 1 July 2016. Going
forward, the performance period will be a 12 month
period commencing at the start of the financial year.
Subject to remaining employed by the Company for
a further one year period following the performance
period (“service period”), rights will vest and will be
kept in trust for a further two years (“deferral period”).
Vested rights will automatically convert into ordinary
shares for $nil consideration at the end of the deferral
period without the requirement for the participant
to exercise their Rights. Participants will receive an
additional allocation of shares at vesting equal to the
dividends paid on vested Rights over the Service Period.
The Company may reduce unvested equity awards
in certain circumstances such as gross misconduct,
material misstatement or fraud. The Board may also
reduce unvested awards to recover amounts where
performance that led to payments being awarded is
later determined to have been incorrectly measured
or not sustained. Awards are normally forfeited if the
participant leaves before the end of the performance
period, except in limited circumstances that are
approved by the Board on a case-by-case basis. If a
participant leaves during the service period, the rights
that will vest will be determined on a pro-rata basis
based on when they leave during the service period. If
a participant leaves during the deferral period, no rights
will be forfeited, but rights will still only convert into
ordinary shares at the end of the deferral period.
The fair value of the rights at grant date was estimated
based on the NZME share price as at 20 December
2016, being the date after the Board approved the
TIP and the terms were communicated to the eligible
participants. The number of rights awarded are based
on the Volume Weighted Average Price (“VWAP”) of the
Company’s shares.
4.3.2 Model inputs
The following is a summary of the key inputs in calculating the share-based payment expense under the 2016 for the year:
• Performance Period
• Service Period
• Vesting Period (being the Performance Period and the
1 July 2016 to 31 December 2016
1 January 2017 to 31 December 2017
1 July 2016 to 31 December 2017
Service Period)
• Deferral Period
• Share price at grant date
• VWAP
•
1 January 2018 to 31 December 2019
58 cents
70 cents
It is assumed that all participating employees will remain employed with the Company until the end of the Vesting Period.
Accounting policies
Long-term incentive plans - performance rights (pre-Demerger)
The fair value at grant date is determined using a combination of the Binomial option pricing model and the
Monte-Carlo option pricing model which take into account the exercise price, the term of the right, the vesting
and performance criteria, the impact of dilution, the non-tradeable nature of the right, the share price at grant
date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest
rate for the term of the right.
The fair value of the rights granted is adjusted to reflect the market vesting condition, but excludes the impact
of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the
number of rights that are expected to become exercisable. At each reporting date, its estimate of the number
of rights that are expected to become exercisable are revised. The employee benefit expense recognised each
period takes into account the most recent estimate. The impact of the revision to the original estimates, is
recognised in profit or loss with a corresponding adjustment to equity.
Total incentive plan (TIP) (post-Demerger)
The fair value of rights granted under the TIP plan is recognised as an employee benefits expense with a
corresponding increase in equity over the vesting period, being the service period and the deferral period.
The fair value is measured at grant date and the number of rights are determined using the volume weighted
average price of NZME’s shares on the NZX.
The fair value at grant date is determined taking into account the share price, any market performance
conditions and any non-vesting conditions, but excluding the impact of any service and non-market
performance vesting conditions.
Non-market vesting conditions are included in assumptions about the number of rights that are expected
to vest. At each reporting date, the Group revises its estimate of the number of rights that are expected to
become exercisable.
The employee benefits expense recognised each period takes into account the most recent estimate.
The impact of the revision to the original estimates, is recognised in profit or loss with a corresponding
adjustment to equity.
74
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.4 DIVIDENDS
4.4.1 Dividends paid
On 24 June 2016, the Company declared and settled a
dividend of $191,257,897 to APN International Pty Limited.
This occurred as part of the Internal Restructure. Refer to
Note 6.1 for further details. On 25 August 2016, the Board
declared an interim dividend of 3.5 cents per fully paid
ordinary share. This was paid on 28 October 2016. No
dividends were declared or paid in 2015.
4.4.3 Franking and imputation credits
4.4.2 Dividends declared after balance date
On 23 February 2016, the Board of Directors declared
a fully imputed final dividend of 6 cents per share, to
be paid on 28 April 2017 to registered shareholders as
at 11 April 2017. The Board of Directors also declared
a supplementary dividend of 1.06 cents per share, to
be paid on 28 April 2017 to registered shareholders
as at 11 April 2017, to those shareholders who are
not tax residents in New Zealand. The payment of a
supplementary dividend effectively puts non-resident
shareholders in the position they would have been
had they received imputation credits (which are only
available to resident shareholders).
Imputation credits available for subsequent reporting periods
based on the New Zealand 28% tax rate for the Group
Franking credits available to the Company for subsequent
reporting periods based on the Australia 30% tax rate for the Group
2016
‘000
2015
‘000
NZ$ 4,739
NZ$2,709
AU$ 0 A
AU$ 0 A
Prior to the Demerger, NZME was funded by a combination
of internal cash flows and external financing arrangements.
Following the Demerger, funding is from a combination
of its own cash reserves and NZ$160 million bilateral bank
loan facility, which NZME entered into on 29 June 2016,
of which $112 million is drawn and $48 million is undrawn
as at 31 December 2016. The facility expires on
1 January 2020.
The assets of the Group are collateral for the interest
bearing liability.
In addition, the Group must comply with financial
covenants (a net debt to EBITDA ratio and an EBITDA
to net interest expense ratio) for each 12 month period
ending on 30 June and 31 December. The Group has
complied with these covenants.
The interest rate for the drawn facility is the applicable
bank screen rate plus credit margin.
Capitalised borrowing costs related to the refinancing
were $0.3 million.
The NZME Bilateral Facilities contain undertakings which
are customary for a facility of this nature including, but
not limited to, provision of information, negative pledge
and restrictions on priority indebtedness and
disposals of assets.
Consideration received on the sale of the Partnership
Interests (refer to note 6.1.1) to APN prior to Demerger,
was used to pay down secured bank loans. This is the
main reason for the decrease in interest bearing liabilities
from 31 December 2015.
Accounting policies
Borrowings are initially recognised at fair value less attributable transaction costs and subsequently measured at
amortised cost. Any difference between cost and redemption value is recognised in the income statement over
the period of the borrowing on an effective interest basis.
Costs incurred in connection with the arrangement of borrowings are deferred and amortised over the period
of the borrowing. These costs are netted off against the carrying value of borrowings in the balance sheet.
(A) Although the Company does not have any franking credits available for use, other entities within the Group has AU$10,828,676 (2015:AU$10,824,821)
available that might become available to the Company in future periods.
4.5 INTEREST BEARING LIABILITIES
4.6 COMMITMENTS
Current interest bearing liabilities
Bank loans – secured
Total current interest bearing liabilities
Non-current interest bearing liabilities
Bank loans – secured
Deduct:
Capitalised borrowing costs
Total non-current interest bearing liabilities
NET DEBT
Current interest bearing liabilities
Non-current interest bearing liabilities
Capitalised borrowing costs
Cash and cash equivalents
Total debt less cash and cash equivalents
76
2016
$’000
-
-
112,486
112,486
(318)
112,168
-
112,486
(318)
(16,242)
95,926
2015
$’000
1,257
1,257
184,500
184,500
-
184,500
1,257
184,500
-
(11,065)
174,692
4.6.1 Lease commitments
The group leases certain premises under operating leases. The leases have varying terms, escalation
clauses and renewal rights. Excess space is sub-let to third parties under non-cancellable operating leases.
Commitments for minimum lease payments in relation to rental
commitments contracted for at the reporting date and not
recognised as liabilities, payable:
Not later than one year
Later than one year but not later than five years
Later than five years
Commitments not recognised in the financial statements
2016
$’000
2015
$’000
16,406
52,307
71,856
140,569
18,390
49,976
80,692
149,058
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.7 CASH FLOW INFORMATION
RECONCILIATION OF CASH
Cash at end of the year, as shown in the statements of cash flows,
comprises:
2016
$’000
2015
$’000
4.8 FINANCIAL RISK MANAGEMENT
4.8.1 Capital and Risk Management
The Group’s objectives when managing capital are to:
Safeguard their ability to continue as a going
•
concern, so that they can continue to provide
returns for shareholders and benefits for other
stakeholders; and
• Maintain an optimal capital structure to reduce the
Cash and cash equivalents
16,242
11,065
cost of capital.
RECONCILIATION OF NET CASH INFLOWS (OUTFLOWS) FROM
OPERATING ACTIVITIES TO PROFIT / (LOSS) FOR THE YEAR:
Profit / (loss) for the year
74,543
42,897
Depreciation and amortisation expense
Borrowing cost amortisation
Net gain on sale of non-current assets
Gain on sale of business after tax
Reclassification of foreign currency translation reserve
Change in current / deferred tax payable
Current tax funded through related party balances
Foreign exchange losses / (gains)
Asset write offs and business closure
Revaluation/impairment of financial assets
Change in fair value of financial instrument
Share based payment expense
Changes in assets and liabilities net of effect of acquisitions:
Trade and other receivables
Inventories
Prepayments
Trade and other payables and employee benefits
Net cash inflows/(outflows) from operating activities
26,193
53
9
(192,519)
65,326
41,289
(12,842)
1,086
15
(2,245)
31,481
144
51,104
730
(306)
(22,379)
61,682
28,194
-
(492)
-
-
(3,969)
24,870
(763)
597
(7,067)
12,623
-
(8,572)
(634)
758
32,476
120,918
Accounting policies
For the purposes of presentation on the statement of cash flows, cash and cash equivalents includes cash on
hand and short term deposits held at call with finance institutions, net of bank overdrafts.
In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
Refer to note 4.5 for undrawn facilities to which the
group has access to as well as the net debt calculation
that is used by the group to capital requirements.
The Group’s activities expose it to a variety of financial
risks: market risk (including foreign exchange risk,
interest rate risk, and price risk), credit risk and liquidity
risk. The Group’s overall risk management programme
focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the
financial performance of the Group. The Group uses
different methods to measure different types of risk to
which it is exposed. These methods include sensitivity
analysis in the case of interest rate and foreign exchange
and ageing analysis for credit risk.
Financial risk management is carried out by the Group
Treasury function. The Group Treasury function meet
regularly with the Group CFO to cover specific areas,
such as foreign exchange risk, interest rate risk, credit
risk, use of derivative financial instruments and non-
derivative financial instruments, and investment of
excess liquidity.
4.8.2 Market risk
(a) Cash flow and fair value interest rate risk
Long term borrowings issued at variable rates expose
the Group to cash flow interest rate risk. Borrowings
issued at fixed interest rates expose the Group to fair
value interest rate risk. The Group makes decisions re-
garding variable or fixed rate debt as and when debt
contracts are entered into. Current interest bearing debt
are fixed for 30 days on a rolling basis.
Based on the outstanding net floating debt at 31
December 2016, a change in interest rates of +/-1% per
annum with all other variables being constant would
impact post-tax profit and equity by $1.1 million lower/
higher (2014: $1.5 million lower/higher).
(b) Foreign exchange risk
Foreign exchange risk arises from future commercial
transactions and recognised assets and liabilities that
are denominated in a currency that is not the entity’s
functional currency. Individual transactions are assessed
and forward exchange contracts are used to hedge the
risk where deemed appropriate.
Whilst the Group as a whole (pre-Demerger) had assets
and liabilities in multiple currencies, individual entities in
the Group did not have a significant foreign exchange
exposure to receivables or payables in currencies
that are not their functional currency. Post-Demerger,
the Group’s operations in foreign jurisdictions have
significantly reduced to the extent that the Group does
not have a significant foreign exchange exposure.
(c) Price risk
The Group is not exposed to significant price risk.
There is some risk associated with other financial assets
however this is not deemed to be significant as other
financial assets are categorised as level 3 in the fair value
hierarchy and have been impaired, where applicable, to
the present value of expected future cash flows.
4.8.3 Credit Risk
Credit risk is managed on a Group basis. Credit risk arises
from cash and cash equivalents and deposits with banks
and financial institutions, as well as credit exposures to
wholesale and retail customers, including outstanding
receivables and committed transactions. For banks and
financial institutions, the creditworthiness is assessed
prior to entering into arrangements and approved by
the Board. For other customers, risk control assesses the
credit quality, taking into account financial position, past
experience and other factors. The utilisation of credit
limits is regularly monitored and the Group does not
normally obtain collateral from its customers.
78
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The table below sets out additional information about the credit quality of trade receivables net of the provision for
doubtful debts:
The tables below analyse the Group’s financial liabilities including interest to maturity into relevant maturity groupings
based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the
tables are the contractual undiscounted cash flows.
LESS
THAN ONE
MONTH
$’000
ONE TO
THREE
MONTHS
$’000
PAST DUE
THREE
TO SIX
MONTHS
$’000
OVER SIX
MONTHS
TOTAL
$’000
$’000
LESS THAN
ONE YEAR
$’000
BETWEEN ONE
AND TWO YEARS
$’000
BETWEEN TWO
AND FIVE YEARS
$’000
OVER FIVE YEARS
$’000
2016
Expected loss rate
Trade Receivables
Impaired receivables
2015
Expected loss rate
Trade Receivables
Impaired receivables
CURRENT
$’000
0.0%
23,890
0.7%
17,186
(121)
23,890
17,065
0.1%
63,067
(35)
1.4%
24,131
(345)
63,032
23,786
6.5%
2,616
(171)
2,445
7.0%
5,708
(401)
5,307
47.8%
619
(296)
323
65.3%
1,397
(912)
485
62.0%
732
(454)
278
21.8%
2,079
(453)
1,626
45,043
(1,042)
44,001
96,382
(2,146)
94,236
Trade receivables are generally settled within 30 to
45 days. The Directors consider the carrying amount
of trade receivables approximates their net fair value.
Receivables are monitored on an individual basis and
the company considers the probability of default upon
initial recognition of the receivable and throughout the
period and provides for receivables considered
to be impaired.
equivalents and trade and other receivables.
The Group is not exposed to any concentrations
of credit risk within cash and cash equivalents or
trade and other receivables.
Credit risk further arises in relation to financial
guarantees given to certain parties from time
to time.
As of 31 December 2016, trade receivables of
$3,046,000 (2015: $7,418,000) were past due
but not impaired.
For the year ended 31 December 2015, credit risk
associated with the receivable balances from other
related entities and the maximum exposure to credit
risk is the total of the related party receivables.
The maximum exposure to credit risk at 31 December
2016 is equal to the carrying amount of cash and cash
4.8.4 Liquidity risk
Prudent liquidity risk management implies maintaining
sufficient cash and marketable securities, the availability
of funding through an adequate amount of committed
credit facilities and the ability to close out market
positions. Due to the dynamic nature of the underlying
business, Group Treasury aims at maintaining flexibility
in funding by keeping committed credit lines available.
Management monitors rolling forecasts of the Group’s
liquidity reserve on the basis of expected cash flows.
80
31 DECEMBER 2016
Trade payables
Bank loans
Related party loans
Gross liability
Less: interest
Total financial liabilities
31 DECEMBER 2015
Trade payables
Bank loans
Related party loans
Gross liability
Less: interest
Total financial liabilities
55,788
4,480
-
60,268
(4,480)
55,788
91,758
9,694
322,304
423,756
(9,746)
414,010
-
4,480
-
4,480
(4,480)
-
-
9,694
-
9,694
(9,694)
-
-
116,966
-
116,966
(4,480)
112,486
-
199,054
-
199,054
(14,554)
184,500
4.9 FAIR VALUE MEASUREMENT
The Group measures and recognises the following
assets and liabilities at fair value on a recurring basis:
• Financial assets at fair value through profit
or loss (FVTPL);
• Land and buildings.
4.9.1 Fair value hierarchy
NZ IFRS 13 requires disclosure of fair value
measurements by level of the following fair value
measurement hierarchy:
•
Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included
within level 1 that are observable for the asset or
liability, either directly or indirectly, and
Level 3: inputs for the asset or liability that are
not based on observable market data
(unobservable inputs).
•
•
-
-
-
-
-
-
-
-
-
-
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.9.2 Recognised fair value measurements
RECURRING FAIR VALUE MEASUREMENTS (LEVEL 3)
FINANCIAL ASSETS
Financial assets at fair value through profit or loss
Shares in other companiesA
Financial InstrumentB
Total financial assetsC
NON-FINANCIAL ASSETS
Freehold land and buildings
Freehold land
Buildings
Total non-financial assets
2016
$’000
2015
$’000
-
-
-
1,381
12,345
13,726
31,701
94,095
125,796
2,990
480
3,470
(A) Shares in other companies represent ownership interests in companies that are not consolidated or equity accounted. These were disposed of as
part of the sale of the Group’s interest in Australian Radio Network on 24 June 2016. Refer to Note 6.1 for further details. (B) Financial instrument held by
Level 4 Partnership refers to an investment in a debenture issued by Nathco Holdings Pty Ltd (Nathco), a member of the APN News and Media Group.
The terms of debenture entitle the Level 4 Partnership to receive 95% of the profits of Nathco. This was disposed of on 24 June 2016, refer to note 6.1.
(C) Other financial assets of $5,988,765 (Dec 2015: $2,590,000) are held at cost and therefore have been excluded from this table.
All fair value measurements referred to above are in Level 3 of the fair value hierarchy and there were no transfers
between levels. The Group’s policy is to recognise transfers between fair value hierarchy levels as at the end of the
reporting period.
4.9.3 Disclosed fair values
The Group also has a number of assets and liabilities
which are not measured at fair value but for which fair
values are disclosed in these notes.
The carrying amounts of trade receivables and payables
are assumed to approximate their fair values due to their
short-term nature. There are no outstanding non-current
receivables as at 31 December 2016 or 31 December
2015 (level 3).
The fair value of interest bearing liabilities disclosed
in note 4.5 is estimated by discounting the future
contractual cash flows at the current market interest
rates that are available to the group for similar financial
instruments. For the period ending 31 December 2016,
the borrowing rates were determined to be between
3.5% and 4% (2015: between 5.0% and 6.1%), depending
on the type of borrowing. The fair value of borrowings
approximates the carrying amount, as the impact of
discounting is not significant (level 2).
4.9.4 Valuation techniques used to
derive at level 2 and 3 fair values
Recurring fair value measurements
The fair value of financial instruments that are not
traded in an active market is determined using valuation
techniques. These valuation techniques maximise the
use of observable market data where it is available and
rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are
observable, the instrument is included in level 2.
If one or more of the significant inputs is not based
on observable market data, the instrument is included
in level 3. This is the case for certain shares in other
corporations disclosed in notes 4.9.2 and 6.4.3, which
are valued using discount rates, forecast cash flows,
EBITDA multiples estimated by management based on
comparable transactions and industry data. These were
disposed of as part of the demerger. Refer to note 6.1.
Specific valuation techniques used to value financial
instruments include:
•
The use of quoted market prices or dealer quotes
for similar instruments; and
• Other techniques, such as discounted cash flow
analysis, are used to determine fair value for the
remaining financial instruments.
The Group obtains independent valuations at least
every three years for its freehold land and buildings
(classified as property, plant and equipment in note
3.2), less subsequent depreciation for buildings. This
is considered sufficient regularity to ensure that they
carrying amount does not differ materially from that
which would be determined using fair value at the end
of the reporting period. All resulting fair value estimates
for properties are included as Level 3.
82
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.0 TAXATION
5.1 INCOME TAX
REPORTED INCOME TAX EXPENSE / (BENEFIT) COMPRISES:
Current tax expense / (benefit)
Deferred tax expense / (benefit)
(Over) / under provision in prior years
Income tax expense
Income tax is attributable to:
Profit from continuing operations
Profit from discontinued operations
Total income tax expense
INCOME TAX EXPENSE DIFFERS FROM THE AMOUNT
PRIMA FACIE PAYABLE AS FOLLOWS:
Profit from operations before tax
From continuing operations
From discontinued operations
Prima facie income tax at 28%
IRD settlement
Non assessable asset sales and exempt distribution receipts
Non-deductible impairment / revaluation
Non-deductible expenses
Derecognition of deferred tax on losses and foreign tax credits
Derecognition of deferred tax on intangible assets
Differences in international tax rates
Effects of accounting for discontinued operations
Other
(Over) / under provision in prior years
Income tax expense
84
2016
$’000
70,791
8,175
(3,310)
75,656
64,050
11,606
75,656
13,498
136,701
150,199
42,056
16,968
(275)
-
1,554
62,035
(15,803)
(2)
(26,498)
(1,069)
(3,310)
75,656
2015
$’000
26,536
(316)
(648)
25,572
(1,207)
26,779
25,572
(11,475)
79,944
68,469
19,171
-
(773)
3,748
664
-
-
2,943
-
467
(648)
25,572
5.2 DEFERRED TAX
Deferred tax assets and liabilities are attributable to:
BALANCE
RECOGNISED
IN INCOME
$’000
RECOGNISED
IN EQUITY
$’000
OTHER
MOVEMENTS
$’000
BALANCE
$’000
2015
Tax credits
Tax losses
Employee benefits
Doubtful debts
Accruals / restructuring
Intangible assets
Property Plant and
Equipment
Other
2016
Tax credits
Tax losses
Employee benefits
Doubtful debts
Accruals / restructuring
Intangible assets
Property Plant and
Equipment
Other
912
60,576
2,398
520
(1,563)
(41,396)
978
1,593
589
116
(849)
1,529
(12,963)
(4,787)
(3,640)
4,844
1,890
67,149
2,987
636
705
(43,155)
(8,860)
(11,383)
9,969
1,147
316
(1,887)
(61,549)
(1,554)
(345)
397
42,031
3,490
11,242
(8,175)
-
4,980
-
-
3,117
(3,117)
1,890
67,149
2,987
636
705
(43,155)
8,890
(8,860)
(8,890)
4,980
(11,383)
9,969
-
-
-
-
-
(171)
-
-
(171)
-
-
-
-
-
595
-
-
-
(5,600)
-
-
-
-
-
-
595
(5,600)
3
-
1,433
291
1,102
(529)
(5,370)
(141)
(3,211)
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Group deferred income tax assets and liabilities are
presented net in the analysis above. These include net
deferred income tax liabilities of $33,778,000 (2015:
$36,944,000) arising from the Group’s Australian
subsidiaries. Also refer to note 6.1 for further information
regarding the Demerger. For the year ended 31 December
2015 the net deferred tax asset of $9,969,000 consisted
of a deferred tax asset of $46,065,000 and a deferred tax
liability of $36,096,000 as shown on the balance sheet.
There are unrecognised tax losses of $1,811,935
(AUD1,744,812) in an Australian subsidiary of the Company
which have not been recognised as there is uncertainty
as to their future recoverability. The deferred tax asset
on these losses were not offset against the deferred tax
liabilities of the rest of the Group because they are
levied by a different tax authority.
5.3 IRD SETTLEMENT
The tax expense from continuing operations of NZ$64.05
million comprises a NZ$17 million cash payment to
fully settle historical tax disputes with the New Zealand
Inland Revenue Department (“IRD”), the utilisation and
derecognition of historically recognised tax losses
and other deferred tax balances related to the
demerged business.
The Company has previously disclosed that the IRD was
auditing or reviewing several taxation matters, including
the dispute with the IRD regarding the Mandatory
Convertible Note (“MCN”) transaction. These matters
were disclosed in previous financial statements and in an
Explanatory Memorandum dated 11 May 2016 relating to
the Demerger of the Company from APN.
On 23 June 2016, the Company and APN reached a
binding heads of agreement with the IRD to settle the
MCN transaction, the Branch financing transaction, non-
resident withholding tax and thin capitalisation issues,
and a further matter that was under review by the IRD.
This settlement closes off all current areas of audit
and dispute between the IRD and the Company. The
settlement was for the total sum of NZ$33.9 million, with
the cost of settlement shared between the Company
and a subsidiary of APN on a near equal basis. Payment
occurred on 26 August 2016. The settlement utilised
NZ$56 million of tax losses.
Accounting policies
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement,
except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In
this case the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provision where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred
tax liabilities are not recognised if they arise from the initial recognition of goodwill: deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the
balance sheet date and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled
by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
86
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.0 GROUP STRUCTURE AND INVESTMENTS IN OTHER ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.1 NZME DEMERGER FROM APN
On 11 May 2016, APN News & Media Limited (“APN”), then
the ultimate parent entity of the Company announced
a demerger of 100% of the Group to APN shareholders
(“Demerger”), subject to a majority shareholder vote
held on 16 June 2016. The Demerger was approved by
the requisite majority of APN Shareholders and all other
conditions precedent to the Demerger were satisfied or
waived. The Demerger was completed on 29 June 2016.
On 27 June 2016 the Company was listed as a separate
standalone entity on the NZX Main Board and ASX under
the ticker code NZM on a deferred settlement basis (on
a post consolidation basis). Trading of NZME shares
commenced on a normal settlement basis on 1 July 2016.
Prior to the Demerger, APN initiated an internal
restructure, being an internal restructure to separate and
align the relevant businesses, assets and liabilities of APN
with the appropriate entity prior to the Demerger (the
“Internal Restructure”).
The Demerger Implementation Deed, entered into by the
Company and APN, provided for the Internal Restructure
to be completed so that:
• The Group was created as an identifiable and separate
corporate group under NZME Limited, capable of
operating on a standalone basis; and
• All subsidiaries, assets and liabilities which did not
relate directly to the Group business were held by APN
following the Demerger.
Broadly, the Internal Restructure entailed the following:
• Certain subsidiaries, business, assets and liabilities
relating to the Group business were aligned or
transferred to entities that would be subsidiaries of the
Company following the Demerger;
• Certain subsidiaries, business, assets and liabilities
relating to the APN business which are held by
subsidiaries of the Company were aligned or
transferred to entities that would be subsidiaries of
APN following the Demerger;
• Various intercompany loans, receivables and payables
were repaid (other than ordinary trading receivables
and payables which will be settled on normal
commercial terms) so that upon the Demerger there
were no loans across the APN and NZME businesses
outstanding; and
• Various distributions were made between the
subsidiaries of NZME and subsidiaries of APN.
On 24 June 2016, the Company declared and
settled a dividend of $191,257,897 to APN International
Pty Limited.
In order to give effect to the share and asset
transfers forming part of the Internal Restructure, a series
of share and asset sale agreements were entered into
between APN and the Group. These sale agreements
were on standard terms for intra-group share and asset
sales, including limited title and capacity warranties
given by both parties.
Acquisition of businesses
The acquisition of the entities have been recognised
as common control transactions. The Group applies
the predecessor values method, without any step up
to fair value. All the assets and liabilities acquired were
recognised at book values per the consolidated financial
statements of the highest entity that had common
control (i.e. APN) immediately prior to the Internal
Restructure. The difference between the consideration
established under the Internal Restructure and the
adjusted carrying value of the assets and liabilities (at
the date of the transaction) acquired totalling $51.9
million has been recognised in equity. No goodwill was
created or recognised. The Group financial statements
incorporate the acquired entity’s results only from the
date of acquisition. The corresponding amounts of the
previous period are not restated.
Disposal of businesses
Upon the disposal of entities, where there was a loss
of control, the Group has derecognised the assets and
liabilities of the subsidiary, any related non-controlling
interests and other components of equity. Any resulting
gain or loss is recognised in the income statement. The
Group’s interest in Australian Radio Network (“ARN”), The
Level 3 Partnership and The Level 4 Partnership were
acquired by a subsidiary company of APN on normal
commercial terms.
Asset acquisition
On 24 June 2016, the Group acquired certain NZ
publishing masthead brands (refer to note 3.1) on
normal commercial terms from a subsidiary
company of APN.
88
6.1.1 Business disposed – discontinued operations
The results of ARN, The Level 3 Partnership and The
Level 4 Partnership prior to disposal are reported as
discontinued operations. Information relating to the
discontinued operations for the period to the date of
disposal is set out below.
As a result of the Internal Restructure, the disposals resulted
in a recognition of a gain of $192,519,000 (tax impact: $nil).
For the entities disposed where there was a loss of
control, the Group has derecognised the assets and
liabilities of the subsidiary, any related non-controlling
interests and other components of equity. Any resulting
gain or loss is recognised in the income statement.
Balances in the foreign currency translation reserve in
respect of NZME’s net investment in entities disposed
have been recycled through the income statement.
The Group’s 98% interest in The Level 3 Partnership was
sold to a subsidiary of APN on normal commercial terms.
This APN subsidiary had previously held a 1% interest
in The Level 3 Partnership. The consideration received
was $119,937,000. This transaction, alongside the sale
of the Group’s interest in ARN, resulted in a decrease in
non-controlling interests in ARN. The carrying amount of
the non-controlling interests in ARN on the date of the
transaction was $180,520,000. The Group recognised
a decrease in non-controlling interests of $180,520,000.
The combined results of discontinued operations
included in profit or loss and cash flows for the period are
set out below.
The comparative income statement has been
re-presented to include those operations classified as
discontinued in the current year.
Revenue and other income
Expenses from operations before finance costs, depreciation
& amortisation
Finance costs
Depreciation and amortisation
Change in fair value of financial instrumentsA
Profit / (loss) before income tax
Income tax expense
Profit / (loss) after income tax of discontinued operations
Profit / (loss) on sale of businesses after income tax
Reclassification of foreign currency translation reserves to the
income statement
2016
$’000
127,542
2015
$’000
252,019
(83,606)
(154,518)
(599)
(2,348)
(31,481)
9,508
(11,606)
(2,098)
192,519
(65,326)
(422)
(4,512)
(12,623)
79,944
(26,779)
53,165
-
-
Profit / (loss) after income tax from discontinued operations
125,095
53,165
Profit / (loss) from discontinued operations is attributable to:
Owners of the parent entity
Non-controlling interests
Profit / (loss) from discontinued operations
Net cash inflows from operating activities
Net cash outflows from investing activities
Net cash inflows/(outflows) from financing activities
Net decrease in cash generated by the businesses
Footnote on the next page.
115,502
9,593
125,095
37,322
(1,120)
(37,277)
(1,075)
37,649
15,516
53,165
84,128
(88,763)
3,978
(657)
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(A) Change in fair value of financial instruments relates to the Level 4 Partnership’s investments in a debenture issued by Nathco Holdings Pty Ltd,
a member of the APN group. NZME’s interest in the Level 4 Partnership was subsequently sold to APN, prior to Demerger.
Carrying value of net assets derecognised
Cash and cash equivalents
Trade and other receivables
Intangible assets
Property, plant and equipment
Other financial assets
Other assets
Trade and other payables
Current tax payable
Provisions
Deferred tax liabilities
Net assets derecognised
Less: net assets attributable to non-controlling interests
Net assets derecognised attributable to equity holders of NZME Limited
Consideration received
Profit / (loss) on sale
Income tax expense on gain
Profit / (loss) on sale after income tax
2016
$’000
2,564
230,754
401,258
16,775
91,294
324
(34,365)
(82)
(3,996)
(33,778)
670,748
(180,520)
490,228
682,747
192,519
-
192,519
Accounting policies
Discontinued operations and assets held for sale
Non-current assets (or disposal Groups) are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. They are measured at the lower of
their carrying amount, and their fair value less costs to sell, except for assets such as deferred tax assets, assets
arising from employee benefits, financial assets and investment property that are carried at fair value and
contractual rights under insurance contracts, which are specifically exempt from this requirement.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while
they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group
classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are
presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as
held for sale are presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for
sale and that represents a separate major line of business or geographical area of operations, is part of a
single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired
exclusively with a view to resale. The results of discontinued operations are presented separately on the face of
the income statement.
90
6.1.2 Businesses and net assets acquired
As part of the Internal Restructure undertaken by the
Group pursuant to the Merger Implementation Deed
with APN, several entities, assets and liabilities have
been acquired by the Group.
The acquisition of the non-controlling interest in NZME
Radio Limited (“NZME Radio”) has been treated as
a common control transaction. Any gain or loss on
acquisition of an ownership interest held by a non-
controlling party is recognised directly in equity. The
difference between the consideration transferred and
the carrying value of APN’s non-controlling interest in
NZME Radio at 24 June 2016 resulted in an adjustment
of $45,776,000 being recognised directly within equity.
The acquisition of NZME Educational Media Limited
has been recognised as common control transaction.
The difference between the consideration established
under the internal restructure and the carrying value of
the assets and liabilities (at the date of the transaction)
acquired totalling $6,110,000 has been recognised
in equity.
The Group also acquired certain NZ publishing
masthead brands (refer to note 3.1) on normal
commercial terms from a subsidiary company of APN.
The total carrying value of the assets and liabilities
that were acquired by the Group as part of the Internal
Restructure that occurred prior to the Demerger
were as follows:
Net assets acquired
Trade and other receivables
Masthead brands
Other
Total assets
Trade and other payables
Current tax payable
Total liabilities
Net assets attributable to equity holders of NZME Limited
2016
$’000
579
146,976
17
147,572
216
425
641
146,931
6.1.3 Net cash flow
The net cash flow from the sale of businesses, acquisitions of businesses and net assets and the settlement of
dividends was NZ$96 million and has been presented within investing activities in the cash flow statement.
This is made up as follows:
NET CASH FLOW
Cash consideration received
Cash and cash equivalents disposed of
Net cash inflow of internal restructure
2016
$’000
98,500
(2,564)
95,936
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounting policies
Common control transactions
Business combinations in which all of the combining entities or businesses ultimately controlled by the same
party or parties both before and after the combination are recognised as common control transactions.
The Group applies the predecessor values method, without any step up to fair value. The net assets acquired,
including goodwill, are incorporated in the Group financial statements at the book values as per the
consolidated financial statements of the highest entity that has common control (i.e. APN). The difference
between any consideration given and the aggregate book value of net assets (at the date of the transaction)
of the acquired entity is recorded as an adjustment to equity. No additional goodwill is created.
The Group financial statements incorporate the acquired entity’s results only from the date of acquisition.
The corresponding amounts of the previous period are not restated.
NAME OF ENTITY
Adhub Limited
APN Braiside Pty Limited
APN Milperra Pty Limited
Australian Radio Network Pty Ltd
Cardcorp (Manufacturing) Pty Limited
ESKY Limited
Grabone Limited
Idea HQ Limited
Mt Maunganui Publishing Co Limited
NZME 2014 Limited
6.2 BUSINESS COMBINATION
NZME Australia Pty Limited (Previously GrabOne Australia Pty Limited)A
During the year ended 31 December 2015, the Group gained control over Radio 96FM Perth Pty Ltd for a consideration
of AU$78,000,000 less working capital adjustments. The acquisition accounting was disclosed in the Company’s
financial statements for the year ended 31 December 2015. Radio 96FM Perth Pty Ltd was subsequently disposed of as
part of the Demerger (refer to note 6.1).
6.3 CONTROLLED ENTITIES
Significant judgement
Prior to the Demerger as described in note 5.1, the Group held 50% of the issued capital of ARN, but exercised
effective control over the entity based on the Board and management representation and the 76.8% economic
interest held by the Group.
The consolidated financial statements incorporate the assets, liabilities and results of the subsidiaries listed below.
Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group,
and the proportion of ownership interest held equals the voting rights held by the Group. All entities are incorporated
in, and operate in, New Zealand unless otherwise stated. Changes in control over entities occurred on Demerger
(see note 6.1).
92
NZME Digital Limited
NZME Educational Media Limited
NZME Finance Limited
NZME Holdings Limited (Previously: APN Holdings NZ Limited)
NZME Investments Limited (Previously: APN NZ Investments Limited)
NZME Online Limited
NZME Print Limited (Previously: APN Print NZ Limited)
NZME Publishing Limited
NZME Radio Investments Limited
NZME Radio LimitedB
NZME Specialist Limited (Previously: APN Specialist Publications NZ Limited)
NZME Trading Limited
Radio 96FM Perth Pty LimitedA
Regional Publishers Limited
Sell Me Free Limited
Sella Limited
Stanley Newcomb & Co Limited
The Hive Limited
The Level 3 Partnership
The Level 4 Partnership
The New Zealand Radio Network Limited
The Radio Bureau Limited
Trade Debts Collecting Co Limited
W & H Interactive Limited
Wilson & Horton Australia Pty Limited
(A) Incorporated in, and operate in, Australia. (B) One “Kiwi Share” held by the Minister of Finance.
The rights and obligations are set out in the NZME Radio Limited constitution.
2016
100%
-
-
-
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
-
-
100%
100%
100%
100%
-
2015
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
50%
100%
100%
100%
100%
100%
98%
99%
50%
50%
100%
100%
100%
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.4.2 Associates, joint ventures and joint operations
The Group has the following associates, joint ventures and joint operations:
Chinese New Zealand Herald LimitedA
Eveve New Zealand LimitedA
KPEX LimitedA
New Zealand Press Association LimitedA
Restaurant Hub LimitedA
The Beacon Printing & Publishing Company LimitedA
The Gisborne Herald Company Limited (held through Essex
Castle Limited as a trust company for NZME Publishing Limited)A
The Radio BureauB
The Wairoa Star LimitedA
Ratebroker LimitedA
The Newspaper Publishers Association of New Zealand IncorporatedC
Online Media Standards Authority IncorporatedC
New Zealand Press CouncilC
Radio Broadcasters Association IncorporatedC
OWNERSHIP
INTEREST
2016
OWNERSHIP
INTEREST
2015
50%
40%
25%
38.82%
40%
21%
49%
50%
40.41%
20%
-
-
-
-
-
-
25%
38.82%
-
21%
49%
50%
40.41%
-
-
-
-
-
(A) These entities are classified as joint ventures or associates. Because the effects of equity accounting are immaterial, these investments are carried at
cost (refer note 6.4.3). (B) The Radio Bureau is classified as a joint operation and the Group has included its direct right to the assets, liabilities, revenues
and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses in these consolidated financial
statements.(C) These are bodies with which entities in the Group have memberships, but no ownership interest.
Accounting policies
The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the activities
of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to
account for business combinations by the Group (refer note 6.2), other than for common control transactions
(refer note 6.1).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the group. Non-controlling interests in the results and equity of subsidiaries are shown
separately in the consolidated income statement, statement of comprehensives income, statement of changes
in equity and balance sheet respectively.
6.4 INTERESTS IN OTHER ENTITIES
6.4.1 Material subsidiaries with
non-controlling interests
Set out below are the Group’s principal subsidiaries with
material non-controlling interests. Unless otherwise
stated, the subsidiaries as listed below have share capital
consisting solely of ordinary shares, which are held directly
by the Group, and the proportion of ownership interests
held equals to the voting rights held by the Group.
On 24 June 2016, as part of the Internal Restructure,
the Group’s interest in ARN (including Brisbane FM Radio
Pty Limited, Radio 96FM Perth Pty Limited and Emotive
Pty Limited) was sold to APN on normal commercial
terms. NZME Radio, which was previously owned by
the ARN, was acquired by an entity within the
NZME Group on 24 June 2016. Refer to Note 6.1
for further details.
NAME OF ENTITY
PLACE OF
BUSINESS
COUNTRY OF
INCORPORATION
Ownership
interest held by
the Group
Ownership
interest held by
non-controlling
interest
2016
2015
2016
2015
Australian Radio
Network Pty
LimitedA
Australia
and New
Zealand
Australia
-
50%
-
50%
(A) The ARN owned 100% of NZME Radio as at 31 December 2015. As at 31 December 2016, the Group owns 100% of NZME Radio.
Refer to note 6.1 for further transactional information on the disposed entities.
PRINCIPLE
ACTIVITIES
Commercial
radio
Accounting policies
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated
income statement, statement of comprehensives income, statement of changes in equity and balance sheet
respectively. The effects of all transactions with non-controlling interests are recorded in equity if there is no
change in control. Where there is a loss of control, any remaining interest in the entity is remeasured to fair value
and a gain or loss is recognised in the consolidated income statement. Any losses are allocated to the non-
controlling interest in subsidiaries even if the accumulated losses should exceed the non-controlling interest in
the individual subsidiary’s equity.
94
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounting policies
Associates
Associates are all entities over which the Group has significant influence but not control or joint control. Material
investments in associates are accounted for in the consolidated financial statements using the equity method
of accounting, after initially being recognised at cost. The Group’s investment in associates includes goodwill
(net of any accumulated impairment loss) identified on acquisition.
Joint arrangements
Under NZ IFRS 11 Joint Arrangements investments in joint arrangements are classified as either joint operations
or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather
than the legal structure of the joint arrangement.
For material joint operations, the Group recognises its direct right to the assets, liabilities, revenues and
expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and
expenses. These have been incorporated in the financial statements under the appropriate headings.
Interests in material joint ventures are accounted for using the equity method (see below) after initially being
recognised at cost in the consolidated balance sheet.
Equity method of accounting
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter
to recognise the group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the
Group’s share of movements in other comprehensive income of the investee in other comprehensive income.
Dividends received or receivable from associates and joint ventures are recognised as a reduction in the
carrying amount of the investment.
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to
the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees
have been changed where necessary to ensure consistency with the policies adopted by the Group
6.4.3 Other financial assets
The carrying amount of equity-accounted investments is tested for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. Where the effects of equity
accounting is immaterial, investments are carried at cost.
6.4.3 Other financial assets
Shares in other corporations
Financial instrument held by Level 4 Partnership
Total other financial assets
2016
$’000
5,988
-
5,988
2015
$’000
34,291
94,095
128,386
For the year ended 31 December 2016, shares in other corporations consist of investments in entities that are not
consolidated or equity accounted (see also note 6.4.2). These investments are carried at cost.
For the year ended 31 December 2015, shares in other corporations consisted of:
•
•
Investments in entities that are not consolidated or equity accounted of $2,590,000 (see also note 6.4.2), and
Interests in other companies that are not consolidated or equity accounted, but was carried at fair value of
$31,701,000. This was disposed as part of the sale of the Group’s interest in ARN on 24 June 2016. Refer to
Note 6.1 for further details on the Demerger.
96
7.0 OTHER NOTES
7.1 RELATED PARTIES
7.1.1 Key management compensation
TOTAL REMUNERATION FOR DIRECTORS
AND OTHER KEY MANAGEMENT PERSONNEL:
Short term benefits
Post-employment benefits
Termination benefits
Share-based payments
2016
$’000
2015
$’000
5,510
3,838
-
52
144
125
482
315
5,706
4,760
The table above includes remuneration of the Board of
Directors and the Executive Team, including amounts
paid to members of the Executive Team who left
during the year. Where a staff member was acting in
a position on the Executive Team, that portion of their
remuneration has been included in the table above.
The table excludes any dividends that may have been
received due to shares of the Company being held by
the Directors or other key management personnel.
7.1.2 Transactions with other related parties
The Company was, until the 29 June 2016, a wholly
owned subsidiary of the APN News & Media Limited
(“APN”) group. With the exception of transactions
relating to tax losses, transactions with Beacon Print
Limited and transactions relating to new associates and
joint ventures which includes transactions for the full
year, the transactions with related parties as described
below include transactions up to 29 June 2016, the date
on which these parties ceased being related parties to
the Group.
Since 31 December 2015, amounts due from related
parties of $304,931,000 and amounts due to related
parties of $322,304,000 have been settled as reported
in the interim financial statements for the six months
ended 30 June 2016, with a significant portion of the
settlement occurring as part of the Internal Restructure
(refer to Note 6.1 for further details).
During the period, the Group charged interest of
$358,780 (2015: $1,032,232) to Biffin Pty Ltd a member
of the APN Group. Biffin Pty Ltd charged management
fees to NZME Holdings Limited (previously: APN Holdings
NZ Limited) of $611,056 (2015: $2,050,000). A Group
company, NZME Holdings Limited charged shared
services fees totalling $1,456,000 (2015: $2,258,000) to
related parties. The Group purchased print services worth
$4,134,000 (2015: $4,949,000) from Beacon Print Limited,
a company in which the Group holds an interest in. Biffin
Pty Ltd repaid loans of $5,012,246 (2015: $104,990,779)
to Group companies and borrowed $nil (2015:
$3,452,707) from group companies.
Wilson & Horton Finance Pty Ltd, New Zealand Branch
(the “Branch”), charged royalty fees of $12,216,000
(2015: $22,853,000), advanced $13,200,000 (2015:
$17,762,603), repaid loans of $539,000 (2015: $297,000)
and charged interest of $2,765,000 (2015: $6,186,000) to
the Group. The Group charged the Branch, office rental
and service fees of $78,000 (2015: $168,000).
New Zealand entities within the Group received tax
losses from New Zealand entities outside the Group of
$nil (2015: $18,437,826) for consideration of $nil (2015:
$5,162,591). New Zealand entities in the Group offset
tax losses to New Zealand entities outside the Group
of $35,110,134 (2015: $650,905) for consideration of
$9,830,837 (2015: $182,253).
In November 2015, the Company, Fairfax Media, TVNZ
and MediaWorks launched a new local advertising
exchange service, KPEX Limited, offering media
agencies and clients a programmatic option for
purchasing online advertising. The group received
advertising revenue of $2,359,475 (2015: $84,788) and
paid commission of $358,782 (2015: $12,467).
During 2016, the Group acquired interests in certain
joint ventures and associates. The Group has entered
into commitments to provide future services to joint
ventures and associates (such as house advertising,
occupancy space at NZME offices, business as usual
finance and human resources support). During the year
such services were provided to Eveve, valued at $10,706
(2015:$nil), and Restaurant Hub, valued at $41,415
(2015:$nil). The outstanding balances for future services
are included in the table on the next page.
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Balances with related party
Biffin Pty Limited
Media Tek Pty Limited
APN Newspapers Pty Limited
NZME Educational Media Limited
Wilson & Horton Finance Pty Limited
– New Zealand Branch
APN News & Media Limited
KPEX Limited
Chinese New Zealand Herald Limited
Eveve New Zealand Limited
Restaurant Hub Limited
Ratebroker Limited
Other related party balances
2016
RECEIVABLES
$’000
2015
RECEIVABLES
$’000
2016
PAYABLES
$’000
2015
PAYABLES
$’000
-
-
-
-
-
-
750
-
-
-
-
-
25,807
53,434
225,184
216
-
-
-
-
-
-
-
290
-
-
-
-
-
-
113
43
194
604
1,700
-
37,785
1,068
55,206
1,428
153,224
67,898
-
-
-
-
-
5,695
Total related party receivables and payables
750
304,931
2,654
322,304
7.2 CONTINGENT LIABILITIES
7.2.1 Claims
Claims for damages are made against the Group from
time to time in the ordinary course of business. Sky
Network Television Limited initiated proceedings against
NZME Publishing Limited and other NZ media companies
alleging breaches of copyright in relation to the use of
rugby video footage in news stories. The Directors cannot
presently estimate a potential liability, if any. The Group
continues to defend this claim.
7.3 SUBSEQUENT EVENTS
Refer to note 1.4.2 for a description of events relating to
the proposed merger with Fairfax New Zealand.
The Directors are not aware of any other material events
subsequent to the balance sheet date.
7.4 NEW STANDARDS AND INTERPRETATIONS
ADOPTED IN THE CURRENT YEAR
The Group applied the following new or revised
pronouncements for the first time during the year.
None of these pronouncements had a material
impact on the disclosures or amounts recognised
in the Group’s consolidated financial statements.
Accounting for acquisitions of interests in joint
operations (amendments to NZ IFRS 11)
(effective 1 January 2016)
The amendment to NZ IFRS 11 clarifies the accounting for
the acquisition of an interest in a joint operation where
the activities of the operation constitute a business.
XRB A1 Application of the accounting standards
framework (effective 1 January 2016)
XRB A1 Application of the Accounting Standards
Framework supersedes all previous versions of XRB
A1. This final version of XRB A1 does not change the
requirements of the accounting standards framework,
however the XRB took the opportunity to
remove duplications and clarify the meaning
of public accountability.
Amendments to for-profit accounting standards as
a consequence of XRB A1 and other amendments
(effective 1 January 2016)
Amendments to clarify minor points, align terminology
with that used in XRB A1, amend RDR concessions and
update for editorial changes in various accounting
standards, including NZ IFRS 1, NZ IFRS 4, NZ IAS 1,
NZ IAS 8, NZ IAS 33, NZ IAS 34, FRS-43 and FRS-44.
All other new standards, interpretations and amendments
are either not applicable to the Group or not material.
7.5 STANDARDS AND INTERPRETATIONS ISSUED
BUT NOT YET EFFECTIVE
NZ IFRS 15 Revenue from contracts with customers
replaces NZ IAS 18 and NZ IAS 11 and is effective for
periods commencing 1 January 2018. The new standard is
based on the principle that revenue is recognised when
control of a good or service transfers to a customer. The
notion of control therefore replaces the existing notion of
risks and rewards.
NZ IFRS 16 Leases replaces NZ IAS 17 and is effective
for periods commencing 1 January 2019. It requires a
lessee to recognise a lease liability reflecting future lease
payments and a “right-of-use asset” for virtually all lease
contracts. Included is an optional exemption for certain
short-term leases and leases of low-value assets
for lessees.
The impact that these standards will have on
the Group’s financial statements has not yet
been determined.
All other standards, interpretations and amendments
issued but not yet effective are either not applicable
to the Group or not material.
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Independent auditor’s report
To the shareholders of NZME Limited
The consolidated financial statements comprise:
•
•
•
•
•
•
the balance sheet as at 31 December 2016
the income statement for the year then ended
the statement of comprehensive income for the year then ended
the statement of changes in equity for the year then ended
the statement of cash flows for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies.
Our opinion
In our opinion, the consolidated financial statements of NZME Limited (the Company), including its
subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as
at 31 December 2016, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of taxation compliance and advisory
services, tax pooling services, advisory services in connection with the potential merger with Fairfax,
and other assurance services. The provision of these other services has not impaired our
independence as auditor of the Group.
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $1,865,000, which represents 5% of profit before
tax from continuing operations excluding one-off items of the Group.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark. We have adjusted
this benchmark for one-off transactions to reduce volatility and to reflect the
underlying performance of the Group.
Our key audit matters are:
• Accounting for the demerger of NZME from APN News & Media Limited
•
Impairment testing of intangible assets.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Accounting for the demerger of NZME
from APN News & Media Limited
As set out in note 6.1, on 29 June 2016, the
group completed the demerger of 100% of
NZME Limited Group (NZME) from APN
News and Media Limited (APN). This was a
significant event for the Group and, prior to
the demerger, required a complex internal
restructure to separate and align the
relevant businesses, assets and liabilities
within the respective entities. The internal
restructure involved:
• The acquisition of businesses, as
detailed in note 6.1, by NZME from
APN. These were accounted for as
common control transactions using the
predecessor values method. The
difference between the consideration
paid, which management determined
was the best estimate of the fair value of
the businesses, and the predecessor
values was recorded as a reduction to
equity of $51.9m.
Our audit procedures included obtaining an
understanding of each phase of the restructure and
demerger, including understanding the accounting
treatment adopted by management.
We performed audit procedures over the demerger and
allocation of assets and liabilities to ensure these
followed the legal execution of all steps in the
transaction. We ensured that the accounting for each
step of the transaction met the requirements of NZ
accounting standards.
Specifically, we performed the following procedures:
• Obtained copies of all relevant contracts,
agreements, and valuations.
• Assessed whether the recognition of business sales
as common control transactions was supported by
contracts and was consistent with the
requirements of NZ accounting standards.
• Recalculated the amount recorded in equity in
relation to the businesses acquired.
• Agreed the consideration amounts to supporting
contracts, and the predecessor values to the
underlying accounting records of the businesses
acquired.
• The sale of businesses, as detailed in
• Recalculated the gain on disposal of businesses.
note 6.1, by NZME to APN resulted in
the recognition of a gain on disposal in
the Income Statement of $127.2m. This
was the difference between the carrying
value of the net assets disposed and the
consideration of $682.7m which
management determined was the best
estimate of the fair value of the
businesses.
• The acquisition of masthead brands as
detailed in note 6.1 by NZME from APN
for consideration of $147.0m which was
determined based on management’s
best estimate of the fair value of the
masthead brands. These were
accounted for as asset acquisitions and
the acquired assets recorded at cost.
• Agreed the net assets derecognised to the carrying
value of the assets and liabilities disposed as at the
date of disposal, and the consideration amounts to
supporting contracts.
• Agreed the terms and conditions of the acquisition
of the masthead brands, including the acquisition
price to the legal agreements entered into.
• Assessed the related tax implications including the
treatment of the gain on disposal for tax purposes.
• Agreed the actual cash flows associated with the
transaction to supporting contracts.
Examined the disclosures in note 6.1 and 5 of the
financial statements to ensure that it was accurate and
compliant with the requirements of NZ accounting
standards.
Key audit matter
How our audit addressed the key audit matter
Impairment testing of intangible assets
As outlined in note 3.1, total non-
amortising intangible assets, including
goodwill ($70.8m), masthead brands
($147.0m), and brands ($59.1m) have a
carrying value of $276.8m at 31 December
2016 and represent 57% of total assets.
Management utilised a value in use
methodology to determine the value of the
business using discounted cash flows and
performed an impairment assessment of
the goodwill and non-amortising intangible
assets. This assessment is complex in
nature and includes key estimates and
assumptions made by management,
particularly in the following areas:
• The assessment of cash generating
units (CGUs) – management have
determined that the NZME business
constitutes one CGU.
• Expected future trading results –
management have based these on
budgets and forecasts which have been
approved by the Board of Directors.
• The weighted average cost of capital
used as the discount rate in the model –
management have applied a rate of
9.5%.
• The expected long term growth rate –
management have applied a rate of 0%.
• Considering sensitivity by determining
and forecasting other reasonably
possible scenarios and assessing the
impact on the valuation of these
scenarios.
In their assessment management
determined that the model was most
sensitive to the ratio of growth in digital
revenue as compared to the decline in print
revenue.
The impairment assessment completed by
management for 2016 calculated the value
of the business as higher than the carrying
value of applicable net assets and no
impairment was identified.
We considered management’s identification of cash
generating units by gaining an understanding of the
business, how it is managed, and how the results are
reported to management and the directors.
We tested the calculation of the valuation model
including the inputs and mathematical accuracy of the
model and comparison to the relevant net assets value
of the Group.
We also assessed key estimates and assumptions made
by management. Our audit procedures included the
following:
• We gained an understanding of the business
process applied by management in determining
whether there are any indicators of impairment in
the value of goodwill and non-amortising
intangible assets.
• We agreed the future cash flows included in
management’s model to the budgets and forecasts
approved by the Board of Directors.
• We considered the reasonableness of key
assumptions in the cash flow forecasts, in
particular revenue growth and the profile of print
and digital revenues, forecast margins and
terminal growth rates. We considered these with
reference to historic performance of the Group, key
initiatives being undertaken and comparison to
results of comparable companies and available
broker reports.
• We engaged an independent expert to recalculate
the weighted average cost of capital used as the
discount rate in the model and determined that the
rate used by management was within a reasonable
range.
• We considered management’s sensitivity analysis
and in particular the assumptions associated with
digital and print revenues. For each of the
scenarios we tested the mathematical accuracy of
the model, the changes made, and the impact of
those changes on the valuation.
We reviewed the disclosure in the financial statements
to ensure that this is compliant with the requirements
of NZ accounting standards.
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Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Julian Prior.
For and on behalf of:
Chartered Accountants
23 February 2017
Auckland
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not, and will
not, express any form of assurance conclusion on other information. At the time of our audit, there
was no other information available to us.
In connection with our audit of the consolidated financial statements, if other information is included
in the annual report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the
work we have performed on the other information that we obtained prior to the date of our auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page1.aspx
This description forms part of our auditor’s report.
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Directory
REGISTERED ADDRESS
NZME Limited
2 Graham St
Auckland 1010
New Zealand
REGISTERED OFFICE CONTACT DETAILS
POSTAL ADDRESS: Private Bag 92192
Victoria St West
Auckland 1142
New Zealand
+64 9 397 5050
www.nzme.co.nz
Investor_Relations@nzme.co.nz
PHONE:
WEBSITE:
EMAIL:
AUDITORS
PricewaterhouseCoopers
PRINCIPAL BANKERS
Westpac
PRINCIPAL SOLICITORS
Chapman Tripp
SHARE REGISTRY
Link Market Services
SHARE REGISTRY CONTACT DETAILS
Inquiries about the Shares may be made to the Registrar:
WEBSITE:
EMAIL:
STREET ADDRESS: Level 11, Deloitte House,
www.linkmarketservices.co.nz
enquiries@linkservices.co.nz
80 Queen Street, Auckland
POSTAL ADDRESS: PO Box 91976,
Auckland 1142
09 375 5998
09 375 5990
Phone:
Fax:
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