ANNUAL REPORT
NZME LIMITED
For the year ended 31 December 2017
Page 1
CONTENTS
NZME FY17 Results Summary
Letter From The Chair
How We Create Value
Letter From The CEO
Digital Initiatives
Merger Update
Strategic Plan
Our People
Our Communities and The Environment
The NZME Board
The NZME Executive Team
Corporate Governance
Other Statutory Information
Consolidate Financial Statements
Independent Auditor’s Report
Directory
This annual report is dated 27 March 2018
and is signed on behalf of the Board of Directors by:
Peter Cullinane
Chair
Carol Campbell
Director
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NZME FY17 RESULTS SUMMARY
Statutory NPAT1
$20.9m
Trading Revenue2
$387.7m
4% FY16 Pro forma2 $404.7m
Trading EBITDA2
$66.2m
2% FY16 Pro forma2 $67.2m
Trading NPAT2
$26.7m
4% FY16 Pro forma2 $27.8m
Trading Earnings Per Share2
13.6cps
4% FY16 Pro forma2 14.2cps
Final Dividend Fully Imputed3
6.0cps
Scheduled for payment on 3 May 2018
Full Year Dividends 9.5cps
(1) The FY16 Statutory NPAT of $74.5m was impacted by the demerger from HT&E (formerly APN), discontinued businesses and tax
payments, and is therefore not comparable with the FY17 result as explained in the Supplementary Information on pages 30-34 of
the NZME Full Year 2017 Result’s Presentation available on the Company’s website. (2) All Trading and Pro forma measures shown
here are non-GAAP measures that are explained and reconciled in the Supplementary Information on pages 30-34 of the NZME Full
Year 2017 Result’s Presentation available on the Company’s website. (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.
Page 4
LETTER FROM THE CHAIR
I was honoured to be named Chair when
Sir John Anderson retired in December
2017 and I am pleased to be able to report
that in our first full year as a standalone
company NZME Limited delivered a solid
earnings performance.
opportunities and cost efficiencies. In the
medium term, NZME aims to be a growth
business and, as such, we continue
to explore ways to further improve
efficiency, address customer needs, and
establish new revenue streams.
“NZME’s strategy continued
to add value for shareholders
in the 2017 financial year.”
The financial results featured continued
Digital revenue growth, a slowing rate of
decline in Print advertising revenue and
an improvement in Radio revenue trends
over the year. NZME’s strong focus on
cost control and business integration
again assisted earnings.
This has enabled the Board to declare a
fully-imputed final dividend of 6.0 cents per
share to be paid in May, making 9.5 cents
per share in dividends for the full year.
Our audience of 3.2 million1 New
Zealanders is a key driver of value. The
most recent survey results show our
audience grew again in 2017, supported
by an increase in nzherald.co.nz
audience and Radio listener growth.
Our strong brands in Print, Radio and
Digital provide multiple contact points
with our audience, and we often remain
in touch with an audience member
over an entire day across our various
platforms; over breakfast, in the
workplace, during the commute and in
the evening. This unique offering gives
our advertising customers multiple
opportunities in a single day to engage
with their marketplace through NZME.
Bringing Print, Radio and Digital together
to form NZME has provided revenue
Given a challenging third quarter of 2017,
impacted in part by the general election
and the ongoing headwinds in traditional
advertising markets, we were heartened
that Trading EBITDA2 was down just 2%
compared to pro forma2 2016.
His extensive business and governance
experience has been an asset to the
Company during NZME’s first year as a
listed company and all of us at NZME wish
Sir John the very best for his retirement.
Print advertising revenue trends improved,
Radio revenue returned to growth in the
fourth quarter, and we saw continued
strong growth in Digital revenue. Moreover,
NZME outperformed the market in 2017 in
each of these key areas3.
Following Sir John’s retirement, NZME
appointed David Gibson as an independent
director. David has a strong background
in strategy and finance with over 20
years’ investment banking experience.
Revenue was assisted by operational
and content initiatives, while a strong
focus on efficiency through our business
integration and process improvement
further enhanced profitability.
NZME continues to invest in growth,
launching our exciting new digital
classifieds platforms DRIVEN, YUDU and
OneRoof in recent months. You will no
doubt see a lot more of these brands in
automotive, employment and property
over the course of 2018. If you haven’t
yet visited these sites I commend you to
have a look and see what a fantastic user
experience they offer.
Pursuing the merger with Stuff Limited
(previously Fairfax New Zealand Limited)
remains a priority. NZME believes the
transaction would be positive for New
Zealand, its employees and shareholders
due to enhancing the competitiveness of
locally produced content for our news,
sport and entertainment offerings. Further
information on the proposed merger is
included on page 19 of this Annual Report.
Sir John Anderson retired as Chairman
and from the Board of NZME on the 8th
of December 2017. Sir John made an
invaluable contribution to NZME, including
leading the Board through the demerger
from HT&E Limited, and listing in June 2016.
Sir John has also made a significant
contribution over a long period to the
growth of businesses in New Zealand.
We are expanding our Board to achieve
the optimal mix of general business
experience and specific skills. I have
been encouraged by the interest shown
and the depth of talent we have to
choose from. I am fully confident that
we will have an exemplary Board team,
to further enhance the Company’s
governance and ensure NZME continues
to have the appropriate resources and
skills to support its growth strategy.
The Board would like to thank our
employees for all their commitment
and dedication throughout the year.
Ours is a dynamic industry. While there is
no question that we will face headwinds
in some areas, I am excited about the
many opportunities NZME has to improve
its business and to grow.
Given our market leading brands and
audience reach, great people, and unique
integrated offering, we are well placed to
build on our existing assets as well as re-
imagine our business to grow shareholder
value in the medium to long term.
Peter Cullinane
Chair
(1) Nielsen CMI, November 2017 fused database: Q4 16 – Q3 17 (population 10 years +).
Based on unduplicated weekly reach of NZME newspapers, radio stations, and monthly
domestic unique audience of NZME’s digital channels (2) All references to “Trading” and
“pro forma” are non-GAAP measures that are fully explained and reconciled on pages
30 to 34 of the NZME Full Year 2017 Results Presentation available on the Company’s
website. (3) See also page 10 of the NZME Full Year 2017 Results Presentation (available
on the Company’s website) for a more detailed analysis of the market comparisons.
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Our wisdom is our strength
The team is our courage
The NZ Herald, Newstalk ZB and Radio Sport are joining forces
to bring you unbeatable coverage of the upcoming Series.
Arm yourself, with live results, latest breaking news,
in depth analysis, and expert opinion.
We’ve been here before
We’ve shared the battle
We’ve heard that roar
The NZ Herald, Newstalk ZB and Radio Sport are joining forces
to bring you unbeatable coverage of the upcoming rugby Series.
Arm yourself, with live results, latest breaking news,
in depth analysis, and expert opinion.
Chris Allen and Trevor McKewen
The New Zealand Herald
Brett Phibbs
NZ Herald Chief Photographer
THEY’RE COMING: ARM YOURSELF.
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United in battle
We’ll be there
The NZ Herald, Newstalk ZB and Radio Sport
are joining forces to bring you unbeatable
coverage of the upcoming rugby Series.
Arm yourself, with live results, latest
breaking news, in depth analysis,
and expert opinion.
D'Arcy Waldegrave and Goran Paladin
Radio Sport Hosts
We’ll be there
Come, join us
The NZ Herald, Newstalk ZB and Radio Sport
are joining forces to bring you unbeatable
coverage of the upcoming rugby Series.
Arm yourself, with live results, latest
breaking news, in depth analysis,
and expert opinion.
Laura McGoldrick
NZ Herald Focus Host
THEY’RE COMING: ARM YOURSELF.
THEY’RE COMING: ARM YOURSELF.
THEY’RE COMING: ARM YOURSELF.
THEY’RE COMING: ARM YOURSELF.
THEY’RE COMING: ARM YOURSELF.
THEY’RE COMING: ARM YOURSELF.
HOW WE CREATE VALUE
NZME offers advertisers a unique opportunity to access a growing
audience via its fully integrated multi-platform brands.
C
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C A PABILITIES
MARKETPLACES
EXPERIENTIAL
NZME’s reach continues to
grow and cross-pollinate
UP 2% YOY, 3.2 MILLION1 NEW
ZEALANDERS READ, WATCH,
LISTEN TO OR OTHERWISE
ENGAGE WITH OUR BRANDS
NZME REACHES:
DATA &
INSIGHTS
R
O
C
E C O N T ENT + CHAN
N
E
L
S
DIGITAL
CLASSIFIEDS
CREATIVE
NEWS
PRINT
CONTENT
CREATION
RADIO
NATIVE
CONTENT
AUDIENCE
TARGETING
ENT.
SPORT
EVENTS
VIDEO &
PRODUCTION
DIGITAL
BRAND
ENGAGEMENT
STRATEGY
& PLANNING
DIGITAL
MARKETING
SERVICES
2.6million 1.2million 0.7million
in the North Island1
2% YoY
in Auckland1
2% YoY
in South Island1
2% YoY
OUR GROWING NATIONAL AND
LOCAL PRESENCE ALLOWS US TO
OFFER ADVERTISERS BROADER
ACCESS TO THEIR TARGET MARKETS
THROUGH OUR INTEGRATED MULTI-
PLATFORM PRESENCE
(1) Nielsen CMI, November 2017 fused database: Q4 16 – Q3
17 (population 10 years +). Based on unduplicated weekly
reach of NZME newspapers, radio stations, and monthly
domestic unique audience of NZME’s digital channels.
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LETTER FROM THE CEO
performance and helped us achieve a
5% reduction in costs in 2017, supporting
Trading EBITDA1 despite lower revenue.
Our Trading Net Profit After Tax1 was
$26.7 million in 2017, down 4%. This
translated to Trading Earnings Per
Share1 of 13.6 cents and total dividends
declared for 2017 of 9.5 cents per share.
NZME has healthy cash flow, enabling a
$5.7 million reduction in net debt over
the year to $90.2 million at 31 December
2017. This was achieved on the back of
relatively stable Trading EBITDA1, and
capital expenditure within our plan.
Capital expenditure in 2017 was in
line with our expectations of $15.0
million. We expect to maintain this
level of spending in 2018, including the
capital component of the investment
in digital classifieds and other projects
under our 2018 plan.
It’s pleasing that we were able to pay
dividends to shareholders, implement
our growth strategy and reduce debt in
2017. This is consistent with our medium
term capital management objectives
for the Company.
In 2017, Print revenue was $221.3 million,
down 7% on pro forma1 2016. Despite the
challenging third quarter of 2017, in which
advertising spending was impacted by
the New Zealand general election and
a slowing property market, the rate of
decline in Print advertising revenue slowed
a little compared to pro forma1 2016.
We also maintained Print subscriber
revenue in 2017, which provides comfort
that despite major changes in the media
landscape, subscribers continue to
support our major publications.
Across the NZ Herald, Herald on Sunday
and five regional daily newspapers, our
subscriber base is strong. A 5% decline
in our average net circulation to the third
quarter of 2017 was better than the 7%
decline for the market, again reflecting
our brand strength and reader loyalty2.
The New Zealand print advertising
market declined an estimated 12%3
in 2017 while our pro forma1 print
advertising revenue declined only 9%
for the same period, which suggests
we are doing better than many of our
competitors in retaining advertisers,
As CEO, it has been rewarding to see the
achievement of our strategic priorities
to improve shareholder value and deliver
results in the 2017 financial year. I am
pleased to report that we had a productive
year and made good progress on the
implementation of our strategy and
adding value for shareholders.
“NZME now operates as an
integrated audience-centric
media business, across Print,
Radio and Digital channels.”
With an unmatched portfolio of leading
brands, delivering premium News,
Sport and Entertainment content, we
are uniquely placed to help advertisers
engage with their customers.
In the context of the headwinds faced by
the media sector in traditional advertising
markets, we are pleased with our solid
financial results for 2017. These results
reflect significant steps, both in our
existing assets and in establishing new
businesses, to achieving revenue growth
in NZME in the medium term.
NZME reported statutory net profit after tax
(NPAT) of $20.9 million in 2017. Given the
changes in the structure of the Company
since listing in 2016, we see our “Trading”1
and “pro forma”1 figures as offering a useful
view of NZME’s underlying performance.
Trading Revenue1 was $387.7 million in 2017,
down 4% on 2016. We were pleased to
limit the revenue decline when many of
our peers globally have seen significant
advertising revenue erosion. This was
achieved by limiting declines in Print
revenues, while improving momentum
in Radio and achieving strong growth in
Digital revenue.
We are equally encouraged by Trading
Earnings before Interest, Tax, Depreciation
and Amortisation (“Trading EBITDA”)1 of
$66.2 million in 2017, down just 2% on
2016. Our continued focus on efficiency
and full integration of the business has
again underpinned an excellent cost
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reflecting a healthy readership of our
leading publications.
The NZ Herald remains our most valuable
media asset and we are working hard to
continue to grow its audience to further
enhance its value.
The daily brand audience of the NZ
Herald passed 1 million for the first time
in the third quarter4, across print and
digital, assisted by events such as the
Americas Cup in the first half of 2017.
There’s a lot more work to do but we’re
encouraged with these achievements in
the print business in 2017. Achieving this
on a consistent basis is a focus for 2018.
digital display revenue grew 19%, well
above market growth supported by
strong growth in mobile advertising and
video. This is a very exciting part of the
NZME story as we have a number of
initiatives in train to maintain this strong
momentum in Digital revenue.
We continue to emphasise new
product development, launching our
first multi-platform content series,
including podcasts, “Chasing Ghosts” in
October, which introduces a new level of
storytelling. In another exciting initiative,
NZ Herald and Newstalk ZB flash briefings
and ZM’s custom Amazon Alexa skill were
made available for the launch of Alexa in
New Zealand, in February 2018.
Radio and Experiential revenue was
$110.1 million in 2017, down 4% on 2016.
After a period of declining radio revenue,
we achieved our priority of returning
radio revenue to growth in the final
quarter of 2017.
The team has had a very busy year
as we launched our new digital
classifieds marketplaces in motoring,
employment and property, called
DRIVEN, YUDU and OneRoof.
The improvement in Radio was supported
by the completion of the sales team
integration, and talent and content
enhancements. It’s still early days in the
turnaround of this business but trends
are encouraging and we look forward to
seeing the full benefit of our initiatives in
further audience growth and improved
financial results over the medium term.
On radio content, we continue to pursue
the best offer in the market to inform,
entertain and attract radio audiences,
and this is demonstrated in our ratings
performance in 2017.
New Zealand’s leading news and talk
station, Newstalk ZB, retained the
highest station market share nationally,
also winning a number of other key
categories5. The Hits breakfast show, with
Sarah, Sam and Toni, also grew audience
in every survey since launch in early 20176.
On the digital radio side, iHeart Radio
registered users reached 700,000 in
2017, which represents 35% growth in
just 12 months.
In Digital and e-Commerce, revenue
grew 8% overall to $56.3 million, but
“Our leading audience, brands
and industry relationships provide
a tremendous opportunity to
establish new revenue streams.”
This supports our objective to become a
growth business in the medium term.
NZME intends to create market-leading
platforms and experiences in each
of the three verticals, supported by
competitive advantages as a unique
multi-platform media company.
And we are not just about emulating
existing online offers. Each of the
new sites provides an innovative user
experience and proposition that aims
to evolve the market, and consumer
behaviour. We have included further
details of each of these new initiatives
on pages 16 to 18 of this Annual Report.
The launch of these three new platforms
is only beginning and, as such, it’s very
early days. While we see the medium-
term opportunity for these platforms as
appealing, the market is competitive and
our financial expectations in the initial
phase of operation remain modest.
capitalising on radio enhancements, is
expected to help us to achieve this goal.
We are excited by these opportunities,
but this is just one of the areas where we
are looking to drive shareholder value.
We also want to make sure we maintain a
strong balance sheet, enabling us to invest
for growth, reduce debt, maintain financial
stability, and maximise shareholder returns.
I would like to echo the Chairman’s
comments about the efforts of our
dedicated people. Aiming to be a growth
business in a challenging industry requires
constant innovation and effort and the
whole NZME team has been amazing in
2017 in embracing this mantra.
I also offer our thanks to the 3.2 million
Kiwis that make up our audience, as
well as our suppliers, business partners,
customers and shareholders for their
continued support.
Michael Boggs
Chief Executive Officer
We also remain focused on our operational
priorities, which include retaining
revenue in our traditional businesses
and improving operational efficiency, as
these are also fundamental to achieving
our goals for NZME shareholders.
Developing our people and talent is very
important. Given the pace of change in
our industry we’ve focused strongly on
employee engagement. Results have
been positive and we are starting to see
the benefits of this across the Company.
The final major area of focus for 2017 was to
progress the merger with Stuff Limited. We
have been granted leave to appeal the High
Court’s adverse ruling on the matter, with a
four-day hearing in the Court of Appeal set
down for 5 to 8 June 2018 and judgment
expected in the second half of 2018.
On page 22 we outline our strategic plan,
based around the three horizon model.
It focuses on optimising our existing
business, while launching new ventures
to take advantage of our existing
audience and customer relationships,
and identifying new business models
that address unmet customer needs.
We remain very much focused on
growing audience and engagement.
This will be achieved through the
amplification of NZME’s brands and
developing more planned, unique,
local and premium content and the
exploration of paid content solutions.
Returning total revenue to growth across
the business is a focus for the medium
term. Retaining print revenues as best we
possibly can, growing digital revenue, and
(1) All references to “Trading” and “pro forma” are non-GAAP measures that are fully explained and reconciled
on pages 30 to 34 of the NZME Full Year 2017 Results Presentation available on the Company’s website.
(2) Nielsen CMI, NZ Herald AIR trend to Q3 17. AP15+. ABC Circulation Q4 16 - Q3 17. (3) PwC NPA Quarterly
Performance Comparison Report Q4 2017. (4) Nielsen CMI Q4 2016 – Q3 2017. AP15+. (5) GfK Radio Audience
Measurement. Total NZ Survey, NZME & Partners. Trended till T4/2017. Cumulative Audience. Mon-Sun 12mn-
12mn, All 10+. (6) GfK Radio Audience Measurement, The Hits Auckland, trended till T4/2017. Cumulative
Audience. Mon-Fri 6am-9am, 25-54.
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DIGITAL INITIATIVES
DRIVEN is the destination for car buyers and motoring enthusiasts alike where, with our DRIVEN Ambassador, Sam
Wallace, you can find the latest car news, reviews, and road tests; alongside over 30,000 dealer and private car listings.
DRIVEN makes it easier than ever to buy or sell a car with buyers for new and used vehicles across all price
points together with reviews and the soon-to-be-released DRIVEN Toolbox. The Toolbox features easy-to-
use tools to discover what a car is worth, the best time to buy or sell a car and details regarding the cost of
ownership without having to trawl numerous websites – DRIVEN has put it all in one place.
For those with a passion for cars or motorsport, DRIVEN offers the latest car news and high octane motorsport
action from New Zealand and around the globe with in-depth articles, videos and content to keep you up to
date. It also contains a new video series, DRIVEN News, where our DRIVEN Ambassador provides you with the
latest information on all things motoring.
WE’RE
ALL ABOUT
WHAT
YOU DO.
YUDU is about you. The astronaut, the rock star, the whatever-it-is-you-want-to-do.
YUDU is more than just another job listing site. It is a dedicated career platform which aims to connect employers
to the right talent that fits the role and to connect candidates to the right role that fits their talent. YUDU allows
jobseekers to create a profile online and apply for available roles directly from YUDU.
YUDU aims to empower the user to never stop learning, never settle for less, and never miss the chance to do
what they do best.
YUDU is about more than just job hunting. There are twelve dedicated Career Hubs filled with news, tips and
insights aimed at keeping users informed about the latest developments in their industry.
Through these Career Hubs, YUDU also provides opportunities for users to get involved with personality based
profiles, relevant news, videos and more.
FIND YOUR NEXT CAR NOW
SAM WALLACE - CAR FANATIC
DEALER & PRIVATE LISTINGS | REVIEWS | NEWS
Page 16
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PROPOSED NZME/STUFF
LIMITED MERGER UPDATE
PROCESS UPDATE
· The previous merger implementation agreement in respect of the proposed merger between NZME Limited
(“NZME”) and Stuff Limited (“Stuff”) terminated on 5 March 2018. However, if an appeal of the transaction
is successful we intend to negotiate a new agreement to implement the merger, with the transaction also
expected to be subject to finance, board and shareholder approval.
· NZME and Fairfax Media Limited’s (“Fairfax”) appeal to the High Court of the New Zealand Commerce Commission’s
(“NZCC”) decision to decline the merger was declined in a judgement issued on 19 December 2017.
· The parties have been granted leave to appeal the High Court’s adverse ruling on the matter, with a four-day
hearing in the Court of Appeal set down for 5 to 8 June 2018 and judgement expected in the second half of 2018.
· There is a further right of appeal to the Supreme Court with leave on points of general public importance.
RATIONALE FOR A FURTHER APPEAL
· NZME and Fairfax continue to believe the NZCC was wrong in fact and wrong in law to decline clearance
or authorisation for the merger. The questions on appeal are focused on the issue of plurality.
· NZME continues to share the costs of the legal process with Fairfax. The shared costs going forward are
expected to be less than $0.5m, significantly outweighed by the potential benefits of the transaction,
both for shareholders and the New Zealand public.
Search for your
property under
All things property
It’s hard to make the right property decision when you’re scattered between websites, trying to make sense of
and consolidate all the information from real estate agents, banks, maps and more. OneRoof makes this easier
by bringing it all together on one platform.
Regardless of whether you’re buying, selling or renting, OneRoof helps to make property decisions easier by
enhancing New Zealand’s latest real estate listings with up-to-date property and market insights. OneRoof provides
enhanced search capabilities, allowing users to search for properties based on criteria that may be important to
them, such as school zones, valuations and yield growth, journey times and other location-based benefits.
As well as offering real estate agents a platform to connect with buyers, OneRoof also caters to renters,
allowing them to apply for tenancies directly through the platform. OneRoof will build on NZME’s strong property
resources — such as Herald Homes — and is backed by the Company’s network that reaches 3.2 million Kiwis.
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Over 60% of you read the news
on your phone.
So we redesigned the Herald site
with mobile in mind – with
dynamic content, larger imagery,
and bite-size summaries to keep
you up-to-date while you’re on
the move.
D I S C O V E R M O R E
W I T H Y O U R N E W
You told us you’re often
You told us you’re often
overwhelmed by information.
overwhelmed by information.
So we redesigned the Herald site
So we redesigned the Herald site
to highlight the top stories of the
to highlight the top stories of the
hour, with a simpler structure and
hour, with a simpler structure and
clearer signposting to the issues
clearer signposting to the issues
that matter most to you.
that matter most to you.
D I S C O V E R M O R E
D I S C O V E R M O R E
W I T H Y O U R N E W
W I T H Y O U R N E W
You said your life was busier –
that you had less time to read
the news.
So we redesigned the Herald site
to give you an instant snapshot
of what’s going on, right now –
with bite-size summaries,
intuitive navigation, and faster
loading speeds.
D I S C O V E R M O R E
W I T H Y O U R N E W
You told us you wanted to
broaden your horizons.
So we redesigned the Herald site
with enhanced navigation, a
clearer interface, and pointers to
in-depth stories and opinion
pieces – deepening your
understanding across a wider
range of topics.
D I S C O V E R M O R E
W I T H Y O U R N E W
STRATEGIC PLAN
OUR PEOPLE
We all want to be phenomenal at what we do. Success doesn’t just happen, it’s about delivering the best work in
the best way to the right audience. 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 key priorities (what
needs to be achieved) and our values (how these should be achieved).
OUR VALUES
Our Values make us who we are, and we express them at every turn. They are the stuff of our DNA; the things
that make us unique and different from everyone else in the industry. We deliver to our priorities by being
connected, curious and confident.
CURIOUS
GO BEYOND
BE
CURIOUS
CURIOUS
CONFIDENT
LIVE IT, BREATHE IT
GO BEYOND
GO BEYOND
BE
BE
CONNECTED
ENGAGE THE RIGHT PEOPLE
Horizon 1:
Optimising the Core
Offsetting declines in Print
advertising with growth in
Radio and Digital advertising,
and streamlining the cost base.
Horizon 2:
Beyond Advertising
Growing new revenue
streams that leverage our
audiences to generate new
revenue opportunities - Digital
classifieds and paid content.
Horizon 3:
Re-imagining
Identifying opportunities
to develop new business
models that grow audience
engagement and deliver new
revenue streams.
1. Grow audience and engagement through amplification of NZME’s brands and increased
focus on planned, unique, local and premium content, supported by continued implementation
of the Washington Post arc roadmap.
2. Return advertising revenue to growth by continuing to retain Print revenues, drive Digital
revenue growth and capitalise on Radio coverage, content and talent enhancements.
3. Effective cost and capital management through exploring opportunities to leverage
our existing fixed cost base and continued focus on improving balance sheet strength.
4. Engage and develop our people by continuing to focus on improving leadership and
talent succession planning.
5. Grow new revenue streams through the launch of DRIVEN, YUDU and OneRoof,
improved data monetisation and developing a paid content proposition. Identify
and develop new business models.
6. Progress the Stuff merger to further improve our efficiency and underwrite the
competitiveness of New Zealand content generation and delivery.
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PEOPLE & DIVERSITY
NZME sets itself apart by having talented
people who can make a difference for
our audiences and our customers.
Diversity and inclusion are key to
attracting and engaging the best talent
and we work very hard to make sure
everyone not only feels safe but looks
forward to coming to work.
We have a Diversity Policy that is available
on our website and established a
Diversity Committee in 2017 consisting
of a passionate group of individuals with
diverse backgrounds, experiences and
viewpoints to contribute to our efforts
in this space. “Diversity of all kinds -
gender, ethnic, cultural and sexual - is
key to a productive workplace. Great
solutions come from seeking opinions
and perspectives from a diverse
group. Our workplace is a slice of our
community so it’s important people
bring their whole selves to work. This
is what NZME is about,” says Michael
Boggs, NZME’s CEO.
We were actively involved in celebrating
Māori language week, including
challenging our people to learn a number
of new words every day; ranging from
colours and numbers to some Māori slang.
Other initiatives included an Instagram
contest where you name everyday objects
in Te Reo and photograph them creatively
to win a prize!
And speaking of language, NZME was
proud to support New Zealand Sign
Language week which included workshops
to learn the basics of New Zealand’s
third official language – Sign Language.
Diwali is the five-day festival of lights,
celebrated by millions of Hindus, Sikhs
and Jains across the world. This year
our celebrations included a traditional
lamp lighting and Bollywood dance
performance, some delicious food and
treats and henna hand designs.
During 2017 we have put considerable
effort into youth employment,
participating in JobFest events in
Auckland and careers festivals in
Southland, Dunedin and Christchurch.
Our involvement with WorkChoice has
seen us speak at their youth employability
events in Auckland, Wellington and
Christchurch. We also had multiple
secondary school groups visit our offices
in Auckland, Wellington and Christchurch
for a first-hand experience of what working
at NZME is like.
As a result of our input into youth
employment and our involvement with
students, WorkChoice, JobFest and
various careers festivals right around
the country, NZME was nominated as
a finalist for the Young at Heart Awards
in the School Engagement and Work
Experience Award category.
This year we were pioneers in the media
industry as the first media company in
New Zealand to receive the Rainbow
Tick. The Rainbow Tick is awarded to
organisations that truly embrace making
their workplace a safe environment for
everyone, regardless of sexual orientation.
To celebrate being awarded the Rainbow
Tick, and to continue the crusade to
become an employer of choice and
cement our commitment to being a
truly diverse workplace, NZME proudly
displayed the rainbow in its brands
on Friday 13 October. The iconic New
Zealand Herald brand and well known
radio brands sported a rainbow Logo.
The Rainbow Tick forms part of our
wider Inclusion and Diversity strategy,
which includes nurturing a multicultural
workforce, encouraging you to “bring
your whole self to work” and truly
harnessing all our differences.
The charts on the next page demonstrate
our demographic breakdown as at 31
December 2017.
WELLNESS WEEK
We again hosted two wellness weeks
this year, one in May and one in October.
Wellness Weeks provide our people with
the opportunity to spend some time
reflecting on their health and wellbeing.
This year activities included free eyesight
testing, yoga sessions, flu jabs, healthy
breakfasts, boot camps and a host of
other activities around the country.
Please also refer to the Governance
section of this Annual Report for
additional information on Health & Safety.
Page 24
Page 25
AGE GROUP
OUR PEOPLE (continued)
GENDER/LEVEL
including undeclared
33%
67%
45%
55%
55%
45%
Executive
Senior Leadership
Team
Staff
Female
Male
Undeclared
5%
55+Y
14%
<25
22%
45-54Y
16%
35-44Y
18%
25-34Y
25%
ETHNICITY
Incl. Undeclared
NZ European
55%
Middle Eastern / Latin
American / African
1%
Other Ethnicity
2%
Pacific Peoples
2%
Maori
3%
European
8%
Asian
7%
Undeclared
22%
CONTRACT TYPE
LENGTH OF SERVICE
600
500
400
300
200
100
0
<1Y
1-2Y
3-5Y
6-10Y
11-20Y
21-30Y
31Y+
Full Time
69%
Part time
9%
Casual
18%
Contractor
4%
ENGAGEMENT
We believe that an engaging work
environment is essential to us
achieving our goals. We undertook two
engagement surveys last year to take
stock of what our people think. We
are very happy that participation rates
and overall engagement scores have
consistently increased over the last year.
To foster an inclusive and engaging
workplace, we also give our people other
opportunities to engage and say it as it
is. Our CEO is regularly joined by other
members of the Executive for his Kitchen
Catch-ups where different groups get
to interact, share and ask whatever is
on their minds. He also regularly invites
someone from the business to join him
as CEO for the day where they get an
inside look into what being CEO entails.
Boggsy’s Bus has become a bit of an
institution as well. Given that half of
NZME’s people are outside the Auckland
head office, it is an opportunity to build
a connection with all our people. The
CEO and others get to visit a number
of offices in the regions to make sure we
give all our people a chance to have their
say. In 2017 they visited Waihi, Katikati,
Tauranga, Te Puke, Rotorua, Taupo, Te
Awamutu, Hamilton and drove over
1,400 kilometres visiting our South Island
teams from Blenheim to Invercargill.
2017 AWARDS
NZME is proud to be the home of
some of New Zealand’s best talent and
2017 again provided us with plenty of
opportunity to celebrate.
At the 2017 Canon Media Awards,
the NZ Herald walked away with the
following top awards: Website of the
Year (nzherald.co.nz), Newspaper of
the Year (Weekend Herald), Weekly
Newspaper of the Year (Weekend Herald)
and Best Daily Newspaper (more than
30,000 circ) (NZ Herald). In addition,
many of our journalists won individual
awards including Matt Nippert being
awarded both Reporter of the Year
and Best Investigation, Dylan Cleaver
being awarded Sports Journalist of
the Year, Alan Gibson being awarded
Photographer of the Year, and Mike Scott
(with Olivia Carville) being awarded Best
Single Story. Herald Weekends Editor
Miriyana Alexander was also awarded the
prestigious Wolfson College (Cambridge
University) press fellowship. The NZME
Ellerslie team was also thrilled to receive
a Gold Medal for the 29 March edition
of the NZ Herald in the Publications
category at the Pride in Print awards.
Stephen Parker, Chief Photographer
from the Rotorua Daily Post was named
best regional sports photographer at
2017’s PANPA (Pacific Area Newspapers
Publishers’ Association) Awards in
Sydney. We also took home four awards
in Advertising & Marketing section of the
PANPA Awards.
We were delighted that NZH Focus, our
video news bulletin, was announced as
winner of the “Best Launch of a Brand
or Product to Create an Audience
Segment” award at the International
News Media Association (“INMA”) World
Congress in New York.
On the Radio front, NZME had a
fantastic showing at the 2017 NZ Radio
Awards. ZM was crowned Network
Station of the Year for excellence in
radio broadcasting and Hauraki once
again took “The Blackie” award for
funny and entertaining radio excellence.
Our radio stations ZB, The Hits and
Radio Sport and their presenters
received numerous awards in the Best
On-Air category and Best News and
Sport categories plus NZME teams took
home awards that recognise excellence
and effectiveness in marketing,
digital/social promotion, services to
broadcasting and associated craft.
Page 26
Page 27
OUR COMMUNITIES
AND THE ENVIRONMENT
As a diverse, wide reaching, influential
and integrated media company, NZME
takes great pride in championing worthy
causes and facilitating community
conversations about the topics that
matter to our audiences. We use our
huge reach across NZ to support a
vast number of causes by providing
platforms and audiences to discuss
social issues and to campaign for good.
Under the Bridge was a long-form
documentary which saw us spending
a year following staff and students at
Papakura High. We were there for their
highs and lows, tribulations and triumphs.
The results were powerful, emotive and
compelling. We expected to be telling the
story of a school in decline. But we found
a heart-warming and raw tale of pride
and prejudice; a group of passionate
young people who, with the help of a new
principal, were determined to turn around
the school and its reputation.
Break the Silence – a campaign of care
and responsibility, was an investigative
series to start a national conversation
about youth suicide in New Zealand and to
encourage young people to speak up and
ask for help. It has been heartening to see
how deeply our readers and our people
have connected with the campaign.
Chasing Ghosts was our first true crime
podcast series, about the investigation
into the cold case disappearance of two
year old Amber-Lee Cruickshank in 1992.
Chasing Ghosts retraced the steps of
the police investigation and provided
exclusive new interviews and insights.
The Herald and World Vision ran the
Hidden Pacific campaign to raise funds
for the immense and urgent needs in
Melanesia, a hidden corner of the Pacific,
where our neighbours are isolated
and vulnerable with children and their
families lacking essential resources.
We are also proud to support and work
with local organisations such as the
Tauranga Art Gallery, the Port of Tauranga
Half; and support local initiatives like
the Property Brokers/The Hits Round
the Bridges fun run (this year raising
money for Alzheimers Whanganui), Thrive
Whanganui social enterprise business
expo and the Child Cancer Charity
Breakfast & Art Auction in Rotorua.
Our Christmas campaigns at multiple
locations across the country also help
raise food and funds for worthy causes
such as the Salvation Army’s foodbank.
Our footprint on the environment is
something NZME takes seriously. NZME
Print has been at the forefront of this
for some years now and has again
been awarded the Enviro-Mark Gold
certificate for excellence in environmental
responsibility. This is achieved after
satisfying a range of criteria including
having environmental objectives, targets
and KPIs; implementing environmental
programmes; monitoring environmental
aspects; having emergency preparedness
and response processes; and leadership
and commitment from top management.
Last year, NZME Print was recognised for
the site’s longstanding commitment and
compliance to the Enviro-Mark scheme of
which it has been a participant for the past
11 years. Our building at NZME Central has
a 5 Green Star – New Zealand Excellence
– rating which is the second highest rating
under the Green Star system that takes
into consideration the building or fitout’s
rating in nine categories: Energy, Water,
Materials, Indoor Environment Quality
(IEQ), Transport, Land Use & Ecology,
Management, Emissions, and Innovation.
Page 28
Page 29
THE NZME BOARD
PETER CULLINANE
Independent Chair
CAROL CAMPBELL
Independent Director
DAVID GIBSON
Independent Director
David has a strong background in
strategy and finance with over
20 years’ investment banking
experience, including as Co-Head of
Investment Banking in New Zealand
for Deutsche Bank and Deutsche
Craigs. During his finance career
David has advised on many of New
Zealand’s largest capital market
transactions, including within the
media industry. He holds a Bachelor
of Laws (LL.B. Hons) and a Bachelor
of Commerce in Economics.
Peter has a strong track record in
building and running companies
as well as advising companies on
business, marketing and advertising
matters. He is the founder and Chief
Executive of Lewis Road Creamery
and 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 is a Director of HT&E (listed
on the ASX). Peter was previously
on the Board of WPP AUNZ and
SKYCITY Entertainment Group. Peter
is a member of both the Advertising
and Marketing ‘Halls of Fame’. He
holds Masters degrees in Business
Administration and Management.
Carol is a chartered accountant
and member of Chartered
Accountants of Australia and New
Zealand. Carol has extensive
financial experience and a sound
understanding of efficient Board
governance. Carol holds a number
of directorships across a broad
spectrum of companies, including
New Zealand Post, T&G Global, NPT
and the Fisher Listed Investment
companies – Kingfish, Barramundi
and Marlin Global where she is
also Chair of the Audit and Risk
Committee. She is also a Director
of Kiwibank. Carol was a Director
of The Business Advisory Group for
11 years, a chartered accountancy
practice, and prior to that a partner
at Ernst & Young for over 25 years.
She holds a Bachelor of Commerce
in Accounting.
Page 30
Page 31
THE NZME EXECUTIVE TEAM
MICHAEL BOGGS
Chief Executive Officer
Michael was appointed
CEO of NZME in March
2016, prior to that he held
the CFO position. He has
been integral in developing
the strategy to grow
NZME’s presence in New
Zealand particularly in the
areas of digital, video and
events whilst upholding
the company’s traditional
brands including The
New Zealand Herald and
Newstalk ZB.
Joining NZME from
TOWER Limited where he
successfully managed
TOWERS multibillion
dollar assets, TOWERS’s
Pacific Islands operations,
TOWER’s earthquake
recovery programme
and the sale of TOWER’s
life insurance, health
insurance and investment
management businesses.
Prior to TOWER, Michael
held executive roles
in leading finance,
commercial and business
functions in major
telecommunications and
technology organisations
including TelstraClear
and previously Clear
Communications. In 2014
Michael was awarded CFO
of the year at the annual
New Zealand CFO Awards.
SARAH JUDKINS
Chief Strategy Officer
& Acting Chief
Financial Officer
Sarah is responsible for
a number of strategic
projects across NZME and
the development of new
business initiatives. Sarah
joined NZME in 2014 to
lead the transformation
and integration of the
APN, TRN and GrabOne
businesses into NZME.
Sarah joined NZME
from KPMG where she
was a Director in the
transactions team,
specialising in operational
strategy, transaction
support and integration
planning. Sarah has 20
years’ experience working
with business managers
and stakeholders in a
wide range of industries
in New Zealand and
Asia developing and
implementing strategic
plans. Since returning
to New Zealand, Sarah
has worked with several
New Zealand companies
on a range of strategic
projects and brings a
breadth of financial and
strategic experience
to NZME. Sarah is also
currently the acting CFO.
LAURA MAXWELL
Chief Digital Officer
MATT HEADLAND
Chief Commercial
Officer
SHAYNE CURRIE
Managing Editor
DEAN BUCHANAN
Group Director,
Entertainment
MATTHEW WILSON
Chief Operations Officer
ALLISON WHITNEY
General Counsel
Laura first joined The Radio
Network as a Commercial
Director in July 2013,
moving to the role of
Group Director Digital
Media in 2014. In 2015,
Laura was promoted to
Group Revenue Director
and this title transitioned
to Chief Commercial
Officer as part of the
NZME transformation.
Prior to the NZME group,
Laura held the position of
General Manager/Director
for Yahoo! New Zealand.
Laura has over 20 years of
experience in media and is
well known and respected
in the industry, having
held roles including Sales
Director for both APN
Outdoor and Buspak
New Zealand. She is also
currently serving as the
Chair of the Interactive
Advertising Bureau and as
a Director of Restaurant
Hub and Chinese New
Zealand Herald. Laura
was also previously a
Director of the Newspapers
Publishers Association
and a board member of
the Radio Bureau.
Matt joined NZME as
Head of Agency Sales
in August 2016 and in
September 2017 he was
appointed Acting Chief
Commercial Officer.
Within his time at NZME
Matt has restructured and
revitalised the agency
sales team, building and
leading an innovative
and fresh culture, while
delivering market leading
revenue growth.
Prior to the NZME group,
Matt held the position
of Director of National
Direct Sales TV, Radio and
Digital at Mediaworks New
Zealand. Matt has over
18 years of experience in
media, entertainment and
advertising industries,
where he has led
change and revenue
growth across multiple
businesses, these roles
include Country Manager
EMI Music New Zealand,
NZ Sales Manager
MTV Networks, Head
of Marketing EMI New
Zealand and founder of
Wonder and Thunder
Talent Management. He is
also the Chair of the Radio
Bureau Board.
Dean has over two decades
of experience in developing
world class content and
talent in New Zealand and
internationally. Prior to
joining the Radio Network
as Chief Content Officer in
September of 2013, then
Managing Director Radio,
Dean was an international
consultant in the UK and
Europe. He then joined
DMG Radio Australia as
Group Programme Director
and was responsible
for launching the highly
successful Nova Network.
Dean has vast multimedia
experience having worked
in Touring with TV Touring
and established a successful
talent management
company Plus1 Talent,
developing the futures of
many key Australian TV
and Radio talent.
Allison joined NZME in
2013 and with over 20
years’ legal experience,
manages the provision of
legal advice and company
secretarial services across
the NZME group - bringing
corporate, commercial,
intellectual property,
consumer and media law
experience to the table.
Prior to commencing her
role at NZME Allison held
roles both in-house and in
private practice, including
six years as Group Legal
Advisor to London-based
International Media Group;
UBM plc. During her time at
NZME, Allison has provided
legal guidance to the NZME
Group through several
significant milestones and
projects, including the 2014
re-brand from APN to NZME,
and the 2016 demerger
from APN and listing
of NZME on the
NZX and ASX.
Matthew has lead several
of NZME’s operational
teams. With a passion
for media, Matthew
has over two decades
of experience working
across NZME’s newspaper
brands, including finance
roles in print, commercial,
content and corporate to
leading the Newspaper
Sales, Print and Herald
product functions.
Matthew was integral
to the launch of the
Weekend Herald brand
and the Herald on
Sunday newspaper in
2004, consolidated
newspaper sales and
distribution functions
across NZME in 2013 and
led the development of
NZME’s highly successful
distribution services
business in 2015. Matthew’s
extensive experience and
knowledge of the business
and its brands helps
drive NZME’s operating
performance.Matthew
currently also looks after
Culture & Performance.
As NZME’s Managing
Editor Shayne oversees
journalists and content
across the newsroom for
Newstalk ZB, Radio Sport,
The NZ Herald and NZME’s
regional and community
news brands. Shayne
has been a journalist
for 25 years, starting
as a crime reporter in
Wellington - and briefly,
New York - before
taking up newsroom
leadership roles. Shayne
has overseen major
change and innovation in
newsrooms throughout
New Zealand.
A former News Editor
and Deputy Editor of
the Sunday Star Times,
Shayne joined the
Company to help launch
the Herald on Sunday
and became editor of
that paper in 2005 and of
The NZ Herald in 2011. He
led the editorial project
to transform the NZ
Herald into the award-
winning compact format.
In 2016 Shayne was
awarded a scholarship
to Wolfson College at
Cambridge University in
the UK, studying audience
patterns in the digital age.
Page 32
Page 33
CORPORATE GOVERNANCE
GOVERNANCE FRAMEWORK
The Company is 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 contemporary standards
in New Zealand, incorporating the NZX
Corporate Governance Code 2017,
effective for reporting periods from 1
October 2017, (“NZX Code”).
The Group is committed to having a
good governance framework within
which it operates and therefore aims
to comply with the recommendations
of the NZX Code. The Corporate
Governance Policies set out in this
section reflect the Group’s governance
framework as at 31 December 2017
(unless otherwise stated). The
Board considers that the corporate
governance practices it has adopted
are in compliance with the NZX Code
unless otherwise stated below.
PRINCIPLE 1 - CODE OF ETHICAL
BEHAVIOUR
Directors should set high standards of
ethical behaviour, model this behaviour
and hold management accountable
for these standards being followed
throughout the organisation.
Code of Conduct & Ethics
The Company’s Code of Conduct &
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 Code of Conduct &
Ethics comprises certain fundamental
principles and demonstrates the high
standards of conduct expected of us.
The current Code of Conduct & Ethics
was adopted on 27 June 2016 (and
updated on 12 December 2017) 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 & Ethics
and the Whistleblower Policy.
The Company also has an Editorial Code
of Ethics highlighting that our principal
responsibilities are to the community and
the truth; undertaking to maintain the
highest ethical standards in our journalism
while balancing the right of the individual
with the public’s right to know.
Securities Trading Policy
The Securities Trading Policy details the
Company’s trading policy and guidelines,
including trading restrictions on dealing in
the Company’s quoted financial products
which applies to the Directors and all
employees. The Securities Trading Policy
places additional trading restrictions on
the Directors, the CEO and his direct
reports (and employees reporting
directly to them) and all participants in
any NZME employment incentive plans.
PRINCIPLE 2 - BOARD
COMPOSITION & PERFORMANCE
To ensure an effective Board, there
should be a balance of independence,
skills, knowledge, experience and
perspectives.
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 interests of the
Company. The objective of the Company
is to generate growth, corporate profit
and shareholder gain from the activities
of the Group. In pursuing this objective
the role of the Board is to assume
accountability for the success of the
Company by taking overall responsibility
Skills and 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. Directors are expected to
maintain their knowledge of the latest
governance and business practices in
order to perform their duties.
Directors and 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 $156,500.
Performance Review
The Chairperson meets annually with
Directors of the Company to discuss
individual performance of Directors.
The Board reviews its performance as
a whole, and the performance of its
committees, on an annual basis. The
Board may choose to use external
facilitators, where appropriate, to assist
with reviewing the performance of
Directors, the Board and its committees.
for the strategic direction and monitoring
of operational management of the Group
in accordance with good corporate
governance principles. More details
regarding the main functions of the
Board can be found in the Board Charter
(adopted 12 December 2017) on the
Company’s website.
Director Independence and 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 31 of the Annual
Report. The roles of the Chair and Chief
Executive Officer are exercised by
different persons.
Nomination and 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.
Induction and Access To Information
and Advice
On appointment to the Board a Director
will be given a copy of the Board Charter,
an appointment letter covering the role
of the Board, the Board’s expectations
of the Director and any particular terms
of his or her appointment. The Director
will be offered induction training as
to the responsibilities of the Directors
and to enable the Director to become
familiar with the Company’s operations
and sites. All Directors have access
to the advice and assistance of the
General Counsel 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.
Page 34
Page 35
CORPORATE GOVERNANCE (continued)
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.
Also refer to the Our People section on
page 23 of the Annual Report for more
information on our diverse workforce.
The table below includes the quantitative
breakdown as to the gender composition
of NZME’s Board and OfficersA.
separate Health & Safety Committee, but
Health & Safety is considered by the full
Board. The Board did not identify a need
for any other standing Board committees.
The Company also has a NZME Takeover
Response Manual (not publicly available)
which was in place for the full year, but as
recommended by Recommendation 3.6
of the NZX Code, was formally adopted
by the Board on 12 December 2017.
Audit & Risk Committee
The Committee consists of at least three
non-executive directors, with the majority
being also independent directors (one of
whom has 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.
As at
Board
OfficersA
Male
Female
Male
Female
31 December 2017
31 December 2016
2
2
1
1
6
5
3
6
PRINCIPLE 3 - BOARD
COMMITTEES
The Board should use committees where
this will enhance its effectiveness in key
areas, while retaining Board responsibility.
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. The Board does not have a
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 which is
available on the Company’s website.
For the year ended 31 December 2017, all
the Directors were members of the Audit
& Risk Committee and it was chaired by
Carol Campbell. Employees and external
parties may attend meetings of the Audit
& Risk Committee at the invitation of the
Audit & Risk Committee.
(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.
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, in consultation with the CEO, the
remuneration packages of executives
reporting directly to the CEO.
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 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 2017, all the
Directors were members of the Governance
& Remuneration Committee and it was
chaired by Peter Cullinane. David Gibson will
take over as Chair in 2018. Employees and
external parties may attend meetings of the
Governance & Remuneration Committee
at the invitation of the Governance &
Remuneration Committee.
· There is full and timely disclosure
of the Company’s activities and price
sensitive information to shareholders
and the market; and
· All stakeholders (including shareholders,
the market and other interested parties)
have an equal opportunity to receive
and obtain externally available
information issued by the Company.
The Company will immediately notify
the market of any material information
concerning the Company in accordance
with legislative and regulatory
disclosure requirements.
Charters and Policies
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/):
· Board Charter
· Code of Conduct & Ethics
· Remuneration Policy
· 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
PRINCIPLE 4 - REPORTING &
DISCLOSURE
The Board should demand integrity in
financial and non-financial reporting,
and in the timeliness and balance of
corporate disclosures.
Market Disclosure Policy
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 Market Disclosure Policy is designed
to ensure that:
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 2017,
the Company had three 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.
Page 36
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CORPORATE GOVERNANCE (continued)
Financial Reporting and Disclosure
The Company is committed to providing
financial reporting that is balanced,
clear and objective. The Audit &
Risk Committee oversees the quality,
integrity and timeliness of external
reporting. The Group’s Consolidated
Financial Statements for the year ended
31 December 2017 are set out on pages
48 to 96 of the Annual Report. Those
Consolidated Financial Statements have
been streamlined to make them easier
to read. Also refer to the letters from the
Chair and the CEO in this Annual Report
and the NZME Full Year 2017 Results
Presentation (available on the Company’s
website) for additional information.
Non-Financial Reporting and
Disclosure
The Company provides non-financial
disclosures relating to Health & Safety,
Risk Management, our interaction
with our communities and our impact
on the environment. We also include
information about our performance
against our operational priorities for the
year. Information about our strategic
plan for 2018 is included on page 22 of
the Annual Report.
NZME does not currently report under
a recognised environmental, social and
governance (“ESG”) framework, but aims
to provide non-financial information that
would be useful for our stakeholders.
This includes a summary of how we
create value as set out on pages 10 to 11
of the Annual Report and the information
referred to above. We intend to continue
enhancing our non-financial reporting
initiatives based on the feedback we
receive from our shareholders.
PRINCIPLE 5 - REMUNERATION
The remuneration of Directors and
executives should be transparent, fair
and reasonable.
Remuneration Policy
The Remuneration Policy outlines the
Company’s approach to the remuneration
of its Directors and executives. The
Governance & Remuneration Committee
is responsible for reviewing non-executive
Directors’ remuneration and benefits. The
pool available to be paid to non-executive
Directors is subject to shareholder
approval. The levels of fixed fees payable
to non-executive Directors should reflect
the time commitment and responsibilities
of the role. The Governance &
Remuneration Committee will obtain
independent advice, as necessary, and
will also consider the results of market
comparison and a benchmarking
assessment in setting the fixed fees
payable to non-executive Directors.
While the Company does not pay equity
based remuneration to its non-executive
Directors, it encourages those Directors
to hold shares in the Company to better
align their interests with the interests of
other security holders.
As noted under 4.2, the Governance &
Remuneration Committee is also
responsible for reviewing the
remuneration of the Chief Executive
Officer (“CEO”) and any executive
Directors and, in consultation with the
CEO, for reviewing the remuneration
packages of executives reporting directly
to the CEO. The Company conducts
external benchmarking analysis in order
to determine the market rate for a role.
The Company provides a combination
of cash and non-cash benefits and takes
a total remuneration approach. The
Company reviews remuneration with
the objective of achieving pay equity,
including by gender.
Directors’ Remuneration
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
FEES PAID FOR THE YEAR ENDED 31 DECEMBER 2017 (IN $)
Date appointed
Date resigned /
retired
Chairman of
the Board
Board
Member
Committee
Chair
Committee
Member
TotalA
Peter CullinaneB
24 June 2016
N/A
9,524
93,651
20,000
10,000
133,175
Sir John AndersonC
24 June 2016 8 December 2017
140,476
-
18,730
159,206
Carol CampbellD
24 June 2016
David GibsonE
8 December 2017
N/A
N/A
-
100,000
20,000
10,000
130,000
6,349
1,270
7,619
Total fees paid
430,000
(A) 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. (B) Peter Cullinane is a member of the NZME Board, Chair of the Governance &
Remuneration Committee and a member of the Audit & Risk Committee. Following the retirement of Sir John Anderson, Peter Cullinane was also
elected as Chairman of the NZME Board. (C) Sir John Anderson was, up to his retirement, 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) David Gibson is a member of the NZME Board, the Audit & Risk Committee and
the Governance & Remuneration Committee. David will become Chair Governance & Remuneration Committee in 2018.
Chief Executive Officer’s Remuneration
SalaryA
BonusB
BenefitsC
Total
Michael Boggs
806,226
336,699
34,288
1,177,213
(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.
Michael Boggs held 141,167 shares in the Company as at 31 December 2017 and earned $10,411 in dividends paid
by the company on shares held by him during the year. In addition to the remuneration disclosed above, as at 22
February 2018, Michael Boggs held 1,119,022 performance rights issued to him under the Group’s Total Incentive
Plan (“TIP”). Please refer to note 4.3 of the Consolidated Financial Statements for a summary of the TIP and the
performance criteria used to determine performance based payments. Under the 2016 TIP, the participants will be
entitled to additional shares (not reflected in the rights above) when the rights are exercised (on 31 December 2019)
for any dividends foregone during the period 1 January 2017 to 31 December 2019. For dividends declared during the
period 1 January 2017 to 31 December 2017, this will result in an additional 53,161 shares being issued to him.
Page 38
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CORPORATE GOVERNANCE (continued)
Directors of Subsidiary Companies
As at 31 December 2017, Michael Boggs (CEO) and Sarah Judkins (Chief Strategy Officer & Acting Chief Financial Officer)
were directors of the wholly owned subsidiaries listed in Note 6.2 of the Consolidated Financial Statements, other than
NZME Australia Pty Limited. Michael Boggs and Mark O’Sullivan (a professional director resident in Australia) were
Directors of NZME Australia Pty Limited as at 31 December 2017. Sarah Judkins was also a director of Chinese New
Zealand Herald Limited, Restaurant Hub Limited, Eveve New Zealand Limited and Ratebroker Limited (resigned 3
October 2017) and a trustee of the Auckland Arts Festival. Michael Boggs is also a director of Ratebroker Limited
(appointed 6 October 2017), New Zealand Press Association Limited and a trustee of the Herald Foundation. Other than
Mark O’Sullivan who received $8,624 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.
Employee Remuneration
The Group paid remuneration including benefits in excess of $100,000 to employees (other than directors)
during the year ended 31 December 2017. 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
$290,001 - $300,000
68
59
50
45
28
28
18
12
8
9
4
9
3
6
2
5
4
1
11
4
$300,001 - $310,000
$310,001 - $320,000
$320,001 - $330,000
$330,001 - $340,000
$340,001 - $350,000
$350,001 - $360,000
$370,001 - $380,000
$380,001 - $390,000
$390,001 - $400,000
$400,001 - $410,000
$410,001 - $420,000
$420,001 - $430,000
$440,001 - $450,000
$450,001 - $460,000
$470,001 - $480,000
$480,001 - $490,000
$540,001 - $550,000
$610,001 - $620,000
$1,170,001 - $1,180,000
2
2
6
1
1
3
1
1
1
1
2
1
1
1
2
1
1
1
1
Total number of employees that were paid remuneration of $100,000+
404
The remuneration above include all remuneration paid to permanent employees, including fixed remuneration,
employer KiwiSaver contributions, medical aid contributions, bonuses, commission, settlements and redundancies.
PRINCIPLE 6 - RISK
MANAGEMENT
Directors should have a sound
understanding of the material risks
faced by the issuer and how to manage
them. The Board should regularly
verify that the issuer has appropriate
processes that identify and manage
potential and material risks.
Risk Management Framework
The Audit & Risk Committee is
responsible for the oversight and
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
practise 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 risk 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;
·
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;
· Workplace Health & Safety matters;
· Legal, regulatory and policy compliance;
· Technology and security matters;
· Business continuity planning.
The Group has a Head of Risk, Compliance
and Financial Reporting who is 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.
The Group is a diversified media company
and is subject to diverse types of risk
including, but not limited to cyber
security, 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
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.
Page 40
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CORPORATE GOVERNANCE (continued)
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
Head of Risk, Compliance and Financial Reporting
reports to the NZME Risk Committee and the Audit &
Risk Committee on progress of the implementation of
the Risk Management Framework and Guidelines.
For additional information on financial risks, please also
refer to Note 4.8 of the Consolidated Financial Statements.
Health & Safety
The NZME Board Charter states that the role of the Board
includes ensuring that the Group Health & Safety and
environmental practices and culture comply with legal
requirements, reflects best practice and are recognised
by employees and contractors as key priorities for the
Group. As noted earlier, NZME does not have a separate
Board-level Health & Safety Committee as Health &
Safety is dealt with by the full Board.
Health & Safety is included on the NZME Board Risk
Register. The NZME Annual Health & Safety Plan captures
the projects and objectives for the year to respond to the
identified risks. NZME records and monitors critical Health
& Safety risks in a separate Health & Safety Critical
Risk Register. Currently that register is reviewed and
monitored by the Risk Committee, who meet monthly
and receive and review reporting on Health & Safety
performance, trends and updates, with key matters
and progress against the annual plan being reported
to the Board. In 2017, areas of focus included, for
example, dealing with risks relating to fatigue, traffic
management and public exposure.
Health & Safety advice and direction are overseen
by the Culture and Performance team, a full-time
Health & Safety Advisor and a contracted Health and
a Safety Consultant. NZME utilises the online safety
management system “Vault” as the framework for how
safety is managed within the business. Vault is used
for incident reporting, contractor management, hazard
and risk management, management of hazardous
substances, risk monitoring and reporting.
Worker engagement and involvement is recognised
as an important part of growing a positive workplace
Health & Safety culture. At NZME, being actively
involved in and contributing to Health & Safety is
included in the GuideMe performance review template
as a KPI for all employees and reviewed as part of the
performance review process. In 2016 and 2017 NZME
rolled out a mandatory safety leadership training
workshops to up-skill all levels of management to
ensure they are aware of NZME’s Health & Safety
obligations, critical risks and the resources available to
satisfy these. To ensure effective worker involvement,
NZME has multiple Health & Safety Committees in
place across New Zealand that actively contribute
to the management of risk and the effectiveness of
controls in place around the business. Health & Safety
performance is communicated throughout all levels
of NZME through regular Senior Leadership team
meetings and internal business communications.
NZME maintains a Wellness & Safety page on its intranet
with sections for Safety at NZME (which includes training
manuals, emergency procedures and safety induction
documents) and a Wellness section (which includes
information about our Employee Assistance Programme,
wellness videos and wellness success stories).
PRINCIPLE 7 - AUDITORS
The Board should ensure the quality and independence
of the external audit process.
Refer to note 2.2.4 of the Consolidated Financial Statements
for fees paid to the auditors, PricewaterhouseCoopers, for
the year ended 31 December 2017.
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. 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
PRINCIPLE 8 - SHAREHOLDER RIGHTS &
RELATIONS
The Board should respect the rights of shareholders
and foster constructive relationships with shareholders
that encourage them to engage with the issuer.
NZME seeks to regularly engage with shareholders to
ensure they are informed about our activities and our
progress against our stated priorities. NZME employs an
Investor Relations Manager to ensure any questions or
feedback from shareholders are responded to promptly.
The NZME website has a dedicated Investor Relations
section containing NZX / ASX announcements,
presentations & webcasts, financial reports, frequently
asked questions and other information that might
be useful to our shareholders. The share registry is
maintained by Link Market Services and their contact
details are available under the Investor Relations
section of the Company’s website. Shareholders can
elect to receive communications electronically.
Following each results announcement, NZME holds
an investor call to present the results and to allow
investors to ask questions. This is followed by an
investor roadshow during which the Chief Executive
Officer and other members of the Executive aim to
meet with as many shareholders as possible.
Shareholders are entitled to exercise their voting
rights as provided for under the applicable legislation
and listing rules.
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 and the Company 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 2017, 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.
The Company requires the external auditor to attend
the Annual Shareholders Meeting (“ASM”) to answer
questions from shareholders in relation to the audit.
The Group’s auditor, PricewaterhouseCoopers,
attended the last ASM on 22 June 2017.
Internal Audit
The Audit & Risk Committee is responsible for reviewing
the integrity and effectiveness of the internal audit
function. NZME operates a co-sourced internal audit
programme that utilises a mix of self-certifications,
scheduled control testing by Group Financial Services,
random assignments and investigations by Risk &
Compliance and a structured internal audit programme
executed by external firms.
Any reporting from external parties are presented to
the Audit & Risk Committee and any significant findings
from other internal activities are reported to the Audit &
Risk Committee in the Risk & Compliance report.
Page 42
Page 43
OTHER STATUTORY INFORMATION
DIRECTORS’ INTEREST IN NZME SHARES
Ordinary shares held by Directors and parties associated with them are as follows:
Director
Company
Position
Sir John Anderson (retired 8 December 2017)
Carol Campbell
Peter Cullinane
31 Dec 2017
Number
114,286
50,000
68,286
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
Peter Cullinane
HT&E Limited
Position
Director
Lewis Road Creamery Limited
Director and shareholder
Happy Chickens Limited
Director
Carol Campbell
The Business Advisory Group Limited
Director (resigned effective 1 April 2017) and
shareholder (disposed effective 24 May 2017)
New Zealand Post Limited
Kiwibank Limited
Kingfish Limited
Marlin Global Limited
Barramundi Limited
NPT Limited
T&G Global Limited
Director
Director
Director
Director
Director
Director
Director
David Gibson
DG Advisory Limited
Director and shareholder
Revolutionary Beekeeping Limited
Director and shareholder
Eat Shop Do Limited (trading as
Jess’ Underground Kitchen)
Hub App Limited
Penguin Limited
Director and shareholder
Director and shareholder
Director and shareholder
Waiheke Brewing Company Limited
Director and shareholder
Herbal Investments Limited
Lewis Road Creamery Limited
Harker Herbal Products Limited
Shareholder
Shareholder
Shareholder
Sir John Anderson
(retired 8 December 2017)
NPT Limited
Chairman (resigned effective 17 March 2017)
Steel & Tube Holdings Limited
Chairman (resigned as Chairman 17 February
2017 and as Director effective 31 March 2017)
T&G Global Limited
Deputy Chairman (resigned 4 December 2017)
The Interests Register also includes, pursuant to section 140(1) of the Companies Act 1993, entries for authorising
the remuneration and particulars of indemnities and insurance for the Directors.
SHAREHOLDER INFORMATION
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 noted below:
Ronald McDonald House Charities
Chair (resigned effective 31 August 2017)
Nomura Holdings Inc
Forager Funds Management Pty Limited
Auscap Asset Management Limited
Allan Gray Australia Pty Limited
Date of substantial
security notice
Number of shares
held
% of shares held
26/10/2016
5/09/2017
19/09/2017
23/02/2018
23,395,418
9,883,157
12,408,486
35,000,000
11.94
5.04
6.33
17.86
The total number of ordinary shares issued by the Company as at 31 December 2017 was 196,011,282. The Company
did not have any other quoted voting products.
Page 44
Page 45
OTHER STATUTORY INFORMATION (continued)
Top 20 shareholders
As at 28 February 2018
Spread of Quoted Security Holders
Number of shares
held
% of shares held
Citicorp Nominees Pty Limited
New Zealand Central Securities Depository Limited
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Bond Street Custodians Limited
Pax Pasha Pty Limited
Aust Executor Trustees Limited
FNZ Custodians Limited
Forsyth Barr Custodians Limited
Bnp Paribas Nominees Pty Limited
Australian Executor Trustees Limited
Aet Ct Pty Limited
Morgan Stanley Australia Securities (Nominee) Pty Limited
Rudie Pty Limited
Leh Soon Yong
Goolestan Dinshaw Katrak
Steven Fahey & Lynette Fahey
UBS Nominees Pty Limited
Bnp Paribas Nominees Pty Limited Hub24 Custodial Serv Limited Drp
Timothy John Eakin
Georgina Jane Birrell
58,959,726
33,106,861
24,877,882
21,480,111
12,233,821
1,702,920
1,692,143
1,455,281
1,413,000
1,311,000
1,222,463
1,000,000
1,000,000
700,188
698,427
538,000
500,000
410,238
389,302
387,919
380,000
380,000
30.08
16.89
12.69
10.96
6.24
0.87
0.86
0.74
0.72
0.67
0.62
0.51
0.51
0.36
0.36
0.27
0.26
0.21
0.2
0.2
0.19
0.19
Range of Securities Held
Number of
Investors
% of Total
Investors
Shares Held
% of Shares
Issued
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
Above 100,000
Total
3,807
1,232
349
514
69
5,971
63.76
20.63
5.84
8.61
1.16
100
1,041,437
2,949,899
2,611,911
15,612,212
173,795,823
196,011,282
0.53
1.50
1.33
7.96
88.67
100
OTHER INFORMATION
Waivers from the NZX
The Company did not receive any
waivers from any of the NZX Listing
Rules during the year.
Donations
In accordance with section 211(1)(h)
of the Companies Act 1993, NZME
notes that the Group made donations
of $16,060 during the year ended 31
December 2017.
Credit rating
As at the date of this Annual Report,
NZME did not have a credit rating.
Exercise of NZX disciplinary powers
For the year ended 31 December 2017, 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.
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 2017,
none of the Directors were appointed
pursuant to Rule 3.3.8.
Page 46
Page 47
CONSOLIDATED
FINANCIAL
STATEMENTS
For the year ended
31 December 2017
Page 49
CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2017
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 Auditor’s Report
51
52
53
54
55
56
57
59
65
74
86
89
94
97
DIRECTORS’ STATEMENT
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 2017, 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 2017 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 50 to 96 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
Peter Cullinane
Director
Carol Campbell
Director
Date: 21 February 2018
*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 is also included under the Basis of
Preparation section on pages 57 to 58.
Page 50
Page 51
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2017
CONTINUING OPERATIONS
Revenue
Finance and other income
Total revenue and other income
NOTE
2017
$’000
2016
$’000
2.1
2.1
2.1
390,688
407,856
926
2,340
391,614
410,196
Profit for the year
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
NOTE
2017
$’000
20,885
2016
$’000
74,543
Exchange differences on translation of foreign operations
4.2
(15)
44,846
Expenses from operations before finance costs, depreciation,
amortisation
Depreciation & amortisation
Finance costs
Profit / (loss) from continuing operations before income tax
expense
2.2.1
(332,839)
(363,553)
Items that will not be reclassified to profit or loss
2.2.2
2.2.3
(24,946)
(23,845)
(4,497)
(9,300)
29,332
13,498
Exchange and other differences applicable
to non-controlling interests
Other comprehensive income, net of tax
Total comprehensive income
Income tax expense
5.1
(8,447)
(64,050)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
-
(14,683)
(15)
30,163
20,870
104,706
20,870
105,464
-
(758)
20,870
104,706
20,870
(10,038)
-
115,502
20,870
105,464
Owners of the Company
Non-controlling interests
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO OWNERS
OF THE COMPANY:
Continuing operations
Discontinued operations
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
Profit / (loss) from continuing operations for the year
20,885
(50,552)
DISCONTINUED OPERATIONS
Profit / (loss) after tax from discontinued operations
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
-
125,095
20,885
74,543
20,885
-
20,885
60,618
13,925
74,543
Earnings per share from continuing operations
attributable to the ordinary shareholders of the company
Basic / diluted earnings per share
2.3
10.7
(28.0)
NOTE
CENTS
CENTS
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
10.7
30.9
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
Page 52
Page 53
CONSOLIDATED BALANCE SHEET
as at 31 December 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
NON-CURRENT ASSETS
Intangible assets
Property, plant and equipment
Other financial assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
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 equity
NOTE
2017
$’000
2016
$’000
4.7
3.3
3.1
3.2
6.3.2
9,570
55,323
1,926
16,242
53,631
2,226
66,819
72,099
330,553
329,776
64,725
5,988
401,266
75,677
5,988
411,441
468,085
483,540
3.4
56,894
7,567
64,461
13,565
99,788
1,239
114,592
179,053
289,032
66,379
2,800
69,179
13,423
112,168
3,211
128,802
197,981
285,559
360,363
360,363
2,385
(73,716)
289,032
(5,198)
(69,606)
285,559
3.4
4.5
5.2
4.1
4.2
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
— 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
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
4.2
4.2
4.4
Share based payments expense
4.2
Acquisitions and
divestments of subsidiaries and
operations
Balance at
31 December 2016
-
-
-
-
-
-
-
-
-
-
60,618
60,618
13,925
74,543
44,846
-
44,846
(14,683)
30,163
44,846
60,618 105,464
(758)
104,706
(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
BALANCE AT 1 JANUARY 2017
360,363
(5,198)
(69,606) 285,559
Profit for the year
Other comprehensive
income
TOTAL COMPREHENSIVE
INCOME
Dividends paid
Supplementary dividends paid
Tax credit on supplementary
dividends
Transfer from transaction with
non-controlling interest reserve
4.4
4.4
4.2
Share based payments expense
4.2
Balance at
31 December 2017
-
-
-
-
-
-
-
-
-
20,885
20,885
(15)
-
(15)
(15)
20,885
20,870
-
-
-
(18,622)
(18,622)
(2,785)
(2,785)
2,785
2,785
6,373
(6,373)
-
1,225
-
1,225
360,363
2,385
(73,716) 289,032
-
-
-
-
-
-
-
-
-
-
-
285,559
285,559
20,885
(15)
20,870
(18,622)
(2,785)
2,785
-
1,225
289,032
Page 54
Page 55
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.0 BASIS OF PREPARATION
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest paid
Income taxes paid
NOTE
2017
$’000
2016
$’000
387,228
581,485
(336,626)
(488,558)
128
139
141
223
(5,804)
(8,811)
(5,610)
(22,798)
Net cash inflows / (outflows) from operating activities
4.7
39,455
61,682
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
(4,881)
(11,549)
Payments for intangible assets including software
Proceeds from sale of property, plant and equipment
Proceeds from divestment of subsidiaries, net of their cash, as part of
internal restructure
Payments for investment in other entities
Net loans repaid / (advanced) to other entities
(10,165)
27
-
-
-
(4,407)
2,251
95,936
(848)
2,278
Net cash inflows / (outflows) from investing activities
(15,019)
83,661
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
-
(55,958)
4.5
4.5
84,000
54,000
(96,486)
(127,242)
-
(18,622)
-
(400)
(6,860)
(3,630)
Net cash inflows / (outflows) from financing activities
(31,108)
(140, 090)
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate changes
(6,672)
16,242
-
5,253
11,065
(76)
Cash and cash equivalents at end of the year
4.7
9,570
16,242
The Consolidated Statement of Cash Flows includes cash flows from continuing and discontinued operations.
Refer to Note 6.1 and the Consolidated Financial Statements for the year ended 31 December 2016 (available on
the Company’s website) 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.
1.1 REPORTING ENTITY AND
STATUTORY BASE
NZME Limited (NZX and ASX:NZM) 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 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 relevant note. These
policies have been consistently applied to
all the years presented, unless otherwise
stated. These consolidated financial
statements are presented for the Group
and were approved for issue by the Board
of Directors on 21 February 2018.
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.
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.
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. In the statement
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
Page 56
Page 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.0 GROUP PERFORMANCE
demerger and the tax settlement did
not have a material impact on the year
ended 31 December 2017. Detailed
notes regarding the demerger and the tax
settlement are included in the audited
consolidated financial statements for
the year ended 31 December 2016
available on the Company’s website.
Also refer to note 6.1 of these
consolidated financial statements.
1.4.2 Proposed Merger with Stuff Limited
On 7 September 2016 the Company
and Fairfax Media Limited (“Fairfax”)
announced the signing of a merger
implementation agreement to effect
the merger of the Company and Stuff
Limited,formerly Fairfax New Zealand
Limited, (“Stuff”).
The New Zealand Commerce Commission
(“NZCC”) declined to grant clearance or
authorisation for the proposed merger of
the Company with Stuff on 3 May 2017.
On 26 May 2017 the Company, Fairfax and
Stuff announced that they would appeal
the NZCC’s decision in the High Court.
A nine day hearing was held in October
2017 and on 19 December 2017 we
announced that the High Court has
upheld the NZCC’s decision not to clear
or authorise the proposed merger. The
Company, Fairfax and Stuff have now
applied for leave to appeal the High
Court decision upholding the NZCC’s
decision not to clear or authorise the
proposed merger of the two businesses.
actual results and are reviewed on an
ongoing basis. 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
Note
estimates or judgements
Impact of Performance Rights
on earnings per share
Determination of number of
reportable segments
Intangible assets with indefinite
useful lives
2.3
2.4
3.1
Assumptions used in testing
3.1.1
for impairment of indefinite
life intangible assets
1.4 SIGNIFICANT CHANGES
1.4.1 Demerger from APN News &
Media Limited (now HT&E Limited)
and tax settlement in the prior year
The Company completed its demerger
from APN News & Media Limited
(subsequently rebranded as HT&E Limited
(“HT&E)) on 29 June 2016, marking the
creation of a standalone New Zealand
Group focused on the operation of
an integrated print, radio and digital
media and entertainment business. On
23 June 2016, the Company and HT&E
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. The demerger and tax settlement
had a significant impact on the audited
consolidated financial statements for
the year ended 31 December 2016 as
shown in the comparatives to these
consolidated financial statements. The
2.1 REVENUE AND OTHER INCOME
FROM CONTINUING OPERATIONS
Advertising revenue
Circulation and subscription revenue
Services revenue
Other revenue
2017
$’000
279,095
83,263
12,542
15,788
2016
$’000
295,141
86,782
12,206
13,727
Revenue from continuing operations
390,688
407,856
Dividends
Rental income from sub-leases
Profit / (loss) on disposal of properties and businesses
Profit / (loss) on disposal of property, plant and equipment
Other income
Interest income – related parties
Interest income – other entities
Finance income
Total finance and other income
Total revenue and other income
128
632
-
27
787
-
139
139
926
391,614
141
586
1,320
-
2,047
91
202
293
2,340
410,196
FROM DISCONTINUED OPERATIONS (REFER TO NOTE 6.1)
Total revenue and other income
-
127,542
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 and digital design and is
recognised when the event occurs, the product is delivered or the goods are sold.
Page 58
Page 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
2017
$’000
157,350
75,045
47,569
21,986
-
2,970
4,314
275
6,973
4,180
12,177
2016
$’000
161,610
82,301
45,840
23,711
12,216
6,946
6,009
-
6,166
4,086
14,668
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
Total fees paid to auditors
2017
$’000
2016
$’000
368
51
109
125
285
653
454
6
1,057
1,231
2,294
2,748
(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 and payroll assurance. (C) Includes services relating
to transactional advice, tax compliance services, tax pooling services (2016 only) and services relating to the IRD settlement (2016 only).
(D) Includes due diligence and advisory services relating to the proposed merger with Stuff Limited of $124,941 (2016: $1,224,179).
Total expenses from operations before finance costs,
depreciation, amortisation
332,839
363,553
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
2017
$’000
2016
$’000
15,559
9,387
24,946
-
4,391
106
4,497
16,173
7,672
23,845
2,765
6,482
53
9,300
Page 60
Page 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, for the 2017 TIP, will at the discretion of the Board either convert into
fully paid ordinary shares or be settled in cash; and for the 2016 TIP, will convert into fully paid ordinary
shares. Under the TIP, where Performance Rights are settled in shares, 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 either
repurchase shares from the market or settle the rights in cash and not to issue new shares.
2017
$’000
2016
$’000
RECONCILIATION OF EARNINGS USED IN CALCULATING BASIC / DILUTED
EARNINGS PER SHARE (“EPS”)
Profit / (Loss) from continuing operations attributable to owners of the parent entity
20,885
(54,884)
Profit from discontinuing operations attributable to owners of the parent entity
-
115,502
Profit / (Loss) attributable to owners of the parent entity used in calculating EPS
20,885
60,618
WEIGHTED AVERAGE NUMBER OF SHARES
Weighted average number of shares in the denominator in calculating basic EPS
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
2017
NUMBER
2016
NUMBER
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
2017
CENTS
2016
CENTS
10.7
-
10.7
(28.0)
58.9
30.9
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
·
assuming the conversion of all dilutive potential ordinary shares.
the weighted average number of additional ordinary shares that would have been outstanding
(Note that there are no dilutive potential ordinary shares in 2017 (2016: 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
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.
Page 62
Page 63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.0 OPERATING ASSETS & LIABILITIES
2.4.2 Segment revenues and results
The segment information provided to the Directors and Executive Team for the year ended 31 December 2017
is as follows:
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.
GOODWILL
SOFTWARE
$’000
$’000
MASTHEAD
BRANDS
$’000
RADIO
LICENCES
$’000
BRANDS
TOTAL
$’000
$’000
AS AT 1 JANUARY 2016
Cost
Accumulated amortisation
and impairment
177,006
46,587
(95,614)
(35,316)
Net book value
81,392
11,271
FOR THE YEAR ENDED 31 DECEMBER 2016
Opening net book amount
AdditionsA
Divestment of subsidiaries
and operationsB
Amortisation
Foreign exchange differences
81,392
-
11,271
4,286
(10,804)
-
-
195
(4,721)
34
-
-
-
-
479,492
59,079
762,164
(34,134)
-
(165,064)
445,358
59,079
597,100
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
70,783
10,870
146,976
42,068
59,079
329,776
AS AT 31 DECEMBER 2016
Cost
166,397
49,309
146,976
77,457
59,079
499,218
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
REVENUES FROM EXTERNAL CUSTOMERS BY CHANNEL
Print
Radio & Experiential
Digital & e-Commerce
2017
$’000
2016
$’000
221,319
110,071
56,327
239,127
114,849
52,153
Segment revenue from integrated media and entertainment activities
387,717
406,129
Revenue from shared service centre
Total revenues from external customers
Dividend income
Rental income from sub-leases
Expenses from operations before finance costs, depreciation,
amortisation and exceptional items
Total Segment Adjusted EBITDAA
Depreciation and amortisation
Interest income
Finance cost
EXCEPTIONAL ITEMS
Gain / (loss) on disposal of properties and businessesB
Masthead royalty chargesC
Redundancies and associated costsD
Costs in relation to one off projectsE
Profit / (Loss) before tax from continuing operations
2,971
1,727
390,688
407,856
128
632
141
586
(325,280)
(338,382)
66,168
70,201
(24,946)
(23,845)
139
293
(4,497)
(9,300)
(248)
-
(4,314)
(2,970)
29,332
1,320
(12,216)
(6,009)
(6,946)
13,498
(A) Adjusted Earnings before Interest, Tax, Depreciation and Amortisation (“Adjusted EBITDA”) from continuing operations which excludes exceptional
items, is a non-GAAP measure that represents the Group’s total segment result which is regularly monitored by the Chief Operating Decision Maker.
Exceptional items are those gains, losses, income and expense items that are not directly related to the primary business activities of the Group
which are determined in accordance with the NZME Exceptional Items Recognition Framework adopted by the Audit & Risk Committee. Exceptional
items include redundancies, impairment, one-off projects and the disposal of properties or businesses. These items are excluded from the segment
result that is regularly reviewed by the Chief Operating Decision Maker. (B) Gain / (loss) on disposal of properties and businesses is the loss on sale of
land in Ouruhia and Greymouth in 2017 and the gain on sale of the Wairarapa Times Age, Whakatane News offset by loss on sale of property in Nelson
in 2016. (C) Costs charged from a subsidiary company of HT&E for use of NZ publishing mastheads in 2016. On 24 June 2016, the Group acquired
certain NZ publishing mastheads on normal commercial terms from this subsidiary company of HT&E. 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 proposed merger
with Stuff and the continuing integration and co-location of NZME. In 2016 this also included costs relating to listing.
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.
Page 64
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GOODWILL
SOFTWARE
$’000
$’000
MASTHEAD
BRANDS
$’000
RADIO
LICENCES
$’000
BRANDS
TOTAL
$’000
$’000
FOR THE YEAR ENDED 31 DECEMBER 2017
Opening net book amount
70,783
10,870
146,976
42,068
59,079
329,776
Additions
Amortisation
Transfers and other adjustmentsC
-
-
-
1,932
(6,434)
8,142
-
-
-
90
(2,953)
-
-
-
-
2,022
(9,387)
8,142
Net book value
70,783
14,510
146,976
39,205
59,079
330,553
AS AT 31 DECEMBER 2017
Cost
166,397
59,384
146,976
77,547
59,079
509,383
Accumulated amortisation
and impairment
(95,614)
(44,874)
-
(38,342)
-
(178,830)
3.1.1 Year-end impairment review
Significant Judgement
As disclosed in note 2.4 the Directors have determined that 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 2017. 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.
Net book value
70,783
14,510
146,976
39,205
59,079
330,553
Key estimates and assumptions
(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 (now HT&E Limited (“HT&E”)). 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 HT&E. (B) The Company completed its demerger from HT&E on 29 June 2016. Refer to Note 6.1 and
the Consolidated Financial Statements for the year ended 31 December 2016 (available on the Company’s website) for further details around assets
disposed and acquired as part of the Internal Restructure. (C) Included in plant and equipment is capitalised work in progress which is transferred to
the relevant asset category (including software) once the project is complete (refer to note 3.2). Transfers and other adjustments primarily comprise
of transfers from work in progress during the year.
Integrated Media and Entertainment CGU
9.5%
0%
9.5%
0%
2017
2017
2016
2016
Post-tax
Long-term
Post-tax
Long-term
discount rate
growth rate
discount rate
growth rate
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 initially recognised at cost.
The current New Zealand radio licences expire on 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 initially recognised at cost. The Directors believe the
masthead brands have indefinite lives as there is no foreseeable limit over which they 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).
Brands
Brands are accounted for as identifiable assets and are initially recognised 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).
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 and
include cash flow assumptions for new digital ventures being launched in 2018.
· 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.
3.1.2 Impact of reasonably possible
change in key assumptions
The forecasts used in impairment testing
require assumptions and judgements
about the future, such as discount rates,
long term growth rates, forecasted print
and digital revenues, to which the model
is sensitive and which are inherently
uncertain. Given these uncertainties,
the Group has adopted a valuation
approach based on scenario analysis
for those scenarios that it considers to
be reasonably likely to occur. Based on
all available information, the directors do
not consider there to be any reasonably
possible change in the key assumptions
that would cause impairment. Accordingly,
based on the annual impairment assessment
performed, there is no impairment.
Page 66
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
3.2 PROPERTY, PLANT AND EQUIPMENT
AS AT 1 JANUARY 2016
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
(Footnotes on the next page)
FREEHOLD
LANDB
$’000
BUILDINGSB
$’000
PLANT AND
EQUIPMENTC
$’000
TOTAL
$’000
2,990
-
2,990
2,990
-
(752)
(1,133)
-
302
(26)
1,381
480
-
480
404,483
407,953
(308,737)
(308,737)
95,746
99,216
480
1,576
(98)
(714)
(2,217)
13,335
(17)
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
AS AT 31 DECEMBER 2016
Cost or fair value
Accumulated depreciation and impairment
Net book amount
YEAR ENDED 31 DECEMBER 2017
Opening net book amount
Additions
Disposals
Depreciation
Transfers and other adjustmentsC
Net book amount
AS AT 31 DECEMBER 2017
Cost or fair value
Accumulated depreciation and impairment
Net book amount
FREEHOLD
LANDB
$’000
1,381
-
1,381
1,381
-
(216)
-
-
1,165
1,165
-
1,165
BUILDINGSB
$’000
14,562
(2,217)
12,345
12,345
273
(8)
(2,302)
(29)
10,279
14,764
(4,485)
10,279
PLANT AND
EQUIPMENTC
$’000
TOTAL
$’000
336,730
352,673
(274,779)
(276,996)
61,951
75,677
61,951
12,759
(60)
75,677
13,032
(284)
(13,257)
(15,559)
(8,112)
53,281
(8,141)
64,725
338,715
354,644
(285,434)
(289,919)
53,281
64,725
(A) The Company completed its demerger from APN News & Media Limited (now HT&E Limited (“HT&E”)) on 29 June 2016. Refer to Note 6.1 and the
Consolidated Financial Statements for the year ended 31 December 2016 (available on the Company’s website) for further details around assets
disposed and acquired as part of the Internal Restructure. (B) Freehold land and buildings include leasehold improvements with a net book value of
$9,901,993 (2016: $11,942,062) carried at cost. All other 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 $442,270 (2016: $658,270) and the net book
value of buildings would have been $336,973 (2016: $347,504). 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 $8,149,802 (2016: $7,285,650) 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. Work in progress is not depreciated until the asset is completed.
Page 68
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
3 to 25 years
Buildings
10 to 25 years
Leasehold improvements
3 to 25 years
Motor vehicles
Plant & equipment
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 (excluding leasehold improvements) are recorded 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, furniture and fittings and motor vehicles are 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.
3.3 TRADE AND OTHER RECEIVABLES
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
2017
$’000
44,811
(592)
44,219
1,028
10,076
55,323
1,042
430
(880)
592
2016
$’000
45,043
(1,042)
44,001
750
8,880
53,631
2,146
596
(1,700)
1,042
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. 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.
Page 70
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.4 TRADE AND OTHER PAYABLES
CURRENT PAYABLES
Lease liabilityA
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 liabilityA
Total non-current trade and other payables
2017
$’000
2016
$’000
833
1,194
7,211
47,656
56,894
833
2,654
7,104
55,788
66,379
13,565
13,565
13,423
13,423
(A) Lease liability includes lease incentives received on operating leases.
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.
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 and note 7.1.1 for key management compensation.
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)
Net tangible assets per share
2017
$’000
2016
$’000
468,085
483,540
(330,553)
(329,776)
(179,053)
(197,981)
(41,521)
(44,217)
196,011
196,011
($0.21)
($0.23)
Page 72
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.0 CAPITAL MANAGEMENT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 SHARE CAPITAL
AUTHORISED, ISSUED
AND PAID UP SHARE CAPITAL
2017
NUMBER
‘000
2016
NUMBER
‘000
2017
$’000
2016
$’000
Balance at the beginning of the period
196,011
378,550
360,363
360,363
Shares consolidated as part of the demergerA
-
(182,539)
-
-
Balance at the end of the period
196,011
196,011
360,363
360,363
(A) On demerger, NZME shares were distributed to eligible APN News & Media Limited (now HT&E Limited (“HT&E”)) shareholders at a ratio of one
NZME share for every one HT&E share. Also refer to note 6.1 and the Consolidated Financial Statements for the year ended 31 December 2016
(available on the Company’s website) 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
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 earnings
Balance at end of year
Total reserves
2017
$’000
2016
$’000
144
1,225
1,369
722
-
722
-
144
144
1,186
(464)
722
309
(44,537)
-
(15)
(15)
294
44,844
2
44,846
309
(6,373)
8,359
6,373
(14,732)
-
(6,373)
2,385
(5,198)
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.
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.
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. In the event of the sale of an asset,
the revaluation surplus is transferred to retained earnings.
Transactions with non-controlling interests reserve
Following the demerger, there is no non-controlling interest
in any of the Group’s subsidiaries and the remaining
balance at the beginning of the year relates to historical
transactions with minority interests in entities that are
still part of the Group. Given that there are no non-
controlling interests in any of the Group entities, the
remaining balance has been transferred to another
category of equity; retained earnings.
4.3 SHARE BASED PAYMENTS
2017
2016
AVERAGE PRICE
PER RIGHT
(CENTS)
NUMBER OF
RIGHTS
AVERAGE PRICE
PER RIGHT
(CENTS)
NUMBER OF
RIGHTS
0.58
0.58
0.90
0.58
-
0.81
745,301
70,236
1,933,927
(101,820)
-
-
0.58
-
-
-
-
745,301
-
-
-
2,647,644
0.58
745,301
As at 1 January
Granted (2016 TIP)A
Granted (2017 TIP)
ForfeitedB
Exercised
As at 31 December
(A) Included in the number of rights granted for the year ended 31 December 2017 are 70,236 rights granted at a price of $0.58 per right relating to
the 2016 TIP based on the final number of rights approved by the Board in March 2017. Under the 2016 Plan, the participants will be entitled to
additional shares (not reflected in the rights above) when the rights are exercised (on 31 December 2019) for any dividends foregone during the
period 1 January 2017 to 31 December 2019. For dividends declared during the period 1 January 2017 to 31 December 2017, this will result in an
additional 96,862 shares being issued to the participants. (B) Two participants in the 2016 TIP departed prior to the completion of the Service
Period and forfeited their rights under the 2016 TIP.
Share rights outstanding at the end of the year have the following expiry date and fair value at grant date:
GRANT DATE
VESTING DATE
VALUE OF RIGHT
AT GRANT DATE
(CENTS)
20 December 2016
25 September 2017
As at 31 December
31 Dec 2017
31 Dec 2018
0.58
0.90
Share based payment expense recognised
in the current period (refer to note 4.2)
Weighted average remaining time until rights outstanding at the end of
the period vest
Weighted average remaining time until rights outstanding at the end of
the period automatically converts to ordinary shares
PERFORMANCE RIGHTS
2017
$’000
414
1,741
2,155
1,225
2016
$’000
432
-
432
144
2017
2016
12 months
12 months
34 months
36 months
Page 74
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.3.1 Background
Total incentive plan (“TIP”)
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 after
the date that the full year financial performance is
announced to the market.
4.3.2 2017 TIP
Performance measures
Financial performance conditions (50%): 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%
Business Unit Goals (25%):This portion is determined
based on actual achievement against Business Unit
(“BU”) Goals on the following scale:
% of BU Goal
achieved
< 95%
> 95% to 100%
> 100% to 110%
% of target
opportunity awarded
25%
Pro-rata vesting between
25% and 100%
Pro-rata vesting between
100% and 150%
Individual performance conditions (25%): This portion is
determined against individual performance conditions,
as determined for each participant. The TIP award is
earned if all of the individual performance conditions
have been achieved, although the Board has discretion
to award less than a 100% of the target for partial
performance and more than a 100% of the target for
exceptional performance.
Awards under the TIP are granted to participants
following the assessment of performance. To the
extent that 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 2017 awards is a twelve
month period which commenced on 1 January 2017.
Subject to remaining employed by the Company for
a further one year period following the performance
period (“service period”), rights will vest. The vested
rights cannot be exercised 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. At the
discretion of the Board, validly exercised rights may
be satisfied in cash, rather than in shares. Participants
are not entitled to receive any dividends for the rights
they hold, but the Board may, at its sole discretion,
allocate shares or make a cash payment to participants
equal to the value of dividends that were payable
whilst holding the unvested and/or vested rights.
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 25 September
2017, being the date on which the terms, as approved
by the Board, 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 for the first 5 trading days of
the Performance Period.
Model inputs
The following is a summary of the key inputs in calculating the share-based payment expense under the 2017 TIP:
Performance Period
Service Period
1 January 2017 to 31 December 2017
1 January 2018 to 31 December 2018
Vesting Period (being the Performance Period and the Service Period)
1 January 2017 to 31 December 2018
Deferral Period
Share price at grant date
VWAP
1 January 2019 to 31 December 2020
90 cents
59.4 cents
It is assumed that all participating employees will remain employed with the Company until the end of the Vesting Period.
4.3.3 2016 TIP
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 when rights are
exercised equal to the dividends paid on vested Rights
over the Vesting Period and the Deferral 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 on which the terms, as approved
by the Board, 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 for the first 5 trading days of
the Performance Period.
Page 76
Page 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Model inputs
The following is a summary of the key inputs in calculating the share-based payment expense under the 2016 TIP:
Performance Period
Service Period
1 July 2016 to 31 December 2016
1 January 2017 to 31 December 2017
Vesting Period (being the Performance Period and the Service Period)
1 July 2016 to 31 December 2017
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
Total incentive plan (TIP)
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 over the first 5 trading days
of the performance period.
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.
4.4 DIVIDENDS
4.4.1 Dividends paid
On 23 February 2017, the Board of Directors declared
a fully imputed final dividend for the year ended 31
December 2016 of 6 cents per share, 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, paid on 28 April 2017
to registered shareholders as at 11 April 2017, to those
shareholders who are not tax residents in New Zealand
and who hold less than 10% of the shares in the Company.
On 24 August 2017, the Board of Directors declared a
fully imputed interim dividend of 3.5 cents per share,
paid on 27 October 2017 to registered shareholders
as at 17 October 2017. The Board of Directors also
declared a supplementary dividend of 0.62 cents
per share, paid on 27 October 2017 to registered
shareholders as at 17 October 2017, to those shareholders
who are not tax residents in New Zealand and who
hold less than 10% of the shares in the Company. 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).
4.4.2 Dividends declared after balance date
On 21 February 2018, the Board of Directors declared
a fully imputed final dividend of 6 cents per share, to
be paid on 3 May 2018 to registered shareholders as
at 18 April 2018. The Board of Directors also declared
a supplementary dividend of 1.06 cents per share, to
be paid on 3 May 2018 to registered shareholders as
at 18 April 2018, to those shareholders who are not
tax residents in New Zealand and who hold less than
10% of the shares in the Company. 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).
4.4.3 Franking and imputation credits
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
2017
‘000
2016
‘000
NZ$ 8,519
NZ$4,739
AU$ 0 A
AU$ 0 A
(A) Although the Company does not have any franking credits available for use, other entities within the Group have AU$10,828,676
(2016:AU$10,828,676) available that might become available to the Company in future periods.
4.5 INTEREST BEARING LIABILITIES
Non-current interest bearing liabilities
Bank loans – secured
Deduct:
Capitalised borrowing costs
Total non-current interest bearing liabilities
NET DEBT
Non-current interest bearing liabilities
Capitalised borrowing costs
Cash and cash equivalents
Total debt less cash and cash equivalents
2017
$’000
2016
$’000
100,000
112,486
(212)
(318)
99,788
112,168
100,000
112,486
(212)
(318)
(9,570)
(16,242)
90,218
95,926
Page 78
Page 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The change in the bank loans - secured balance for the
year ended 31 December 2017 of $12,486,375 is due to
proceeds from borrowings / repayments of borrowings
as reflected in the consolidated statement of cash flows.
The change in capitalised borrowing costs of $212,220
for the year ended 31 December 2017 is due to the
amortisation of those capitalised borrowing costs over
the period of the loan.
The interest rate for the drawn facility is the applicable
bank screen rate plus credit margin.
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. The assets of the Group are
collateral for the interest bearing liability.
The Group is funded 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
$100 million (2016: $112.5 million) is drawn and $60
million (2016: $47.5 million) is undrawn as at 31 December
2017. The facility expires on 1 January 2020.
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.
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.
4.6 COMMITMENTS
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
2017
$’000
2016
$’000
16,389
48,973
62,185
16,406
52,307
71,856
Commitments not recognised in the financial statements
127,547
140,569
4.7 CASH FLOW INFORMATION
RECONCILIATION OF CASH
2017
$’000
2016
$’000
Cash at end of the year, as shown in the statements of cash flows, comprises:
Cash and cash equivalents
9,570
16,242
RECONCILIATION OF NET CASH INFLOWS (OUTFLOWS) FROM OPERATING
ACTIVITIES TO PROFIT / (LOSS) FOR THE YEAR:
Profit / (loss) for the year
Depreciation and amortisation expense
Borrowing cost amortisation
Net loss 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
20,885
74,543
24,946
26,193
106
216
-
-
2,837
-
-
-
-
-
1,225
(187)
299
(1,505)
53
9
(192,519)
65,326
41,289
(12,842)
1,086
15
(2,245)
31,481
144
51,104
730
(306)
Trade and other payables and employee benefits
Net cash inflows/(outflows) from operating activities
(9,367)
(22,379)
39,455
61,682
Page 80
Page 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 cost of capital.
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
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 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 interest rate risk and credit risk, use
of derivative financial instruments and
non-derivative financial instruments, and
investment of excess liquidity. Due to
the Group’s limited operations in foreign
jurisdictions, the Group does not have a
significant foreign exchange exposure.
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 regarding variable or
fixed rate debt as and when debt contracts
are entered into. Current interest bearing
debt is fixed for 30 days on a rolling basis.
Based on the outstanding net floating debt
at 31 December 2017, a change in interest
rates of +/-1% per annum with all other
variables being constant would impact post-
tax profit and equity by $1.0 million lower/
higher (2016: $1.1 million lower/higher).
(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.
The table below sets out additional information about the credit quality of trade receivables net of the
provision for doubtful debts:
LESS
THAN ONE
MONTH
$’000
ONE TO
THREE
MONTHS
$’000
PAST DUE
THREE
TO SIX
MONTHS
$’000
OVER SIX
MONTHS
TOTAL
$’000
$’000
2017
Expected loss rate
Trade Receivables
Impaired receivables
2016
Expected loss rate
Trade Receivables
Impaired receivables
CURRENT
$’000
0.0%
30,308
0.6%
10,601
(65)
30,308
10,536
0.0%
23,890
0.7%
17,186
(121)
23,890
17,065
4.6%
1,929
(89)
1,840
6.5%
2,616
(171)
2,445
13.7%
1,258
(172)
1,086
47.8%
619
(296)
323
37.2%
715
(266)
449
62.0%
732
(454)
278
44,811
(592)
44,219
45,043
(1,042)
44,001
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.
As of 31 December 2017, trade receivables of $3,375,000 (2016: $3,046,000) were past due but not impaired.
The maximum exposure to credit risk at 31 December is equal to the carrying amount of cash and cash 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.
Page 82
Page 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
31 DECEMBER 2017
Trade payables
Bank loans
Gross liability
Less: interest
Total financial liabilities
31 DECEMBER 2016
Trade payables
Bank loans
Gross liability
Less: interest
Total financial liabilities
LESS THAN
ONE YEAR
$’000
BETWEEN ONE
AND TWO YEARS
$’000
BETWEEN TWO
AND FIVE YEARS
$’000
OVER FIVE
YEARS
$’000
47,656
4,022
51,678
(4,022)
47,656
55,788
4,480
60,268
(4,480)
55,788
-
4,022
4,022
(4,022)
-
-
4,480
4,480
(4,480)
-
-
104,022
104,022
(4,022)
100,000
-
116,966
116,966
(4,480)
112,486
-
-
-
-
-
-
-
-
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 (excluding leasehold
improvements).
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).
4.9.2 Recognised fair value measurements
RECURRING FAIR VALUE MEASUREMENTS (LEVEL 3)
There are no financial assets carried at fair value. Other financial assets of $5,988,765
(2016: $5,988,765) are held at cost and therefore have been excluded from this table.
NON-FINANCIAL ASSETS
Freehold land and buildings
Freehold land
Buildings (excluding leasehold improvements)
Total non-financial assets
2017
$’000
2016
$’000
1,165
377
1,542
1,381
403
1,784
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 2017 or 31 December 2016 (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 2017,
the borrowing rates were determined to be between
3.3% and 4% (2016: between 3.5% and 4%), 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.
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 the
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.
Page 84
Page 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.0 TAXATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 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
2017
$’000
2016
$’000
10,529
(1,972)
(110)
8,447
70,791
8,175
(3,310)
75,656
8,447
64,050
-
8,447
11,606
75,656
29,332
-
29,332
8,213
-
(27)
675
-
-
(8)
-
(296)
(110)
8,447
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
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
2016
Tax credits
Tax losses
Employee benefits
Doubtful debts
Accruals / restructuring
Intangible assets
Property plant and
equipment
Other
2017
Tax credits
Employee benefits
Doubtful debts
Accruals / restructuring
Intangible assets
Property plant and
equipment
Other
1,890
67,149
2,987
636
705
(1,887)
(61,549)
(1,554)
(345)
397
-
-
-
-
-
(43,155)
42,031
595
(8,860)
3,490
(11,383)
9,969
11,242
(8,175)
3
1,433
291
1,102
(529)
(5,370)
(141)
(3,211)
-
765
(126)
(560)
37
1,720
136
1,972
-
(5,600)
-
-
-
-
-
-
3
-
1,433
291
1,102
(529)
(5,370)
(141)
-
-
595
(5,600)
(3,211)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
2,198
165
542
(492)
(3,650)
(5)
(1,239)
Page 86
Page 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
There are unrecognised tax losses of $1,917,077 (AUD1,744,812) (2016: $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.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.0 GROUP STRUCTURE AND INVESTMENTS IN OTHER ENTITIES
6.1 NZME DEMERGER FROM APN
On 11 May 2016, APN News & Media Limited (subsequently
rebranded as HT&E Limited (“HT&E)) then the ultimate
parent entity of the Company announced a demerger
of 100% of the Group to HT&E shareholders (“Demerger”),
subject to a majority shareholder vote held on 16 June
2016. The Demerger was approved by the requisite
majority of HT&E 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.
Detailed disclosures regarding the demerger (which affects
the comparative figures included in these consolidated
financial statements) are included in the audited
consolidated financial statements for the year ended
31 December 2016 available on the Company’s website.
6.2 CONTROLLED ENTITIES
Significant Judgement
Prior to the Demerger as described in note 6.1, the Group held 50% of the issued capital of Australia Radio
Network Pty Ltd, 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.
There were no changes in control during the year
ended 31 December 2017.
Page 88
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, other than for common control transactions.
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.
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. 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
ESKY Limited
Grabone Limited
Idea HQ Limited
Mt Maunganui Publishing Co Limited
NZME 2014 Limited
NZME Australia Pty LimitedA
NZME Digital Limited
NZME Educational Media Limited
NZME Finance Limited
NZME Holdings Limited
NZME Investments Limited
NZME Online Limited
NZME Print Limited
NZME Publishing Limited
NZME Radio Investments Limited
NZME Radio LimitedB
NZME Specialist Limited
NZME Trading Limited
Regional Publishers Limited
Sell Me Free Limited
Sella Limited
Stanley Newcomb & Co Limited
The Hive Online Limited
New Zealand Radio Network Limited
The Radio Bureau Limited
Trade Debts Collecting Co Limited
W & H Interactive Limited
2017
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%
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%
(A) Incorporated in, and operates in, Australia. (B) One “Kiwi Share” held by the Minister of Finance. The rights and obligations are set out in the
NZME Radio constitution.
Page 90
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.3 INTERESTS IN OTHER ENTITIES
6.3.1 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
OWNERSHIP
INTEREST
2017
OWNERSHIP
INTEREST
2016
50%
40%
25%
50%
40%
25%
New Zealand Press Association LimitedA
38.82%
38.82%
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
The New Zealand Press Council IncorporatedC
Radio Broadcasters Association IncorporatedC
40%
21%
49%
50%
40%
21%
49%
50%
40.41%
40.41%
20%
20%
-
-
-
-
-
-
(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 6.3.2). (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
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.
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.
6.3.2 Other financial assets
Shares in other corporations
Total other financial assets
2017
$’000
5,988
5,988
2016
$’000
5,988
5,988
Shares in other corporations consist of investments in entities that are not consolidated or equity accounted
(see also note 6.3.1). These investments are carried at cost.
Page 92
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.0 OTHER NOTES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.1 RELATED PARTIES
7.1.1 Key management compensation
TOTAL REMUNERATION FOR DIRECTORS
AND OTHER KEY MANAGEMENT PERSONNEL:
Short term benefits
Termination benefits
Dividends
Share-based payments
2017
$’000
2016
$’000
5,935
5,510
364
33
1,225
7,557
52
10
144
5,716
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.
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 $2,768,773 (2016: $2,359,475)
and paid commission of $412,931 (2016: $358,782).
7.1.2 Other transactions with related parties
During the year, the Group purchased print services
worth $3,385,000 (2016: $4,134,000) from The
Beacon Printing & Publishing Company Limited, a
company in which the Group holds an interest in.
New Zealand entities in the Group offset tax losses to
New Zealand entities outside the Group of $nil (2016:
$35,110,134) for consideration of $nil (2016: $9,830,837).
In November 2015, the Company, Stuff, TVNZ and
The Group has commitments to provide future services
(such as house advertising, occupancy space at
NZME offices, business as usual finance and human
resources support) to certain joint ventures and
associates. During the year such services were
provided to Eveve New Zealand Limited, valued at
$66,879 (2016:$10,706), Restaurant Hub Limited, valued
at $281,923 (2016:$41,415) and Ratebroker Limited,
valued at $1,174,394 (2016: $nil). The outstanding
balances for future services are included in the table
below, along with other receivables and payables.
2017
RECEIVABLES
$’000
2016
RECEIVABLES
$’000
2017
PAYABLES
$’000
2016
PAYABLES
$’000
Balances with related party
KPEX Limited
Chinese New Zealand Herald Limited
Eveve New Zealand Limited
Restaurant Hub Limited
Ratebroker Limited
1,028
750
-
-
-
-
-
-
-
-
148
43
28
449
526
Total related party receivables and payables
1,028
750
1,194
113
43
194
604
1,700
2,654
7.1.3 Transactions with pre-Demerger
related parties
The Company was, until the 29 June 2016,
a wholly owned subsidiary of the APN
News & Media Limited (subsequently
rebranded as HT&E Limited (“HT&E”))
group. The transactions with these
HT&E 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.
In 2016 amounts due from related parties
of $304,931,000 and amounts due to
related parties of $322,304,000 have
been settled, with a significant portion of
the settlement occurring as part of the
internal restructure prior to the Demerger
(refer to Note 6.1 for further details).
In 2016 the Group charged interest of
$358,780 to Biffin Pty Ltd a member of
the HT&E Group. Biffin Pty Ltd charged
management fees to NZME Holdings
Limited of $611,056. A Group company,
NZME Holdings Limited, charged shared
services fees totalling $1,456,000 to
related parties.
In 2016, Biffin Pty Ltd repaid loans of
$5,012,246 to Group companies.
In 2016, Wilson & Horton Finance Pty
Ltd, New Zealand Branch (the “Branch”),
charged royalty fees of $12,216,000,
advanced $13,200,000, repaid loans
of $539,000 and charged interest of
$2,765,000 to the Group. The Group
charged the Branch, office rental and
service fees of $78,000.
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. The
Group has previously disclosed that
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. This matter has now been
settled on confidential terms.
7.3 SUBSEQUENT EVENTS
Refer to note 1.4.2 for a description of
events relating to the proposed merger
with Stuff and note 4.4.2 for the dividend
declared after the balance date.
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.
Recognition of deferred tax assets for
unrealised losses (Amendments to NZ
IAS 12) (effective 1 January 2017)
Amendments to clarify that unrealised
losses on debt instruments measured
at fair value for accounting purposes,
but at cost for tax purposes, can give
rise to deductible temporary differences;
when determining whether future taxable
profits are available against which
deductible temporary differences may
be utilised, tax deductions resulting
from the reversal of those deductible
temporary differences are excluded;
and estimates of future taxable profits
may take into account the recovery
of an asset for more than its carrying
amount if there is sufficient evidence
that this recovery is probable. None of
these changes had a material impact on
disclosures or amounts recognised in
these consolidated financial statements.
Disclosure initiative (Amendments to NZ
IAS 7) (effective 1 January 2017)
The amendments to NZ IAS 7 require
disclosures that allow users of financial
statements to evaluate changes in
liabilities which arise from financing
activities (this includes both changes
arising from cash flows and non-cash
changes). The amendments apply
prospectively from 1 January 2017 and
no comparative information is required
in the first year of application. Additional
disclosures for the year ended 31
December 2017 are included in note 4.5.
Page 94
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.5 STANDARDS AND
INTERPRETATIONS ISSUED
BUT NOT YET EFFECTIVE
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. Although
the full impact of this standards has
not yet been determined, it will result
in additional assets and liabilities when
the current operating leases are brought
on to the balance sheet; with interest
and depreciation replacing the current
operating lease expense when the
standard is adopted.
finalised, we currently expect the standard
to result in us concluding that the nature
of our promises (and therefore the
performance obligations) in certain
contra and experiential contracts are
that we act as a principal and not as an
agent as previously concluded (i.e. the
nature of the performance obligations in
those contracts are obligations to provide
specified goods or services as opposed
to arranging for those goods and services
to be provided by another party). This is
expected to result in an increase in both
revenue and the related costs (i.e. the
revenue and costs are shown on a gross
basis and not on a net basis), without any
material impact on profit for the year.
The Group does not currently expect the
standard to have a material impact on the
timing of revenue recognition.
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.
The standard permits either a full
retrospective or a modified retrospective
approach for adoption. The Group
currently intends to adopt the standard
using the modified retrospective approach,
which means that the cumulative impact
(if any) of the adoption will be recognised
in retained earnings as at 1 January 2018
and that comparatives will not be restated.
The Group is currently assessing the
effects of applying the new standard on
the consolidated financial statements.
Although this assessment has not been
All other standards, interpretations and
amendments issued but not yet effective
are either not applicable to the Group or
not material.
Independent auditor’s report
To the shareholders of NZME Limited
The consolidated financial statements (“financial statements”) comprise:
the consolidated balance sheet as at 31 December 2017;
the consolidated income statement for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include the principal accounting policies.
Our opinion
In our opinion, the 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 2017, 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 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, advisory services in connection with the potential merger with Fairfax, and other assurance
services including circulation and payroll assurance services. The provision of these other services has
not impaired our independence as auditor of the Group.
Page 96
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Our overall group materiality was $1,845,000, which represents 5% of profit
before tax, excluding one-off expense items incurred during the year.
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.
We have determined that there is one key audit matter for the year to 31
December 2017, being the 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 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 financial statements as a whole.
Audit scope
We designed our audit by assessing the risk of material misstatement in the 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 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.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current year. The key audit matter below was addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on this matter.
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 ($70.8 million), masthead
brands ($147.0 million), and brands
($59.1 million) have a combined carrying
value of $276.9 million at 31 December
2017 and represent 59% of the total assets
of the Group.
In completing their annual impairment
assessment management utilised a value
in use methodology, reflecting the
strategic direction of NZME, to determine
the value of the business using
discounted cash flows. This assessment
is complex in nature and includes key
estimates and assumptions made by
management, particularly in the
following areas:
The assessment that the NZME
business constitutes one CGU.
The expected future trading results of
both existing activities and new
ventures which are based on budgets
and forecasts which have been
approved by the Board of Directors.
The weighted average cost of capital
of 9.5% used as the discount rate in
the model.
The application of a 0% long term
growth rate for the purposes of
impairment testing.
Considering sensitivity by
determining other reasonably possible
scenarios and assessing the impact on
the valuation of these scenarios.
In their sensitivity analysis management
identified that the model was sensitive to
the discount rate, long term growth rate,
We understood the strategic objectives of the business
to enable us to evaluate the impairment assessment
performed by management.
We gained an understanding of the business, how it is
managed, and how the results are reported to
management and the Directors in order to understand
management’s determination that NZME constitutes
one CGU.
We tested the mathematical accuracy of the model by
reperforming the calculation of the recoverable
amount of the business, based on the same estimates
and assumptions used by management. We then
agreed the relevant net assets of the Group to the
audited carrying values.
We also assessed key estimates and assumptions made
by management. Our audit procedures included the
following:
We gained an understanding of the business
process and controls applied by management
in their impairment assessment.
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 for both existing activities and
new ventures in the cash flow forecasts, in
particular revenue growth for each channel,
the expected trends of print and digital
revenues, forecast margins and terminal
growth rates. This was done with reference to
the historic performance of the Group, key
initiatives being undertaken and comparison
to the results of comparable companies and
available broker reports.
We engaged an auditor’s expert to recalculate
a reasonable range for the weighted average
cost of capital used as the discount rate in the
model and determined that the discount rate
PwC
98
50
PwC
99
51
Key audit matter
How our audit addressed the key audit matter
forecasted print and digital revenues.
The impairment assessment completed
by management calculated the
recoverable amount of the business as
higher than the carrying value of
applicable net assets and no impairment
was identified.
used by management was materially
consistent with this.
We considered a range of reasonably possible
scenarios, including those identified by
management. For each scenario we tested the
mathematical accuracy of the changes made to
each assumption, and the impact of those
changes on the valuation and comparison to
the relevant net asset value of the Group.
We reviewed the disclosures in the financial
statements to ensure that they are compliant with the
requirements of the relevant accounting standards and
we have no other matters to report.
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the 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 the other information.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the 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 this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard, except that
not all other information was available to us at the date of signing our auditor’s report.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the 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 financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the 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 financial statements
Our objectives are to obtain reasonable assurance about whether the 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 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://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
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
21 February 2018
Auckland
PwC
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PwC
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DIRECTORY
REGISTERED ADDRESS
NZME Limited
2 Graham St
Auckland 1010
New Zealand
REGISTERED OFFICE CONTACT DETAILS
Private Bag 92192
Postal Address:
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:
Postal Address:
Phone:
Fax:
www.linkmarketservices.co.nz
enquiries@linkservices.co.nz
Level 11, Deloitte House,
80 Queen Street, Auckland
PO Box 91976,
Auckland 1142
09 375 5998
09 375 5990
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