Annual Report
NZME Limited
For the year ended 31 December 2018
For the year ended 31 December 2018
There is no doubt that parts
of our industry continue to
face significant challenges,
but the 2018 results suggest
that we are on the right track
and we look forward to
embracing the exciting
opportunities NZME has
to grow.
Page 2
TABLE OF
CONTENTS
NZME 2018 Results Summary
Chair’s Report
Chief Executive Officer’s Report
Channel Results
Corporate Social Responsibility Report
The NZME Board
The NZME Executive Team
Corporate Governance
Other Statutory Information
Consolidated Financial Statements
Independent Auditor’s Report
Directory
This annual report is dated 29 March 2019 and is signed on behalf of the Board of Directors by:
Peter Cullinane
Director
Carol Campbell
Director
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Page 3
NZME 2018
RESULTS SUMMARY
Results impacted by
Pro-active investment
in Digital Classifieds
Agency market
headwinds
Statutory NPAT
$11.6m
Trading Revenue1
Trading EBITDA1
$378.4m
$54.7m
2017 $20.9m
44%
2017 $387.7m
2%
2017 $66.2m
17%
Trading NPAT1
$18.9m
2017 $26.7m
29%
Trading Earnings
Per Share1
9.6cps
2017 13.6cps
29%
Final Dividend
nil
2018 total dividends
2 cents per share
(1) Trading measures used throughout this Annual Report are non-GAAP measures that are explained and reconciled
on pages 34 and 35 of the NZME Full Year 2018 Results Presentation available on the Company’s website.
Page 4
The New Zealand Herald
remains the most-read and
highest-selling newspaper
in the country.
Page 5
CHAIR’S REPORT
NZME’s financial results for 2018 reflect progress
New Zealand Agency advertising demand in Radio,
on our strategy of growing new revenue streams
Digital and Print. NZME’s overall revenue decline
and retaining revenue from traditional advertising
was 2% in 2018, an improvement on the 4% decline
sources. While New Zealand advertising demand was
experienced in 2017.
softer in 2018 due to economic conditions, the rate
of decline in NZME’s revenue and earnings slowed
again, suggesting we are making constructive
headway on our plans.
We have strengthened the Company’s prospects
by investing in a number of promising new revenue
opportunities to grow long term shareholder value.
By improving declines in print revenue and planting
the seeds of growth in other areas, NZME made solid
progress on its strategy.
Following the completion of the Board’s capital
review in November 2018, NZME refinanced its debt
and announced a revised Capital Management
Policy, which supports our long-term strategic and
financial objectives and operational priorities to
maximise shareholder value. The near-term objective
of the policy is to reduce gearing while maintaining
An improved final quarter, saw the rate of decline in
Print advertising revenue also slow from previous years,
supported by the Travel category, which benefitted from
strong growth in advertising by the cruise ship industry.
NZME maintained its 39% share of radio advertising
market revenue4 and continued to focus on
delivering the best offer to inform, entertain and
attract listeners. This supported an improvement in
Direct Radio revenue, notwithstanding the impact
of weak Agency demand on overall Radio revenue.
Digital advertising revenue growth slowed in 2018,
also impacted by Agency demand. The Digital
market continues to evolve but retains highly
attractive fundamentals and we expect it to remain
a key long-term driver of growth5, which is why it
remains the focus of our growth investment.
investment in growth opportunities and paying
Since launch in March 2018, NZME’s real estate
dividends when trading and investment conditions
classifieds portal, OneRoof, has made significant
permit. Consistent with the policy, the Board has
progress, growing real estate listings and audience
elected not to declare a final dividend with respect
to deliver modest but growing revenue. Our
to the 2018 financial year. Total dividends for 2018
employment and automotive portals, YUDU and
were 2.0 cents per share, fully imputed, and paid
DRIVEN, also continue to show potential.
in October 2018. While the near-term focus of the
policy is to reduce gearing and fund growth, we
recognise that dividends are an important part of total
shareholder returns. As such, it is the Board’s intention
that NZME remain a dividend paying company.
We have made good progress towards launching
digital subscriptions in the second quarter of 2019.
Following the launch of digital subscriptions we will
continue to deliver the majority of our day-to-day news
and current affairs free of charge to our audience of
NZME’s audience of 3.3 million New Zealanders1
1.7 million6, who will also have the opportunity to
represents 80% of the New Zealand population,
access premium content on subscription.
and remains a key driver of the value of the
Company. The New Zealand Herald daily brand
audience exceeded 1 million2 and engagement on
nzherald.co.nz, as measured by time spent per visit,
improved in 20183.
Industry consolidation has been a powerful trend
within the media sector that is expected to continue.
While NZME has determined to not appeal the Court
of Appeal’s decision in relation to the proposed
merger with Stuff Limited, bringing that merger
NZME’s advertising revenue faced ongoing structural
process to a conclusion, NZME will continue to
pressures in the print advertising market and weaker
pursue opportunities that support our strategic
business and consumer confidence, which impacted
objectives and add value for shareholders.
Page 6
In 2018, the Board was pleased to appoint Barbara
We have some of New Zealand’s most recognised
Chapman and Sussan Turner as non-executive
and respected brands, an audience reach that is
directors. Both directors are highly credentialed
difficult to replicate, exceptional people throughout,
in consumer facing businesses, having held
and a unique integrated print, radio and digital
CEO positions at leading companies in the retail
offering. This places us in a strong position to grow
banking sector and media and education sectors
shareholder value in the long term.
respectively. This experience complements the
strategy and finance skills of David Gibson, who was
appointed in late 2017. The Board has a balanced
mix of experience and skills appropriate to the NZME
business and strategy.
The Board would like to thank the entire NZME team
for their commitment and dedication throughout the
year. Everyone at NZME works very hard to create a
positive working environment and contribute to our
success and the Board appreciates this effort.
Peter Cullinane
Chair
There is no doubt that parts of our industry continue
to face significant challenges, but the 2018 results
suggest that we are on the right track and we look
forward to embracing the exciting opportunities
NZME has to grow.
(1) Nielsen CMI October Fused Q4 17 to Q3 18 October 2018
(population 10+ years). (2) Nielsen CMI Q1 18 – Q4 18 AP 15+,
represents a combination of Print readership and Digital audience.
(3) Nielsen Market Intelligence Domestic Traffic (1 Jan 18 – 31 Dec
18). (4) PwC Radio Advertising Benchmark Report, Q3 18. (5) PwC
Outlook NZ Entertainment & Media 2018 – 2022. (6) Nielsen Online
Ratings, December 2018.
Page 7
CHIEF EXECUTIVE OFFICER’S
REPORT
NZME’s revenue performance was satisfactory,
Net debt was $98.3 million at 31 December 2018,
given the economic headwinds faced in 2018 which
down from $106.1 million at 30 June 2018 and up
affected Agency advertising demand. Taking this
from $90.2 million at 31 December 2017. Net cash
backdrop into account, containing the decline in Print
flow was impacted by reduced Trading EBITDA,
revenue was a standout. We are also excited about
changes in working capital and the timing of 2017
the performance of our real estate portal, OneRoof,
tax payments. Capital expenditure was $14.1 million
including its early stage contribution to revenue.
in 2018, compared to $15.1 million in 2017. Net debt
The New Zealand Herald continues to enjoy strong
readership with the weekly readership of NZME’s
daily print publications greater than the readership of
the rest of the daily print market combined.1 NZME’s
Radio audience and revenue share was stable. DRIVEN
to 12-month rolling Trading EBITDA was 1.8 times,
above our target range of 1.0 to 1.5 times. NZME
retains significant headroom on its existing facilities
with undrawn bank facilities of $51.7 million as at
31 December 2018.
and YUDU continue to show potential and OneRoof
2019 STRATEGIC PRIORITIES
enjoyed strong audience and listings growth.
NZME’s long-term strategy is based on a three-
Print revenue declined 4% benefitting from an extra
publishing week in 2018 and a strong print travel
horizon model, focusing on:
1. Optimising our core businesses;
sector, and Radio and Experiential revenue declined
2. Growing new revenue streams that leverage
3% due to challenges in the Agency advertising
existing audience and customer relationships; and
market. These declines were partially offset by 6%
3. Re-imagining revenue models that address
growth in Digital revenue. All channels were affected
unmet customer needs.
by a 4% decline in Agency advertising demand
across the New Zealand market, reflecting weaker
business confidence.
Given the changes in financial reporting standards,
we provide “Trading” figures that offer a useful view
of NZME’s underlying performance.2
In 2019, we are narrowing our focus to horizon 2;
revenue growth, in three main areas:
1. Leading the future of news and journalism
in New Zealand;
2.
Increasing radio capability and performance; and
3. Creating New Zealand’s leading real estate
Statutory Net Profit After Tax (“NPAT”) declined
platform.
44% on 2017 to $11.6 million and Statutory Earnings
Per Share (“EPS”) declined to 9.7 cents. Trading
Earnings Before Interest, Tax, Depreciation and
Amortisation (“EBITDA”)2 declined 17% on 2017. Total
Trading costs2 increased 1% compared to 2017, with
efficiency improvements offset by additional costs
associated with an additional publishing week in
2018, an increase in contractual property operating
expenses and a $6.1 million incremental investment
in the Digital Classified businesses.
Leading the future of news and journalism
In line with our strategy to leverage audience reach
and brand strength to grow new revenue streams,
NZME intends to launch paid content on its digital
mastheads in the second quarter of 2019. The new
platform will deliver access to the best content
from four top global publishers and an unrivalled
local team of premium journalists across business,
politics, news, sport, lifestyle and entertainment.
We intend to maintain our current audience of
Our Trading NPAT2 of $18.9 million and Trading EPS2
1.7 million3 with a freemium model that ensures
of 9.6 cents were 29% lower than 2017.
the majority of our content remains free.
Page 8
Increasing radio capability and performance
a great business. I thank them for their commitment,
NZME is the second largest radio operator in
their innovation and their determination to succeed.
New Zealand, with a weekly radio audience of 2.0
million4. In 2019, we will continue to enhance radio
sales skills to support integrated selling. We will
pursue digital audience and revenue growth through
leveraging iHeart capability and will develop new
shows to further build our radio audience.
Creating New Zealand’s leading real estate
platform
To support continued revenue growth, the
focus for OneRoof in 2019 is on securing further
market listings and property categories, ongoing
development of user features and tools to enhance
listings engagement, and market-leading
New Zealand property commentary and insights.
CONCLUSION
In 2018, we made encouraging progress on our
strategy to return total revenue to growth in the
medium term. We slowed the print revenue decline,
grew digital revenue, and further strengthened radio,
to help us to achieve this goal.
The revised Capital Management Policy will ensure
we maintain a strong balance sheet, enabling us to
invest for growth, reduce debt, maintain financial
stability, and maximise shareholder returns.
Our brilliant people, and their enthusiasm for what
we do, make NZME a great company to work for and
I also offer our thanks to the 3.3 million Kiwis that
make up our audience, as well as our suppliers,
business partners, customers and shareholders for
their continued support.
We are making progress but have further work to
do to realise the opportunity we have in 2019 to
capitalise on our great brands, strong audience
and exceptional people.
Michael Boggs
Chief Executive Officer
(1) Nielsen CMI Q1 18 - Q4 18 AP 15+. (2) Trading measures used
throughout this Annual Report are non-GAAP measures that are
explained and reconciled on pages 34 and 35 of the NZME Full
Year 2018 Results Presentation available on the Company’s website.
(3) Nielsen Online Ratings, December 2018. (4) Gfk Radio Audience
Measurement, Commercial stations, NZME and Partners, Cumulative
Audience T4 2018.
Page 9
CHANNEL RESULTS
PRINT
The strength of NZME’s print brands was recognised
at the 2018 Voyager Media Awards with the Weekend
Herald picking up Newspaper of the Year and best weekly
newspaper. The New Zealand Herald remains the most-
read and highest-selling newspaper in the country.
Continued growth in readership and audience, and the
ongoing market share gains, have supported the slowing
rate of revenue decline. The New Zealand Herald’s daily
brand audience, which includes digital, remained above
1 million in 20181, reflecting the strength of the New Zealand
Herald brand and NZME’s success in growing audience
reach. The New Zealand Herald remains a key asset and
we are working hard to continue to grow audience to
further enhance value.
Overall Print revenue, including advertising and circulation
revenue, was $211.6 million in 2018, a decline of 4%.
Print revenue was assisted in 2018 by an extra publishing
week compared to the previous year but this remains a
pleasing result given the industry headwinds.
Print advertising revenue of $114.2 million was 6% lower
than 2017, impacted by structural deterioration in print
advertising. There were, however, encouraging segments
in Print advertising, such as the travel category, which
experienced growth in the cruise ship segment. The
6% decline in Print advertising revenue in 2018 was a
significant improvement on the declines seen in 2017
and 2016 respectively.
Circulation revenue was 2% lower in 2018. Circulation
volume declined, however yields were maintained
through cover price increases in July 2018. Circulation
revenues were also assisted by an additional publishing
week in 2018.
Other print revenue relating to print and distribution
services provided to third parties continues to decline
in line with declines in third party circulation.
Page 10
CHANNEL RESULTS
RADIO
Trading Radio and Experiential revenue of $106.8 million
in 2018 was 3% lower than 2017. Direct Radio advertising
revenue showed positive trends in 2018. However,
Agency Radio revenue declined 7% in 2018 due to
weakness in Agency market demand as a result of
weaker business confidence. NZME maintained its share
of radio advertising market revenue2 at 39%.
NZME continues to focus on having the best radio offer
in the market. This was supported by new talent and
programming enhancements in 2018, including a new
drive show on ZM and a new breakfast show on Coast.
Radio audience share was stable in 20183 at 35%. NZME’s
leading brands maintained their strong presence, with
NewstalkZB remaining the number one radio station
in New Zealand. In digital radio, iHeart Radio grew its
registered users by 18% over the year to more than
831,0004 and total listening hours increased 16% year
on year to 3.2 million5.
NZME’s aim is to deliver consistent radio revenue growth
through building audience across brands and digital
platforms, and enhancing radio sales skills and execution.
(1) Nielsen CMI Q1 18 – Q4 18 AP 15+, represents a combination of Print
readership and Digital audience. (2) PwC Radio Advertising Benchmark
Report, Q3 18. (3) GfK Radio Audience Measurement, Commercial
Stations. NZME & Partners in Major Markets Trended to T4/2018. Station
Share %, AP 18-54. (4) iHeartMedia, 2017- 2018; Adobe Analytics, 2018.
(5) AdsWizz and StreamGuys, 2017-2018.
Page 11
CHANNEL RESULTS
DIGITAL
Digital and e-Commerce revenue grew 6% in 2018 to
$60.0 million. The growth rate of the digital display and
mobile advertising market slowed during 2018, impacted
by a contraction in the overall Agency market. NZME’s
display and mobile revenue growth also slowed in 2018,
although trends improved late in the year. The Digital
market continues to evolve but retains highly attractive
fundamentals and NZME expects the channel to remain
a long-term driver of growth6.
We were pleased to report a positive start for our real
estate portal, OneRoof. Since launch in late March 2018,
OneRoof has made significant progress on growing real
estate listings and audience to support the generation
of initial revenue of $0.7 million in 2018, $0.5 million of
which was generated in the last quarter.
By the end of 2018, four out of the five major New Zealand
real estate agency group’s listings were on the site and
residential ‘for sale’ listings had grown to cover 66% of the
national market and 87% of the Greater Auckland market.
OneRoof has enjoyed strong audience growth since
launch, supported by listings and the integrated content
and advertising strategy. Audience growth was given a
significant boost in early December 2018 with the release
of the OneRoof Quarterly Property Report.
DRIVEN and YUDU continue to show potential. In 2018
DRIVEN launched a number of unique tools for buyers
and sellers including a Car Value Calculator, Best Time
to Sell and Cost to Run.
GrabOne revenue declined 4% in 2018. This represents
a notable stabilisation in revenue compared to the 18%
and 16% annual declines the previous two years, reflecting
improvements in the business model.
(6) PwC Outlook NZ Entertainment & Media 2018 – 2022.
Page 12
CORPORATE SOCIAL
RESPONSIBILTY REPORT
NZME’S CSR JOURNEY
NZME is committed to Corporate Social Responsibility
A further 415 internal stakeholders, across all levels
(“CSR”) and ensuring our business is sustainable from
and areas of NZME, togther with the interviewees,
a social, environmental and operating standpoint. To
help us identify and define our roles and responsibilities
as a corporate citizen we maintain an internal CSR
committee to supervise our activities, as well as
governance-level oversight through our CSR Board
Committee.
During 2018 we commenced the process of defining
participated in a survey to rank the sustainability
issues, identified through the interview process,
on their relevance to NZME. Issues related to our
authenticity, integrity and role as an advocate and
champion for social issues ranked very highly.
We intend to adopt the UN Sustainable Development
Goals Framework with initial measurement to
be undertaken in 2019 and reporting against the
a materiality matrix of sustainability issues that
framework commencing in 2020.
directly affect our business, to identify issues of
greatest importance to both our internal and external
stakeholders. In order to accurately inform the matrix
NZME conducted interviews with a range of internal
and external stakeholders including representatives
from our staff, Board, shareholders, audience and
Although we are at an early stage in the formalisation
of our CSR strategy, NZME has long been aware of
its responsibility as a corporate citizen to support its
people, care for the environment and engage and
advocate on behalf of the communities in which we
operate. The remainder of this CSR Report covers
customers, to collect their feedback on the material
the progress we are making with regard to People,
issues for NZME’s sustainability.
the Environment and our Communities.
New Zealand’s Prime Minister, Jacinda Ardern, guest editing
The New Zealand Herald suffrage edition, September 2018
Page 13
ENVIRONMENT
NZME takes its responsibility to the environment
seriously. NZME’s print operations were again awarded
the Enviro-Mark Gold Certificate for excellence in
environmental responsibility. The Enviro-Mark Gold
Certificate can only be awarded to organisations
that have developed, implemented and maintained
an Environmental Management System and can
verify this to Enviro-Mark Solutions. To achieve
Enviro-Mark Gold certification an organisation
has to set environmental objectives, targets and
key performance indicators; develop, implement
and test environmental emergency plans; identify
and evaluate significant environmental issues;
actively monitor ongoing compliance with New
Zealand legislation; produce an environmental
policy statement; understand the scope of their
Environmental Management System and exhibit
no non-compliance with New Zealand’s health and
safety and environmental legislation. NZME has been
a participant in the Enviro-Mark Scheme for the past
twelve years.
NZME’s print
operations were
again awarded
the Enviro-Mark
Gold certificate
for excellence in
environmental
responsibility.
In addition to our print operations, our building at
NZME Central has a 5 Green Star – New Zealand
NZME predominantly prints on newsprint sourced
Excellence – rating which is the second highest
from Norske Skog Tasman. Norske Skog Tasman
rating under the Green Star System that takes
makes newsprint in New Zealand largely from waste
into consideration the building or fitout’s rating in
or by-product fibre from sustainable softwood
nine categories: Energy, Water, Materials, Indoor
resources utilising geothermal steam. Norske Skog
Environment Quality (IEQ), Transport, Land Use &
Tasman is Chain of Custody Certified and all fibre
Ecology, Management, Emissions, and Innovation.
used is either from certified or controlled sources (no
native trees are used). The newsprint used by NZME is
the most environmentally friendly paper Norske Skog
Tasman makes. It uses less fibre, chemicals, power
and transport than heavier weight papers which
translates into a smaller carbon emissions footprint.
Page 14
COMMUNITIES
NZME recognises the responsibility that comes with
The Not For Sale campaign which put a spotlight
acting as a voice of record for New Zealand. We
on child exploitation in Asia where millions of young
use our wide reach across the country to champion
girls face the prospect of child marriage, labour
charitable causes and facilitate conversations about
and trafficking. Partnering with World Vision,
the topics that matter to New Zealanders.
the campaign raised almost $200,000 through
reader donations to help their child protection
Her Story was the centrepiece of our coverage
work globally.
of the 125th anniversary of women’s suffrage
in New Zealand. The historic special edition of
the New Zealand Herald, guest-edited by Prime
Minister Jacinda Ardern, celebrated women through
pieces such as Viva Magazine’s ‘Trailblazers’ which
highlighted 125 influential New Zealand women that
have changed the world.
Speaking Secrets was a six-part podcast series
documenting the rise of the #MeToo movement in
New Zealand. The audio podcasts were supported
by videos and written stories in The New Zealand
The Warm Hearts campaign where the New Zealand
Herald joined forces with the charity Variety with
readers giving donations of warm clothes and
bedding to give a helping hand to Kiwi families
facing hardship over winter.
The For The Gift of Sight campaign which
highlighted the growing rate of diabetes-related eye
disease in Vanuatu and the Pacific. Partnering with
the Fred Hollows Foundation, this campaign raised
more than $150,000 for eye-health equipment.
Herald which put victims at the centre of the
NZME is proud to support communities nationwide
discussion. This engaged our communities through
by telling their stories, as well as supporting their
growing awareness of the scale of sexual abuse in
New Zealand.
campaigns with media space. Charities such as
Cure Kids which works on preventative, lifesaving
research for our tamariki, Lifeline which helps
The New Zealand Herald also partnered with many
when people feel there is no other way, or Kiwis
organisations during the year to raise awareness
for Kiwi who are working to halt the decline of
and support for causes that impact our local and
our national bird, are further examples of charities
international community. These included;
NZME supported in 2018.
Page 15
PEOPLE
We focused
our efforts into
developing a
new, more robust
Diversity Strategy
during 2018.
DIVERSITY
Diversity at NZME brings different talents and people
One example of evidence of this is our incorporation
together, all of them working towards a common
of te Reo, one of New Zealand’s official languages,
goal using their unique skill sets. But before diversity
through our lunch time tutorials, dual language
comes inclusion.
With this in mind, and consistent with our Diversity
Policy (available on the Company website), we
focused our efforts on developing a new, more
signage throughout our offices, our recent
introduction of macrons throughout our business
and our newspapers, and coaching for our on-air
talent and executive team in pronunciation.
robust diversity strategy during 2018. Our diversity
It was incredibly rewarding to be recognised
committee continues to build on the work started
externally for our efforts on inclusion and diversity
in 2017 in striving to ensure that NZME is a
when we were named as a finalist in the Emerging
collaborative, inspiring and safe place to work.
Diversity & Inclusion Category of the Diversity Works
There have been some fantastic moments of
celebration, awareness and learning over the past
Awards and through our multiple nominations in a
number of categories at the LGBTI Awards.
year, from getting behind the likes of Pink Shirt
2018 was not without its challenges on the diversity
Day and Sign Language Week to highlighting
front. The issues around the Auckland Pride Parade,
increasingly important issues around mental health.
saw our Diversity Committee pull together to make a
An incredible celebration was put on for Diwali that
collective decision on our stance after seeking advice,
included traditional food, music, henna tattooing
guidance and opinion from members of the rainbow
and dancers. We also celebrated Chinese New Year
community, both inside and outside of NZME, as well
and Maori Language Week (Te Wiki o te Reo Māori)
as various other organisations. Ultimately, we were not
which included education pieces, a hangi lunch and
involved in the parade, but instead helped highlight
kapa haka performances that brought local primary
the very real and raw issue of gay conversion therapy,
school children into multiple NZME offices. We view
by being a lead sponsor in bringing the acclaimed
our diversity initiatives as constantly evolving and
movie Boy Erased to New Zealand cinemas.
we strive to continually go further and do more to
become a more inclusive organisation.
Page 16
NZME’S PEOPLE
AS AT 31 DECEMBER 2018
GENDER/LEVEL
Male
Female
LENGTH OF SERVICE
44%
49%
55%
56%
51%
Executive
Senior
Leadership
Team
45%
Staff
450
400
350
300
250
200
150
100
50
0
<1Y
1-2Y
3-5Y
6-10Y 11-20Y 21-30Y
31+Y
AGE GROUP
CONTRACT TYPE
45-54Y
21%
35-44Y
22%
<25-34Y
29%
55+Y
17%
Undeclared
1%
<25Y
10%
ETHNICITY
including undeclared
NZ European
56%
Middle Eastern/
Latin American/
African
1%
Pacific
Peoples
2%
Other
Ethnicity
2%
Undeclared
20%
European
8%
Asian
8%
Maori
3%
Fulltime
71%
Part Time
8%
Casual
18%
Contractor
3%
Page 17
PEOPLE
As we continue to build on being an inclusive
Results of the audit showed a continuing maturity
workplace and strive to be an employer of choice,
in how health and safety is managed across the
we were thrilled after going through a vigorous audit
business, with increases in the level of engagement
process to be re-awarded The Rainbow Tick for a
seen at both management and employee level. This
further two-year period. We are well on our way to
was particularly evident within our Ellerslie print
achieving our goal of ensuring all NZME employees
plant, which is considered our highest health and
attend inclusion training sessions facilitated by the
safety risk area.
Rainbow Tick organisation.
We were thrilled after going through
a vigorous audit process to be
re-awarded The Rainbow Tick
for a further two-year period.
Youth employment continues to be a focus for our
As part of our commitment to continual improvement
organisation. Wherever possible we aim to give
in the prevention and management of health and
our experience and expertise to help grow youth
safety, NZME has committed to achieving the following
into their future careers. This includes being the
six health and safety priorities:
lead sponsor of events such as the New Zealand
Careers Expo, which attracts thousands of young
Kiwis throughout New Zealand every year, as well as
maintaining close links with secondary schools and
tertiary training providers to develop opportunities
for youth. We maintain an open-door policy in terms
of bringing youth into our organisation, and this
takes many forms from tours and talks through to
1. Our leaders will be proactively involved in
supporting the health, safety and wellbeing
of our people.
2. We will have a consistent approach to managing
health, safety and wellbeing
across all locations.
internships and work experience days.
3. We will maintain safety excellence within
HEALTH AND SAFETY
At NZME we believe that a healthy and safe work
environment contributes to our success. We’re
committed to ensuring we have a framework,
culture and practices in place to protect our
people, contractors and customers.
During May and June 2018, NZME engaged Ernst &
Young to undertake an internal health and safety
our print plant.
4. We will provide a consistently safe and
secure environment for anyone required
to work alone.
5. Our vehicle fleet will be managed and operated
in a manner that significantly reduces risk to
people and property.
audit to determine how our existing health and
6. We will actively manage risk to mental health and
safety framework, policies, procedures and relevant
provide a work environment that is supportive of
documentation aligns to and complies with the
people experiencing mental health issues.
Health and Safety at Work Act 2015, industry best
practice and other relevant standards.
Page 18
WELLNESS
We again hosted two wellness weeks during the
CEO and senior leaders. Our CEO is regularly joined
year, one in April and one in November. These weeks
by other members of the executive for his ‘Kitchen
provide our people with the opportunity to spend
Catch-ups’ where different teams in Auckland get to
some time reflecting on their health and wellbeing.
hear a quick update from the CEO and then engage
This year we partnered with some of our key clients
in an open Q&A session. The CEO regularly invites
and local small businesses across the country to
someone from the business to join him as ‘CEO for
offer key themes including: Mental Health Monday,
the Day’ to get an inside look into what being the
Healthy Eating Tuesday, Activewear Wednesday,
CEO entails. Boggsy’s Bus has continued as a means
Financial Fitness Thursday and Feel Good Friday.
to build a connection with all our people in regional
ENGAGEMENT
offices around the country. As part of this initiative,
the CEO and others visit a number of offices in the
We continue to believe that an engaging work
regions to explain our strategic priorities and hear
environment is essential to us achieving our goals.
their questions and ideas.
In our engagement survey, the score increased
6% year on year, and we were pleased with the
participation rate. Action plans continue at a team
level to work on opportunity areas. To foster an
inclusive and engaging workplace, we give our
people opportunities to engage and interact with our
Wellness week
gives our people
an opportunity to
spend some time
reflecting on health
and wellbeing.
Our reward and recognition programme is also aimed
at increasing employee engagement. It seeks to
recognise the everyday efforts of our people through
‘Shouts Outs’ and to reward ‘NZME Champions’ who
live our Company values and go over and above
to deliver. In 2018, the programme recognised 98
Champions (with 596 nominations) and an additional
714 Shout Outs.
To foster leadership, out of the box thinking
and creative solutions, a small group of
around 25 people continued to participate
in the Kickstarters programme.
Page 19
PEOPLE
AWARDS
•
Best Sports Story – Team Coverage:
NZME is proud to be the home of some of
The America’s Cup, NewstalkZB/Radio Sport;
New Zealand’s best talent and 2018 saw many
wins across digital, print, radio and marketing
at various award ceremonies.
At the 2018 New Zealand Radio Awards, NZME
walked away with top awards including:
• Outstanding Contribution to Radio:
Mike Hosking;
•
Best Talk Presenter, Breakfast or Drive:
Mike Hosking, NewstalkZB;
•
Best Talk Presenter, Other: Marcus Lush,
NewstalkZB;
•
Best Sports Reader, Presenter or Commentator:
Martin Devlin, Radio Sport;
•
Best Music Breakfast Show, Network:
Fletch, Vaughan and Megan, ZM;
•
Best Marketing Campaign:
$50,000 Secret Sound, ZM;
•
•
•
Best Network Station Promotion: Flochella, ZM;
Best Digital Content: zmonline.com;
Best Video: Neil Finn, Bhuja TV, Radio Hauraki,
& Lorde: The Babysitter, ZM;
•
Best Newsreader: Niva Retimanu,
•
Best Community Campaign:
NewstalkZB;
Pledge for Plunket, The Hits;
•
Best Content Director: Jason Winstanley
•
Services to Broadcasting:
and Nadia Tolich, NewstalkZB;
Bryan Waddle and Peter Everett.
Page 20
The New Zealand Herald
had a fantastic showing at
the 2018 Voyager awards.
•
Best News Website or App: nzherald.co.nz;
The NZME marketing team was recognised at the
• Newspaper of the Year and Weekly Newspaper
of the Year: Weekend Herald;
•
Best Editorial Campaign or Project:
nzherald.co.nz for Break the Silence;
Public Relations Institute of New Zealand Awards
with a Highly Commended award for our internal
communications team, for their Boggsy’s Bus initiative.
The Ellerslie team took home the Special Recognition
Award and a gold medal in Newspaper Publications
•
Best Newspaper Front Page: Hawke’s Bay Today;
and the Pride in Print awards.
• Opinion Writer of the Year: Steve Braunias;
At the INMA (International News Media Association)
•
Best Investigation: Olivia Carville for What
becomes of the Broken Hearted;
Awards held in Washington DC, NZME received
an honorable mention for Best Brand Awareness
Campaign, Discover More: nzherald.co.nz relaunch;
•
•
•
Business Journalist of the Year: Matt Nippert;
Second Place in the Best Public Relations or
Political Journalist of the Year: Audrey Young;
Best Team Video, Feature: New Zealand Herald
for Under the Bridge;
Community Service Campaign, Break The Silence;
Third Place in Best Use of Mobile, nzherald.co.nz
redesign; and First Place in Best Execution of Print
Advertising, The Inequality Issue.
• Matt Nippert was also awarded the Supreme
Individual Prize, with a scholarship to Wolfson
Our marketing team was also recognised at the
New Zealand Marketing Awards, winning Best
College, Cambridge University.
Marketing Campaign (Media).
The New Zealand Herald also won the prestigious
NZME was involved with The Inequality Issue Project
Daily News Brand of the Year award at the
in collaboration with FCB Media and Westpac NZ, and
Asia-Pacific News Media Awards, together
were awarded the Best Small Budget, Best Creative
with seven awards across the marketing and
Media Idea, Best Collaboration and Best in Show
advertising categories.
awards at the 2018 Beacon Awards.
Page 21
THE
NZME
BOARD
Page 22
A
C
B
D
E
A
Peter Cullinane
Independent Chair
D
Barbara Chapman
Independent Director
As the former Chief Operating Officer of Saatchi &
Barbara Chapman served as Chief Executive and
Saatchi (Worldwide), and its Chief Executive Officer
Managing Director of ASB Bank Limited from 2011
(New Zealand) and Chairman (Australasia) for over
until 2 February 2018. She has extensive business
eight years prior, Peter is widely respected in global
experience gained through a successful career
advertising and marketing, and has extensive
in the banking industry commencing with the
knowledge and expertise in both Australasian and
Commonwealth Bank Group in 1994. During her
global markets. Peter is the founder and Chairman
career she has held a number of senior and executive
of Lewis Road Creamery Limited, and is also a
roles in retail banking, marketing, communications
Director of Sanford Limited. Peter was previously
and human resources. Barbara is passionate about
on the Board of HT&E Limited (listed on the ASX),
people and culture, and promoting best practice in
WPP AUNZ Limited and SKYCITY Entertainment
community, governance and sustainability. She has
Group Limited.
B
Carol Campbell
Independent Director
Carol Campbell has more than 30 years of
experience as a chartered accountant. Carol was
a partner at Ernst & Young for over 25 years and
has extensive financial experience and a sound
understanding of efficient board governance. Carol
is a director of NZ Post Limited, Kiwibank Limited,
Kingfish Limited, Barramundi Limited, Marlin Global
recently embarked on a corporate governance career
and currently holds independent directorships on the
Boards of Genesis Energy Limited, Fletcher Building
Limited and IAG New Zealand Limited. She also acts
as director of the New Zealand Initiative, patron of the
New Zealand Rainbow Tick Excellence Awards, and
holds a seat on the Reserve Bank Act Review Panel
and the Prime Minister’s Business Advisory Council.
E
Sussan Turner
Independent Director
Limited, T&G Global Limited, Asset Plus Limited,
For the past 25 years Sussan has held senior
Chubb Insurance Limited and a number
leadership roles across media companies, including
of other private companies.
C
David Gibson
Independent Director
David Gibson 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 career David has advised
on many of New Zealand’s largest capital market
transactions, including within the media industry.
David is also a trustee for Diocesan School for Girls
and a Director of Rangatira Limited.
Group CEO of MediaWorks, Managing Director
of Radio Otago and CEO of RadioWorks. She is
currently Group CEO and Director of Aspire2 Group
Limited, one of the leading Private Tertiary Education
groups in New Zealand and is passionate about
building executive teams and company cultures.
Sussan has extensive experience as a director and
is currently Pro Chancellor of Auckland University of
Technology, Co-Chair of Organic Initiative Limited
and trustee of the Waitemata District Health Board’s
Well Foundation.
Page 23
THE NZME
EXECUTIVE
TEAM
A
Michael Boggs
Chief Executive Officer
C
Laura Maxwell
Chief Digital Officer
Michael Boggs joined NZME in March 2015 as Chief
Laura joined The Radio Network as a Commercial
Financial Officer and was appointed Chief Executive
Director in July 2013, moving to the role of Group
Officer in March 2016. Michael has been integral in
Director Digital Media in 2014. In 2015, Laura was
developing and implementing NZME’s strategy to
promoted to Group Revenue Director and this title
establish new revenue streams and retain revenue
transitioned to Chief Commercial Officer as part of
in its traditional media brands and mastheads.
the NZME transformation. Laura was appointed Chief
Prior to joining NZME, Michael was the Chief
Financial Officer of TOWER Limited. While at
TOWER, Michael oversaw the investment operations,
Pacific Islands operations and earthquake recovery
programme and managed the divestment of the
life insurance, health insurance and investment
management businesses.
Digital Officer in September 2017. Prior to joining
the NZME group, Laura held the position of General
Manager/Director for Yahoo! New Zealand. Laura
has over 25 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 the immediate past
Chair of the Interactive Advertising Bureau and a
Michael has also held senior management roles
current Board member.
in major telecommunications and technology
companies, including TelstraClear and Clear
Communications and in 2014, he was named
D
Matt Headland
Chief Commercial Officer
‘CFO of the Year’ at the New Zealand CFO Awards.
Matt joined NZME as Head of Agency Sales in August
2016 and in September 2017 he was appointed Chief
Commercial Officer. During his time at NZME Matt has
restructured and revitalised the commercial team.
Prior to joining the NZME group, Matt held the
position of Director of National Direct Sales TV,
Radio and Digital at MediaWorks New Zealand.
Matt has over 20 years of experience in media,
entertainment and advertising industries, where
he has lead change and revenue growth across
multiple businesses, including as Country Manager
EMI Music New Zealand, NZ Sales Manager MTV
Networks, and Head of Marketing EMI New Zealand.
He is also Chair of The Radio Bureau Board.
Michael is a Chartered Accountant and graduate
of the Executive Development program at Wharton
Business School.
B
David Mackrell
Chief Financial Officer
David was appointed CFO of NZME in March 2019,
joining NZME from his previous position as CFO
of Heartland Bank. David is a highly experienced
finance professional who holds a Bachelor of
Management Studies (Hons) majoring in both
Finance and Accounting.
David started his professional career at Ernst & Young
as an Auditor before joining Air New Zealand in 1992
where, during twenty five years with the airline,
he held a number of senior financial and commercial
roles, including Deputy Chief Financial Officer.
Page 24
A
C
B
D
Page 25
THE NZME
EXECUTIVE
TEAM
Page 26
E
G
F
H
I
E
Shayne Currie
Managing Editor
G
Matthew Wilson
Chief Operations Officer
Shayne has been a journalist for 30 years and in
Matthew has lead NZME’s operational teams for
senior newsroom leadership roles for more than
two years. With a passion for media, Matthew has
two decades – overseeing major and innovative
over two decades of experience working across
newsroom changes across New Zealand. As NZME
NZME’s newspaper brands, including finance roles
managing editor, Shayne leads a team of more
in print, commercial, content and corporate through
than 300 editoral staff and broadcasters from the
to leading the Newspaper Sales, Print and Herald
New Zealand Herald, NewstalkZB and Radio Sport,
product functions.
as well as NZME’s five regional daily newspapers
and more than 20 community titles.
A former editor of the New Zealand Herald and
Herald on Sunday, Shayne has helped lead major
editorial initiatives including the launch of the Herald
on Sunday in 2004 and the New Zealand Herald’s
move to compact format in 2012. He is NZME’s first
managing editor, overseeing since 2015, the unique
mix of digital, print, audio and visual storytelling.
Shayne has worked in newsrooms across New Zealand
and in New York, and in 2016 he was awarded the
Wolfson Scholarship at Cambridge University in the
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.
H
Katie Mills
Chief Marketing Officer
UK, studying audience patterns in the digital age.
Prior to joining NZME in December 2018 as Chief
F
Dean Buchanan
Group Director, Entertainment
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 and 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.
Marketing Officer, Katie was the Group Marketing
Director at Aspire2 Group Limited and was
previously General Manager (Global) Marketing &
Communications at Opus International Consultants.
Katie also spent 15 years at MediaWorks in senior
leadership roles including Head of Marketing,
successfully developing and delivering marketing
and brand strategies for a portfolio of radio, digital,
event and television ventures.
I
Allison Whitney
General Counsel & Company Secretary
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.
Page 27
CORPORATE GOVERNANCE
GOVERNANCE FRAMEWORK
The Company is listed on the NZX Main Board and as
Whistleblower Policy. The Company provides
a Foreign Exempt Listing on the ASX (both under the
training on the Code of Conduct & Ethics in the
ticker code “NZM”). The ASX Foreign Exempt Listing
form of a video series on the key points relevant
category is based on a principle of substituted
to employees.
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 also has an Editorial Code of Ethics
highlighting that our principal responsibilities are
to the community and the truth and our undertaking
to maintain the highest ethical standards in our
journalism while balancing the right of the individual
The Company’s corporate governance framework,
with the public’s right to know.
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”).
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
The Group is committed to having a strong
all employees. The Securities Trading Policy places
governance framework and therefore complies
additional trading restrictions on the directors,
with the recommendations of the NZX Code (unless
the CEO and his direct reports (and employees
specifically stated otherwise). The corporate
reporting directly to them) and all participants
governance policies referred to in this section
in any NZME employment incentive plans.
reflect the Group’s governance framework as at
31 December 2018 (unless otherwise stated) and
are available on the Company’s website:
www.nzme.co.nz/corporate governance.
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
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 are
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
the Company and its subsidiaries’ commercial
shareholder return from the activities of the Group.
operations and the conduct of directors, employees,
In pursuing this objective the role of the Board is
consultants and all other people when they represent
to assume accountability for the success of the
the Company and its subsidiaries. The Code of
Company by taking overall responsibility for the
Conduct & Ethics comprises certain fundamental
strategic direction and monitoring of operational
principles and demonstrates the high standards of
management of the Group in accordance with good
conduct expected of us. Reporting of breaches of
corporate governance principles. More details
the Code is encouraged and steps for doing so are
regarding the main functions of the Board can be
set out in the Code of Conduct & Ethics and the
found in the Board Charter.
Page 28
Director Independence and Profile
All of the Company’s directors are independent
Skills and Experience
The Governance & Remuneration Committee
directors for the purposes of the NZX Listing
reviews, and makes recommendations to the
Rules. The profile for each director is available on
Board, regarding the composition of the Board on
the Company’s website (http://www.nzme.co.nz/
an ongoing basis to ensure that it is comprised of
corporate-governance/board-members) and on
members who provide the required breadth and
page 23 of the Annual Report. The roles of the
depth of experience and knowledge to achieve
Chair and Chief Executive Officer are exercised
the objectives of the Board. It also considers and
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
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 and the
Company supports their development.
to retire and stand for election at the first annual
shareholders meeting after their appointment.
Directors and Officers Insurance
In accordance with Section 162 of the Companies
The Governance & Remuneration Committee
Act 1993 and the Company’s Constitution, NZME has
recommends to the Board potential candidates
indemnified and arranged insurance for all directors
for appointment as directors.
and executive officers to the extent permitted by law
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
for liabilities arising out of the performance of their
normal duties as directors and officers. The total
amount of directors and officers insurance contract
premiums was $261,935 in 2018.
letter covering the role of the Board, the Board’s
expectations of the director and any particular
Performance Review
The Chairperson meets annually with directors
terms of his or her appointment. The director will be
of the Company to discuss individual performance
offered induction training as to the responsibilities
of directors. The Board reviews its performance
of the directors and to enable the director to become
as a whole, and the performance of its committees,
familiar with the Company’s operations and sites.
on an annual basis. The Board may choose to use
All directors have access to the advice and assistance
external facilitators, where appropriate, to assist
of the General Counsel on the Board’s affairs and
with reviewing the performance of directors, the
governance matters. In addition, all directors may
Board and its committees.
access such information and seek independent
advice as they consider necessary to fulfill their
duties and responsibilities.
Page 29
CORPORATE GOVERNANCE
CONTINUED
Diversity
The Group believes that a diverse workforce is
The Group is currently operating in accordance
essential for it to be able to deliver its strategic
with, and applying the principles of its Diversity
objectives and continue to meet its responsibilities
Policy. Also refer to the People section on page
to its customers, its employees, the communities in
16 of the Annual Report for more information on
which it works, and its shareholders.
our diverse workforce.
For the Group, diversity means the competitive
The table below includes the quantitative breakdown
value in the differences of its people in relation
as to the gender composition of NZME’s Board
to gender, race, ethnicity, sexual orientation, age,
and OfficersA.
disability, religion or cultural background.
As at
31 December 2018
31 December 2017
Board
OfficersA
Male
2
2
Female
3
1
Male
5
6
Female
4
3
PRINCIPLE 3 - BOARD COMMITTEES
The Board should use committees where this
Audit & Risk Committee
The Committee consists of at least three non-
will enhance its effectiveness in key areas, while
executive directors, with the majority being also
retaining Board responsibility.
independent directors (one of whom has an
The Board has three standing Committees, the
Audit & Risk Committee, the Governance &
accounting and financial background).
The functions of the Committee are to:
Remuneration Committee and the Corporate Social
• Review, consider and if necessary, investigate
Responsibility Committee, to assist in carrying out
any reports or findings arising from any audit
its responsibilities. The Committees operate under
function either internally or externally;
Board approved charters, with the exception of
the Corporate Social Responsibility Committee,
for which the Board intends to adopt a charter
at the April 2019 Board meeting. 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
• Evaluate financial information submitted to it,
along with relevant policies and procedures;
and
• Assess the effectiveness of risk management
throughout the Group.
not have a separate Health & Safety Committee as
The Committee is also responsible for
Health & Safety is considered by the full Board. The
communicating and engaging with the external
Board did not identify a need for any other standing
auditors and for oversight and review of the risk
Board committees. The Company also has an NZME
management framework. For further information,
Takeover Response Manual (not publicly available) as
also refer to the Committee’s charter which is
recommended by Recommendation 3.6 of the NZX
available on the Company’s website.
Code (adopted 12 December 2017).
(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.
Page 30
For the year ended 31 December 2018, directors
Barbara Chapman and David Gibson were members
PRINCIPLE 4 - REPORTING & DISCLOSURE
The Board should demand integrity in financial
of the Audit & Risk Committee and it was chaired
and non-financial reporting, and in the timeliness
by Carol Campbell. Employees and external parties
and balance of corporate disclosures.
may attend meetings of the Audit & Risk Committee
at the invitation of the Audit & Risk Committee.
Governance & Remuneration Committee
The Governance & Remuneration Committee
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
ensures that remuneration policies and practices are
compliance with the continuous disclosure
consistent with the strategic goals of the Group and
obligations under the Financial Markets Conduct
are relevant to the achievement of those goals. The
Act 2013 and the NZX Listing Rules.
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 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
The Market Disclosure Policy is designed
to ensure that:
• 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.
issued by the NZX. For further information, refer to
The Company will immediately notify the market of
the Committee’s charter available on the Company’s
any material information concerning the Company
website. For the year ended 31 December 2018,
in accordance with legislative and regulatory
directors Peter Cullinane and Sussan Turner were
disclosure requirements.
members of the Governance & Remuneration
Committee and it was chaired by David Gibson.
Employees and external parties may attend meetings
of the Governance & Remuneration Committee at
the invitation of the Governance & Remuneration
Committee.
Corporate Social Responsibility Committee
The Corporate Social Responsibility (“CSR”)
Committee was established in 2018 and assists the
Board of Directors in fulfilling its corporate social
responsibilities, including objective setting and
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
strategy, and ensuring NZME policies and practices are
• Fraud Policy
consistent with its CSR strategy. For the year ended
• Market Disclosure Policy
31 December 2018, directors Peter Cullinane and
• Whistleblower Policy
Sussan Turner were members of the CSR Committee
• Securities Trading Policy
and it was chaired by Barbara Chapman. Employees
• Audit & Risk Committee Charter
and external parties may attend meetings of the CSR
• Governance & Remuneration Committee Charter
Committee at the invitation of the CSR Committee.
• Risk Management Policy
Page 31
CORPORATE GOVERNANCE
CONTINUED
Constitution
The Company’s constitution (“Constitution”)
PRINCIPLE 5 - REMUNERATION
The remuneration of directors and executives
is filed on the Companies Office website
should be transparent, fair and reasonable.
(http://www.companies.govt.nz/co/1181195).
Remuneration Policy
The Constitution contains, amongst other things, the
The Remuneration Policy outlines the Company’s
requirements regarding appointment and rotation of
approach to the remuneration of its directors
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.
Financial Reporting and Disclosure
The Company is committed to providing financial
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
reporting that is balanced, clear and objective.
responsibilities of the role. The Governance &
The Audit & Risk Committee oversees the quality,
Remuneration Committee will obtain independent
integrity and timeliness of external reporting.
advice, as necessary, and will also consider the
The Group’s Consolidated Financial Statements for
results of market comparison and a benchmarking
the year ended 31 December 2018 are set out on
assessment in setting the fixed fees payable to
pages 44 to 101 of the Annual Report. Also refer
non-executive directors.
to the reports from the Chair and the CEO in this
Annual Report and the NZME Full Year 2018 Results
Presentation (available on the Company’s website)
for additional information.
Non-Financial Reporting and Disclosure
The Company provides non-financial disclosures
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.
relating to Health & Safety, Risk Management, our
The Governance & Remuneration Committee
interaction with our communities and our impact
is also responsible for reviewing the remuneration
on the environment. We also include information
of the CEO and any executive directors and,
about our performance against our operational
priorities for the year. Information about our
strategic priorities for 2019 is included on page
8 and 9 of the Annual Report.
NZME does not currently report under a recognised
environmental, social and governance (“ESG”)
framework, but aims to provide non-financial
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
information that would be useful for our stakeholders.
reviews remuneration with the objective of achieving
This includes the information referred to above.
pay equity, including by gender.
We intend to continue to enhance our non-financial
reporting initiatives.
Page 32
Directors’ Remuneration
The fees paid to each director depends on the duties of the director, including committee work.
Current fees per annum are as follows:
Chair 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 2018 (IN $)
Date appointed
Date
resigned
/ retired
Chair
of the
Board
Board
Member
Committee
Chair
Committee
Member
TotalA
Peter Cullinane
24 June 2016
N/A
150,000
3,975
17,500
171,475
Carol Campbell
24 June 2016
N/A
100,000
20,000
4,753
124,753
David Gibson
8 December 2017
N/A
100,000
16,025
12,500
128,525
Barbara Chapman
18 April 2018
Sussan Turner
16 July 2018
N/A
N/A
70,201
10,000
5,000
85,201
46,050
9,210
55,260
Total fees paid
565,215
(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.
As at 31 December 2018 NZME Limited had the following committees:
Committees
NZME Board
Chair
Members
Peter Cullinane
Carol Campbell, David Gibson,
Barbara Chapman, Sussan Turner
Governance & Remuneration
David Gibson
Peter Cullinane, Sussan Turner
Audit & Risk
Carol Campbell
David Gibson, Barbara Chapman
Corporate Social Responsibility
Barbara Chapman
Peter Cullinane, Sussan Turner
Page 33
CORPORATE GOVERNANCE
CONTINUED
Board & Committee Attendance 1 January 2018 to 31 December 2018
Director
Board
Audit & Risk
Governance &
Remuneration
Corporate Social
Responsibility
Peter Cullinane
Carol Campbell
David Gibson
Barbara Chapman
Sussan Turner
7 of 7
7 of 7
7 of 7
5 of 5*
3 of 4*
1 of 1
4 of 4
4 of 4
3 of 3*
N/A
5 of 5
3 of 3
5 of 5
N/A
2 of 2*
1 of 1
N/A
N/A
1 of 1
1 of 1
*Barbara Chapman was appointed as a director on 18 April 2018 and Sussan Turner was appointed 16 July 2018.
Figures reflect the meetings the director was eligible to attend.
Chief Executive Officer’s Remuneration
SalaryA
BonusB
BenefitsC
Total
Michael Boggs
856,202
432,023
38,647
1,326,871
(A) Salary includes normal basic salary and paid leave. (B) Bonus payments are those paid during the relevant accounting period
and excludes any bonus accrual not yet paid. (C) Benefits relate to company contributions for KiwiSaver.
Chief Executive Officer’s Remuneration
Michael Boggs held 141,167 shares in the company as
at 31 December 2018 and earned $11,293 in dividends
paid by the company on shares held by him during
the year. In addition to the remuneration disclosed
above as at 19 February 2019, 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
The Bonus above reflects payments in 2018, based on
2017 performance.
Directors of Subsidiary Companies
As at 31 December 2018, Michael Boggs (CEO) and
Sarah Judkins (Chief Strategy Officer & Interim Chief
Financial Officer – resigned in March 2019) were
directors of the wholly owned subsidiaries listed in
Note 6.1 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 2018. Michael Boggs, Sarah
Judkins and Laura Maxwell (Chief Digital Officer) were
directors of the subsidiary OneRoof Limited, in which
1 January 2017 to 31 December 2019. Under the 2017
an 80% interest was held, listed in Note 6.1 of the
TIP the participants will be entitled to additional
Consolidated Financial Statements. Other than Mark
shares (not reflected in the rights above) or a
O’Sullivan who received $8,642 for his services as a
cash payment when the rights are exercised (on
director of NZME Australia Pty Limited, they did not
31 December 2020) for any dividends forgone
receive any fees or other benefit for their services as
during the period 1 January 2018 to 31 December
directors to any of these companies. Michael Boggs,
2020. No Bonus payments have been made in 2019
Sarah Judkins and Laura Maxwell receive remuneration
for the 2018 year, reflecting the lower financial
as employees of the Company which are not related to
performance of the Group during the period.
their duties as directors of these companies.
Page 34
Directors of Associates, Joint Ventures and Joint Operations
Associates, joint ventures and joint operations are listed in Note 6.2 of the Consolidated Financial Statements.
As at 31 December 2018 the following roles were held:
Associates, Joint Ventures
and Joint Operations
OfficerA
Designation
New Zealand Press Association Limited
Michael Boggs
Shayne Currie
Director
Director
The Newspaper Publishers Association
Michael Boggs
of New Zealand Incorporated
Shayne Currie
Member – Board of control
Member – Board of control
Chinese New Zealand Herald Limited
Sarah Judkins, Laura Maxwell
Director
Restaurant Hub Limited
Sarah Judkins, Laura Maxwell
Director
Eveve New Zealand Limited
Sarah Judkins, Laura Maxwell
Director
KPEX Limited
Sarah Judkins
Director
Ratebroker Limited
Michael Boggs
Director (resigned 14 February 2019)
The Radio Bureau
Matt Headland, Paul Hancox,
Representative – Board
(unincorporated joint venture)
Fiona Hamilton
Herald Foundation
Michael Boggs, Matt Wilson,
Trustee
Allison Whitney, Chris Jagusch
Radio Broadcasters Association
Dean Buchanan
Member – Board
Incorporated
The Wairoa Star Limited
Christopher Jagusch
Director
(A) The Officers did not receive any fees or other benefit for their services as directors to any of these associates, joint ventures and joint
operations, however NZME employees do receive remuneration as employees of the Company which are not related to their duties as
directors of these companies.
Page 35
CORPORATE GOVERNANCE
CONTINUED
Employee Remuneration
The Group paid remuneration including benefits in excess of $100,000 to employees (other than directors)
during the year ended 31 December 2018. 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
$240,001 - $250,000
$250,001 - $260,000
$260,001 - $270,000
$270,001 - $280,000
$280,001 - $290,000
$290,001 - $300,000
72
70
58
49
31
26
15
16
12
5
5
8
6
3
6
8
3
4
3
$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
$420,001 - $430,000
$430,001 - $440,000
$440,001 - $450,000
$470,001 - $480,000
$610,001 - $620,000
$640,001 - $650,000
$1,320,001 - $1,330,000
1
1
5
3
3
4
1
1
2
2
1
2
1
1
2
1
1
Total number of employees that were paid remuneration of $100,000+
432
The remuneration above includes all remuneration paid to permanent employees, including fixed
remuneration, employer KiwiSaver contributions, medical aid contributions, bonuses, commission,
settlements and redundancies.
No Bonus payments have been made in 2019 for the 2018 year, reflecting the lower financial performance
of the Group during the period.
Page 36
PRINCIPLE 6 - RISK MANAGEMENT
Directors should have a sound understanding of
•
Implementation of risk management controls,
processes, policies and procedures appropriate
the material risks faced by the issuer and how to
for the Group;
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:
• 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
•
Review and approval of the risk
appropriately:
management policy;
•
Receiving and considering reports on risk
management;
• Assessing the effectiveness of the Group’s
responses to risk; and
•
Providing the Board with regular reports
on risk management.
The Group has a formal Risk Management Policy and
is committed to the consistent, proactive and effective
monitoring and management of risk throughout the
organisation, in accordance with best practice and the
NZME Risk Management Framework and Guidelines.
The Board is ultimately responsible for the
effectiveness, oversight and implementation
of the Group’s approach to risk management.
The Audit & Risk Committee is responsible for the
oversight and independent review of the NZME
Risk Management Framework and Guidelines,
and assisting the Board to discharge its oversight
responsibility for risk management.
The 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;
•
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 who is
responsible for providing guidance where required
and developing tools, templates and policies that
facilitate the identification, management and
reporting of risk and supports 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
•
The day-to-day identification, assessment and
a responsible corporate citizen and provider of news,
management of risks applicable to the Group;
sport and entertainment.
Page 37
CORPORATE GOVERNANCE
CONTINUED
When setting the appetite for taking and accepting
NZME utilises the online safety management
risk, the Group also considers the risk posed by
system “Vault” as the framework for how safety
inaction in what is a fast-paced and disrupted market.
is managed within the business. Vault is used for
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 Board on the appropriateness of NZME’s
Risk Management Framework and Guidelines. The
NZME Head of Risk & Compliance reports to the
NZME Risk Committee, Chief Financial Officer and
the Audit & Risk Committee on the progress of the
implementation of the Risk Management Framework
and Guidelines.
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. Health &
For additional information on financial risks, please
Safety training forms part of induction and ongoing
also refer to Note 4.8 of the Consolidated Financial
training schedules to ensure awareness of NZME’s
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
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 throughout 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
monitors critical Health & Safety risks in a separate
Employee Assistance Programme, wellness videos
Health & Safety Risk Register. Currently that register
and wellness success stories).
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 2018, areas of
focus included dealing with risks relating to fatigue,
wellbeing, traffic management and public exposure.
Health & Safety advice and direction are overseen by
the Culture and Performance team and a contracted
Health & Safety Consultant.
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 2018.
Page 38
•
•
•
•
•
The Audit & Risk Committee Charter requires
questions from shareholders in relation to the audit.
the Committee to assess the following:
The Group’s auditor, PricewaterhouseCoopers,
The independence of the auditor;
The ability of the auditors to provide additional
services which may be occasionally required;
attended the last ASM on 21 June 2018.
Internal Audit
The Audit & Risk Committee is responsible for
reviewing the integrity and effectiveness of the
The competency and reputation of the auditors;
internal audit function. NZME operates a co-sourced
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 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
internal audit programme that utilises a mix of self-
certifications, scheduled control testing by Group
Financial Services, ad hoc assignments, investigations
by Risk & Compliance and a structured internal audit
programme executed by external firms.
Any reporting from external parties is 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.
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.
established. The Audit & Risk Committee receives
NZME seeks to regularly engage with shareholders to
an annual confirmation from the auditor as to their
ensure they are informed about our activities and our
independence from the Group. The auditor is also
progress against our stated priorities. NZME employs
required to provide the Audit & Risk Committee
with a detailed analysis of fees relating to non-
a General Manager Corporate Finance & Investor
Relations to ensure any questions or feedback from
audit services provided during the year, including a
shareholders are responded to promptly.
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
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
evaluating and concluding on auditor independence.
elect to receive communications electronically.
For the year ended 31 December 2018, given the
Following each results announcement, NZME holds
nature of the services provided and based on the
an investor call to present the results and to allow
Committee’s continuous monitoring of auditor
investors to ask questions. This is followed by an
independence, the Audit & Risk Committee do
investor roadshow during which the Chief Executive
not believe that the non-audit services provided
Officer and other members of the Executive aim to
by the auditors compromised their objectivity
meet with as many shareholders as possible.
and independence.
Shareholders are entitled to exercise their voting
The Company requires the external auditor to attend
rights as provided for under the applicable legislation
the Annual Shareholders Meeting (“ASM”) to answer
and listing rules.
Page 39
OTHER STATUTORY
INFORMATION
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
Carol Campbell
Kiwibank Limited
Position
Director
Chubb Insurance New Zealand Limited
Director
Nica Consulting Limited
David Gibson
Diocesan School for Girls
Barbara Chapman
Genesis Energy Limited
The New Zealand Initiative
Fletcher Building Limited
IAG New Zealand Limited
New Zealand Rainbow Tick
Excellence Awards
Director
Trustee
Chair
Director
Director
Director
Patron
Reserve Bank Act Review Panel
Member
Prime Minister’s Business Advisory Council
Member
Sussan Turner
Aspire2Group Limited
Director, CEO and shareholder
Organic initiative Limited
Co-Chair and shareholder
Waitemata District Health Board
Well Foundation
Trustee
Auckland University of Technology (AUT)
Pro Chancellor
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.
Page 40
DIRECTORS’ INTEREST IN NZME SHARES
Ordinary shares held by directors and parties associated with them are as follows:
31 December 2018
Peter Cullinane
Carol Campbell
Barbara Chapman
David Gibson
Number
68,286
50,000
50,000
50,000
SHARE DEALING BY DIRECTORS
Details of individual directors’ share dealings as entered in the Interests Register of the Company under
section 148(2) of the Companies Act 1993 during the year ended 31 December 2018 are as follows (all dealings
are in ordinary shares):
Director
Date
Nature of relevant
interest
Acquisition/
disposal
No. of shares
Consideration
David Gibson
14 June 2018
Barbara Chapman
31 August 2018
Legal and
beneficial holder
Legal and
beneficial holder
Acquisition
50,000
$42,741.05
Acquisition
50,000
$32,890.32
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:
Date of substantial
security notice
Number of shares
held
% of shares held
Auscap Asset Management Limited
30/10/2018
37,722,980
Renaissance Smaller Companies
Pty Limited
7/09/2018
24,298,829
Forager Funds Management Pty Limited
19/09/2017
12,408,486
19.25
12.40
6.33
The total number of ordinary shares issued by the Company as at 31 December 2018 was 196,011,282.
The Company did not have any other quoted voting products.
Page 41
OTHER STATUTORY
INFORMATION
CONTINUED
Top 20 shareholders
As at 22 February 2019
Number of shares held
% of shares held
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
52,737,531
28,870,411
New Zealand Central Securities Depository Limited
26,768,593
20,311,405
9,914,307
7,000,000
4,020,558
1,784,406
1,294,905
1,084,178
899,855
862,412
791,142
700,000
698,427
644,250
636,681
627,292
530,281
500,000
500,000
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Walling Pty Limited
Forsyth Barr Custodians Limited
Pax Pasha Pty Limited
UBS Nominees Pty Limited
Xu Li & Zhen Zhen
Cs Third Nominees Pty Limited
FNZ Custodians Limited
HSBC Custody Nominees (Australia) Limited Gsco Eca
Goolestan Dinshaw Katrak
Rudie Pty Limited
ASB Nominees Limited
Bnp Paribas Nominees Pty Limited
Howard Cedric Zingel
Australian Executor Trustees Limited
Investment Custodial Services Limited
Peter George Wright
Page 42
26.91
14.73
13.66
10.36
5.06
3.57
2.05
0.91
0.66
0.55
0.46
0.44
0.40
0.36
0.36
0.33
0.32
0.32
0.27
0.26
0.26
Spread of Quoted Security Holders
As at 31 December 2018
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 50,000
50,001 to 100,000
Greater than 100,000
Total
OTHER INFORMATION
3,665
1,193
372
465
66
78
5,839
62.77
20.43
6.37
7.96
1.13
1.34
100
981,578
2,867,885
2,844,160
11,343,024
4,806,737
0.50
1.46
1.45
5.79
2.45
173,167,898
88.35
196,011,282
100
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 $841 during the year ended 31 December 2018. In addition, the Group provided in excess of $2.5 million of
donated media placement to a range of charities.
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 2018, 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 2018, none of the directors
were appointed pursuant to Rule 3.3.8.
Page 43
CONSOLIDATED
FINANCIAL
STATEMENTS
NZME Limited
FOR THE YEAR ENDED 31 DECEMBER 2018
Page 44
Page 45
CONTENTS
Consolidated Financial Statements
for the year ended 31 December 2018
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 & Liabilities
Capital Management
Taxation
Group Structure and Investments in Other Entities
Other Notes
Independent Auditor’s Report
47
48
49
50
51
52
53
56
66
76
92
95
100
102
* 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 53 to 55.
Page 46
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 2018, 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 2018 and the results of the Group’s
operations and cash flows for the year.
The consolidated financial statements for the Group as presented on pages 48 to 101 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
Date: 18 February 2019
Carol Campbell
Director
Page 47
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2018
Revenue
Finance and other income
Total revenue and other income
Expenses from operations before finance costs, depreciation,
amortisation
Depreciation & amortisation
Finance costs
Profit / (loss) from continuing operations before income tax expense
Income tax expense
Profit for the year
Profit for the year is attributable to:
Owners of the Company
Non-controlling interests
Profit for the year
Note
2.1
2.1
2.1
2018
$’000
2017
$’000
388,269
390,688
769
926
389,038
391,614
2.2.1
(343,459)
(332,839)
2.2.2
2.2.3
5.1
(24,555)
(24,946)
(4,636)
16,388
(4,816)
11,572
11,735
(163)
11,572
(4,497)
29,332
(8,447)
20,885
20,885
-
20,885
Cents
Cents
Earnings per share attributable to the ordinary shareholders
of the Company
Basic / diluted earnings per share
2.3
6.0
10.7
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
Page 48
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
for the year ended 31 December 2018
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Note
2018
$’000
2017
$’000
11,572
20,885
Exchange differences on translation of foreign operations
4.2
Items that will not be reclassified to profit or loss
Exchange and other differences applicable to non-controlling interests
Other comprehensive income, net of tax
Total comprehensive income
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
32
-
32
(15)
-
(15)
11,604
20,870
11,767
(163)
20,870
-
11,604
20,870
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
Page 49
CONSOLIDATED BALANCE SHEET
as at 31 December 2018
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Tax receivable
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Capital work in progress
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 Company interest
Non-controlling interests
Total equity
Note
4.7
3.3
3.1
3.2
3.2.1
6.3.2
2018
$’000
2017
$’000
11,717
58,694
1,866
898
73,175
9,570
55,323
1,926
-
66,819
329,911
330,553
47,145
56,031
8,758
3,788
8,694
5,988
389,602
401,266
462,777
468,085
3.4
52,036
3.4
4.5
5.2
4.1
4.2
-
52,036
13,665
109,992
448
56,894
7,567
64,461
13,565
99,788
1,239
124,105
114,592
176,141
179,053
286,636
289,032
360,363
360,363
2,998
2,385
(77,662)
(73,716)
285,699
289,032
937
-
286,636
289,032
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
Page 50
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 December 2018
Attributable to owners of the company
Note
Share
capital
$’000
Reserves
Retained
earnings
$’000
$’000
Non-
controlling
interests
$’000
Total
$’000
Total
Equity
$’000
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 transactions with
non-controlling interest reserve
Share based payments expense
4.2
4.2
-
-
-
-
-
-
-
-
-
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
Balance at 31 December 2017
360,363
2,385
(73,716)
289,032
Balance at 1 January 2018
360,363
2,385
(73,716)
289,032
-
-
-
-
-
-
-
-
-
-
-
285,559
20,885
(15)
20,870
(18,622)
(2,785)
2,785
-
1,225
289,032
289,032
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid
Supplementary dividends paid
Tax credit on supplementary
dividends
Share based payments expense
4.2
Equity transactions with
non-controlling interests
-
-
-
-
-
-
-
-
-
32
32
-
-
-
581
-
11,735
11,735
(163)
11,572
-
32
-
32
11,735
11,767
(163)
11,604
(15,681)
(15,681)
(1,864)
(1,864)
1,864
1,864
581
-
-
-
-
-
-
(15,681)
(1,864)
1,864
581
-
1,100
1,100
Balance at 31 December 2018
360,363
2,998
(77,662)
285,699
937
286,636
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying
notes.
Page 51
CONSOLIDATED STATEMENT
OF CASH FLOWS
for the year ended 31 December 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest paid
Income taxes paid
Note
2018
$’000
2017
$’000
378,082
387,228
(338,289)
(336,626)
143
80
(4,096)
(14,078)
128
139
(5,804)
(5,610)
39,455
Net cash inflows / (outflows) from operating activities
4.7
21,842
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets including software
Proceeds from sale of property, plant and equipment
Payments for investment in other entities
(6,000)
(4,881)
(8,080)
(10,165)
30
(49)
27
-
Net cash inflows / (outflows) from investing activities
(14,099)
(15,019)
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Payments for borrowing cost
Dividends paid to Company's shareholders
Net cash inflows / (outflows) from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
4.7
107,400
84,000
(96,900)
(96,486)
(415)
-
(15,681)
(18,622)
(5,596)
(31,108)
2,147
9,570
11,717
(6,672)
16,242
9,570
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Page 52
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1.0 BASIS OF PREPARATION
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 18 February 2019.
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 to ensure consistency with current year disclosures
and 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 the exception of receivables and payables, which include GST invoiced.
In the statement of cash flows, receipts from customers and payments to suppliers are shown exclusive of GST.
Page 53
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1.3
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of the consolidated financial statements requires the use of certain significant judgments,
accounting estimates and assumptions, including judgments, estimates and assumptions concerning
the future. The estimates and assumptions are based on historical experiences and other factors that are
considered to be relevant. The resulting accounting estimates will by definition, seldom equal the related
actual results and are reviewed on an ongoing basis. A list of those areas of significant estimation or judgment
and a reference to the notes containing further information is provided below:
Areas of significant accounting estimates or judgments
Impact of Performance Rights on earnings per share
Determination of the number of reportable segments
Intangible assets with indefinite useful lives
Assumptions used in testing for impairment of indefinite life intangible assets
Note
2.3
2.4.1
3.1
3.1.1
1.4
SIGNIFICANT CHANGES
1.4.1
Proposed Merger with Stuff Limited
On 25 September 2018 the Court of Appeal upheld the High Court’s decision to decline the proposed
merger of NZME Limited and Stuff Limited.
On 24 October 2018 the Company announced that it would not appeal the Court of Appeal’s decision.
Page 54
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1.5
NEW STANDARDS AND INTERPRETATIONS ADOPTED IN THE CURRENT PERIOD
The Group adopted NZ IFRS 15 Revenue from Contracts with Customers for the first time on 1 January 2018.
The Group applied NZ IFRS 15 retrospectively with the cumulative effect of applying the standard for the first
time recognised at the date of initial application (1 January 2018). Comparative figures for the period ended
31 December 2017 have therefore not been restated. The Group did not identify any significant changes in
the timing of revenue recognition as a result of the adoption of NZ IFRS 15 and accordingly there was no
adjustment for the cumulative effect against opening retained earnings at 1 January 2018. The Group did,
however, identify instances resulting in revenue relating to certain types of contracts being recognised at the
gross amount that have been presented at an amount net of related expenses historically. This resulted in an
increase in both revenue and expenses, with no impact on net profit. Refer to note 2.1.1 for further information
on the impact of the adoption of NZ IFRS 15 on the period ended 31 December 2018.
1.6
STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
NZ IFRS 16 Leases replaces NZ IAS 17 and is effective for the period 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. Work has been undertaken to review all of the lease commitments of NZME to determine the impact
NZ IFRS 16 will have on EBITDA. Currently we believe that the Group EBITDA will increase by between
$16 million to $18 million when the standard is adopted as the leased assets are transferred to the balance
sheet and interest and depreciation replaces the current operating lease expense.
All other standards, interpretations and amendments issued but not yet effective are either not applicable
to the Group or not material.
Page 55
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2.0 GROUP PERFORMANCE
2.1
DISAGGREGATION OF REVENUE AND OTHER INCOME
Radio &
Digital &
Print
Experiential
e-Commerce
$’000
$’000
$’000
Total
$’000
114,159
81,498
8,805
7,137
107,613
58,932
280,704
-
-
-
-
5,689
1,022
81,498
8,805
13,848
211,599
113,302
59,954
384,855
3,414
388,269
143
516
30
689
80
769
389,038
Radio &
Digital &
Print
Experiential
e-Commerce
$’000
$’000
$’000
Total
$’000
121,012
83,263
9,571
7,473
105,037
56,048
282,097
-
-
-
-
5,034
279
83,263
9,571
12,786
221,319
110,071
56,327
387,717
2,971
390,688
128
632
27
787
139
926
391,614
For the year ended 31 December 2018
Advertising
Circulation & subscription
External printing & distribution
Other
Segment revenue from integrated media and
entertainment activities
Shared services centre
Total revenues from external customers
Dividends
Rental income from sub-leases
Gain on disposal of property, plant and equipment
Other income
Finance income
Total finance and other income
Total revenue and other income
For the year ended 31 December 2017
Advertising
Circulation & subscription
External printing & distribution
Other
Segment revenue from integrated media and
entertainment activities
Shared services centre
Total revenues from external customers
Dividends
Rental income from sub-leases
Gain on disposal of property, plant and equipment
Other income
Finance income
Total finance and other income
Total revenue and other income
Page 56
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2.1.1
Impact of NZ IFRS 15 adoption
As discussed in Note 1.5, the Group adopted NZ IFRS 15 Revenue from Contracts with Customers for the first
time on 1 January 2018. Although the Group did not identify any significant changes in the timing of revenue
recognition as a result of the adoption of NZ IFRS 15, following a detailed analysis of the agency vs principal
rules and changes to the requirements relating to non-cash consideration (particularly as they relate to
barter transactions), the Group identified instances where revenue is now recognised at the gross amount
and not net of the related expense as it would previously have been reported. This results in an increase in
both revenue and expenses, with no impact on net profit. The table below shows the amount by which each
financial statement line item is affected in the current year by NZ IFRS 15 as compared to NZ IAS 18 and the
related interpretations that were in effect before the change.
For the year ended 31 December 2018
Revenue
Finance and other income
Total revenue and other income
Expenses from operations before finance costs, depreciation,
amortisation
Depreciation & amortisation
Finance costs
Profit before income tax expense
Accounting policies
NZ IAS 18
Adjustment
NZ IFRS 15
$’000
$’000
$’000
381,807
6,462
388,269
769
-
769
382,576
6,462
389,038
(336,997)
(6,462)
(343,459)
(24,555)
(4,636)
16,388
-
-
-
(24,555)
(4,636)
16,388
Given that NZ IFRS 15 was adopted at 1 January 2018, the Group applies the following accounting
policies in relation to revenue:
Advertising
The Group operates an integrated media and entertainment business and contracts with customers
to provide advertising on multiple platforms consisting of a series of distinct services that are
substantially the same. Advertising is often bundled to include print, radio and/or digital components.
In most cases each component of the bundle is treated as a distinct performance obligation and the
transaction price is allocated on a relative stand-alone selling price basis. Experiential campaigns
are a type of bundling focused on providing an experience utilising a mix of traditional advertising
mediums with bespoke elements like competitions, product sampling, street performances etc.
These activities are highly integrated and inter-dependent and are therefore a single performance
obligation with revenue recognised over the period of the campaign. These campaigns often include
elements that are provided by external parties and the Group acts as the principal in those instances.
These campaigns are typically run over a short period of time and are typically completed and
billed for in the same reporting or billing period. Where the Group provides advertising for non-cash
Page 57
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
consideration, revenue is recognised at the fair value of the consideration received, unless the Group
cannot reasonably estimate the fair value of the non-cash consideration; in which case revenue is
recognised by reference to the stand-alone selling price of the advertising promised to the customer.
When advertising is exchanged for advertising, revenue is recognised on a gross basis as set out
above.
Subscriptions
The Group enters into contracts with customers to deliver a specified publication on specified
days. The performance obligation is satisfied, and revenue is recognised, when the publication
is delivered.
Circulation
The Group enters into contracts with customers to deliver specified publications on specified
days which the customer will on-sell to the public. The performance obligation is satisfied when the
publication is delivered. Certain customers have a right to return any unsold publications which
is treated as variable consideration. Customers are required to report unsold publications using an
online system on a weekly basis. The Group therefore includes in the transaction price an estimate
of the unsold publications using the most likely amount method based on the weekly reporting from
customers to the extent that it is highly probable that a significant reversal in the amount of cumulative
revenue recognised will not occur when the uncertainty associated with the variable consideration is
subsequently resolved.
External printing and distribution
The Group enters into contracts with customers to print their publications and, in certain cases,
distribute those publications on their behalf; including maintaining a distribution network. The
printing, delivery and maintenance of a distribution network are distinct performance obligations.
The performance obligation to print a publication is satisfied when those publications are printed.
Similarly, the performance obligation to deliver a publication is satisfied when it is delivered. The
performance obligation to maintain a distribution network is a service that is largely the same on a
monthly basis and is satisfied, and revenue recognised, in equal increments over the billing period.
e-Commerce (GrabOne)
The Group acts as an agent for merchants selling their products or services to the public using the
GrabOne platform. The Group does not control the product or service before it is transferred to the
purchaser. Revenue is recognised in the amount of any fees or commissions the Group expects to
be entitled to in exchange for arranging for the product or service to be provided by the merchant.
Page 58
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Shared services centre
The Group provides back-office support services to customers. Revenue is therefore recognised
in equal increments over the billing period.
Deferred revenue
When a customer pays for goods or services in advance, the Group recognises a Deferred Revenue
liability which is reduced, and revenue recognised, as the Group satisfies each distinct performance
obligation.
Significant financing component
The Group does not expect, at contract inception, that the period between transferring the promised
goods or services from contracts with customers and when the customer pays for those goods and
services to be more than one year. The Group applies the practical expedient in NZ IFRS 15 to not
adjust the promised amount of consideration it expects to receive for those goods or services for
the effects of a significant financing component.
Incremental cost of obtaining a contract
The Group applies the practical expedient in NZ IFRS 15 to recognise the incremental cost of obtaining
a contract (such as commission) when incurred if the amortisation period is one year or less. If material,
the Group will recognise an asset for any incremental cost of obtaining a contract with a customer if the
Group expects to recover those costs and the amortisation period is expected to be more than one year.
Those costs will be amortised on a systematic basis that is consistent with the transfer of the good or
service to which the asset relates.
Costs to fulfil a contract
If the costs incurred in fulfilling a contract with a customer are material and not within the scope of
another standard, the Group recognises an asset from the costs incurred if all of the following criteria
are met:
• The costs relate directly to the contract;
• The costs generate or enhance resources that the Group will use to satisfy the performance
obligations in that contract; and
• The costs are expected to be recovered.
Those costs will be amortised on a systematic basis that is consistent with the transfer of the goods
or services promised in that contract.
Page 59
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2.2
EXPENSES
2.2.1
Expenses from operations before finance costs, depreciation,
amortisation
Employee benefits expense
Production and distribution expense
Selling and marketing expense
Rental and occupancy expense
Costs in relation to one-off projects
Redundancies and associated costs
Asset write-downs and business closures
Impairment of financial asset
Repairs and maintenance costs
Travel and entertainment costs
Other
2018
$’000
2017
$’000
154,509
157,350
72,997
52,728
22,023
1,632
5,289
89
2,249
7,541
4,007
20,395
75,045
47,569
21,986
2,970
4,314
275
-
6,973
4,180
12,177
Total expenses from operations before finance costs, depreciation, amortisation
343,459
332,839
2.2.2 Depreciation & amortisation
Depreciation
Amortisation
Total depreciation & amortisation
2.2.3 Finance costs
Interest and finance charges – other entities
Borrowing cost amortisation
Total finance costs
2.2.4 Fees paid to auditors
14,664
9,891
24,555
4,517
119
4,636
15,559
9,387
24,946
4,391
106
4,497
Fees paid to the Group’s auditors, PricewaterhouseCoopers, consist of:
Audit or review of financial statements A
383
368
Other services
Other assurance services B
Tax services C
Other services D
Total other services
Total fees paid to auditors
Page 60
22
71
26
119
502
51
109
125
285
653
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
A
B
C
D
Includes the fee for both the audit of the annual financial statements and the independent
review of the interim financial statements.
Includes regulatory and other assurance services, including New Zealand circulations
and payroll assurance.
Includes services relating to transactional advice, tax compliance services.
Includes Treasury advisory services in 2018 and due diligence and advisory services relating
to the proposed merger with Stuff Limited in 2017.
2.3
EARNINGS PER SHARE
Significant judgment: 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.
Reconciliation of earnings used in calculating basic / diluted earnings
per share (“EPS”)
Profit attributable to owners of the parent entity
Profit attributable to owners of the parent entity used in calculating EPS
2018
$’000
2017
$’000
11,735
11,735
20,885
20,885
2018
Number
2017
Number
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
Page 61
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Basic / diluted earnings per share
Attributable to owners of the parent entity
Total basic / diluted earnings per share attributable to owners of the parent entity
Accounting policies
Basic earnings per share
Basic earnings per share is determined by dividing:
2018
Cents
6.0
6.0
2017
Cents
10.7
10.7
•
•
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
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share
by taking into account:
•
the after-tax effect of dividends, interest and other changes in income or expense associated
with dilutive potential ordinary shares; and
•
the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
(Note that there are no dilutive potential ordinary shares in 2018 (2017: nil))
Page 62
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2.4
SEGMENT INFORMATION
2.4.1 Determination and description of segments
Significant judgments: 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 63
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2.4.2 Segment revenues and results
The segment information provided to the Directors and Executive Team for the year ended 31 December 2018
is as follows:
Revenues from external customers by channel
Print
Radio & Experiential
Digital & e-Commerce
Segment revenue from integrated media and entertainment activities
Revenue from shared services 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 EBITDA A
Depreciation and amortisation
Interest income
Finance cost
Exceptional items
Loss on disposal of properties B
Redundancies and associated costs C
Costs in relation to one off projects D
Impairment of financial asset E
Profit / (Loss) before tax from continuing operations
2018
$’000
2017
$’000
211,599
113,302
59,954
384,855
3,414
221,319
110,071
56,327
387,717
2,971
388,269
390,688
143
516
128
632
(334,200)
(325,280)
54,728
66,168
(24,555)
(24,946)
80
139
(4,636)
(4,497)
(59)
(5,289)
(1,632)
(2,249)
16,388
(248)
(4,314)
(2,970)
-
29,332
Page 64
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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
C
D
Loss on disposal of properties is the final adjustment on Greymouth land in 2018 and the loss
on sale of land in Ouruhia and Greymouth in 2017.
The redundancies and associated costs relate to the restructuring and integration of the New Zealand
operations.
2018 costs relate to the provision for historical pay adjustments, residual costs in relation to the
Stuff Limited merger appeal and one off project costs. 2017 costs primarily relate to external
consultants assisting with the proposed merger with Stuff Limited and the continuing integration
and co-location of NZME.
E
Impairment costs are in relation to the investment in Ratebroker (see note 6.3.2).
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 65
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
3.0 OPERATING ASSETS & LIABILITIES
3.1
INTANGIBLE ASSETS
Significant judgment: 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.
As at 1 January 2017
Cost
Accumulated amortisation
and impairment
Net book value
For the year ended 31 December 2017
Goodwill
Software
Masthead
Brands
Radio
Licences
$’000
$’000
$’000
$’000
Brands
$’000
Total
$’000
166,397
49,309
146,976
77,457
59,079
499,218
(95,614)
(38,439)
-
(35,389)
-
(169,442)
70,783
10,870
146,976
42,068
59,079
329,776
Opening net book amount
70,783
10,870
146,976
42,068
59,079
329,776
Additions
Disposals
Amortisation
Transfers from capitalised work
in progress
Net book value
As at 31 December 2017
-
-
-
-
1,932
-
(6,434)
8,142
-
-
-
-
90
-
(2,953)
-
-
-
-
-
2,022
-
(9,387)
8,142
70,783
14,510
146,976
39,205
59,079
330,553
Cost
166,397
59,384
146,976
77,547
59,079
509,383
Accumulated amortisation and impair-
ment
Net book value
For the year ended 31 December 2018
(95,614)
(44,874)
-
(38,342)
-
(178,830)
70,783
14,510
146,976
39,205
59,079
330,553
Opening net book amount
70,783
14,510
146,976
39,205
59,079
330,553
Additions
Disposals
Amortisation
Transfers from capitalised work
in progress
Net book value
As at 31 December 2018
-
-
-
-
2,103
-
(6,935)
7,146
-
-
-
-
-
-
(2,956)
-
-
-
-
-
2,103
-
(9,891)
7,146
70,783
16,824
146,976
36,249
59,079
329,911
Cost
166,397
68,633
146,976
77,547
59,079
518,632
Accumulated amortisation and impair-
ment
Net book value
(95,614)
(51,809)
-
(41,298)
-
(188,721)
70,783
16,824
146,976
36,249
59,079
329,911
Page 66
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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 (refer to note 3.1.1 below).
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 the 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).
3.1.1
Year-end impairment review
Significant judgment: 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 process.
Page 67
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
A comprehensive impairment review was conducted at 31 December 2018. 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 impairment.
Key estimates and assumptions
2018
2018
2017
2017
Post-tax
Long-term
Post-tax
Long-term
discount rate
growth rate
discount rate
growth rate
Integrated Media and Entertainment CGU
9.5%
0.0%
9.5%
0.0%
Forecast prepared over the forecast period (2019 – 2023)
The forecasts used in impairment testing have been prepared by management for that specific
purpose. Actual results may differ materially from those forecast or implied. The forecasts are not,
and should not be read as, a forecast of, or guidance as to, the future financial performance and
earnings of the Group.
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 management expectations for this channel.
• Digital revenues, excluding sums forecasted to be received from the Digital Classifieds,
are forecast to grow in line with management expectations for this channel.
• Radio and experiential revenues are forecast to grow by between 3.0% and 5.1% each year.
• Revenue from Digital Classifieds launched in 2018 is expected to increase over time. The average
revenue forecast for the purposes of impairment assessment is $6.5 million per year over the
forecast period.
• Expenses are forecast to reduce by between 2.9% and 1.5% each year.
Based on the above assumptions the directors have not identified any impairment. The recoverable amount
of the CGU exceeds its carrying amount by $16 million.
Page 68
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
3.1.2
Impact of reasonably possible change in key assumptions
The forecasts used in impairment testing require assumptions and judgments about the future,
such as discount rates, long term growth rates, forecasted revenues, to which the model is sensitive
and which are inherently uncertain.
Management have identified the following reasonably possible changes to key assumptions which could
result in impairment:
• Radio revenues grow at a lower rate than expected.
• Digital Classifieds revenues grow at a lower rate than expected.
• Cost reduction is not at the forecasted level.
The following changes in the assumptions would be required to cause the recoverable amount of CGU
to be equal to its carrying amount.
• A reduction in radio revenue forecasts of 0.4% to a range between 2.6% to 4.7%.
• A reduction in the average Digital Classifieds revenue forecast to $4.6m per year over the five year
forecast period.
• Forecast cost reductions are smaller by a total of $7.5 million over the five year forecast period.
Note: the above disclosure assumes that each of the changes is in isolation and assumes that all other
factors are consistent.
The Group compares the net book value of assets with the market capitalisation value at each balance date.
The share price at 31 December 2018 was $0.50 equating to a market capitalisation of $98.0 million. This market
value excludes any control premium and may not reflect the value of 100% of NZME’s net assets. The book value
of NZME’s net assets at 31 December 2018 was $286.6 million ($1.46 per share). Management considered the
reasons for this difference, whether all relevant factors had been allowed for in their value in use model,
and engaged a third party expert to assist in validating their assessment of the recoverable amount.
Accounting policy
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment and at the end of each reporting period if 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.
Page 69
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
3.2
PROPERTY, PLANT AND EQUIPMENT
As at 1 January 2017
Cost or fair value
Freehold
land A
$’000
Buildings A
$’000
Plant and
equipment
$’000
Total
$’000
1,381
14,562
329,569
345,512
Accumulated depreciation and impairment
-
(2,217)
(274,779)
(276,996)
Net book amount
Year ended 31 December 2017
Opening net book amount
Additions
Disposals
Depreciation
Transfers from capitalised work in progress
Net book amount
As at 31 December 2017
Cost or fair value
1,381
12,345
54,790
68,516
1,381
12,345
54,790
68,516
-
(216)
-
-
273
(8)
3,076
3,349
(60)
(284)
(2,302)
(13,257)
(15,559)
(29)
38
9
1,165
10,279
44,587
56,031
1,165
14,764
330,021
345,950
Accumulated depreciation and impairment
-
(4,485)
(285,434)
(289,919)
Net book amount
Year ended 31 December 2018
Opening net book amount
Additions
Disposals
Depreciation
Transfers from capitalised work in progress
Net book amount
As at 31 December 2018
Cost or fair value
1,165
10,279
44,587
56,031
1,165
10,279
44,587
56,031
-
-
-
-
23
(89)
626
-
649
(89)
(1,780)
(12,884)
(14,664)
10
5,208
5,218
1,165
8,443
37,537
47,145
1,165
14,697
335,602
351,464
Accumulated depreciation and impairment
-
(6,254)
(298,065)
(304,319)
Net book amount
1,165
8,443
37,537
47,145
A
Freehold land and buildings include leasehold improvements with a net book value of $8,311,993
(2017: $9,901,993) 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 (2017: $442,270) and the net book value of buildings would
have been $327,038 (2017: $336,973). The last revaluation was performed for the year ended
31 December 2015.
Page 70
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
3.2.1 Capital work in progress
As at 1 January
Additions
Transfers to intangible assets
Transfers to property plant and equipment
As at 31 December
2018
$'000
8,694
12,428
(7,146)
(5,218)
8,758
2017
$'000
7,160
9,685
(8,142)
(9)
8,694
Capital work in progress, which historically was included under property, plant and equipment, is transferred
to the relevant asset category once the project is completed. Capitalised work in progress is not depreciated
or amortised prior to being transferred to the relevant asset category.
Accounting policies
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to
allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives,
as follows:
• Furniture and fittings
• Buildings
• Leasehold improvements
• Motor vehicles
• Plant & equipment
• 3 to 25 years
• 10 to 50 years
• 2.5 to 50 years
• 5 to 10 years
• 1.5 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 by external independent valuers, less subsequent depreciation for buildings.
Independent valuations are performed with sufficient regularity to ensure that the carrying value
of assets is materially consistent with their fair value. 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.
Page 71
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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
2018
$’000
48,153
(766)
47,387
940
10,367
58,694
592
566
(392)
766
2017
$’000
44,811
(592)
44,219
1,028
10,076
55,323
1,042
430
(880)
592
Page 72
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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 and 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 Group 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 73
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
3.4
TRADE AND OTHER PAYABLES
Current payables
Lease liability A
Amounts due to related companies (note 7.1.2)
Employee entitlements
Trade payables and accruals
Total current trade and other payables
Non-current payable
Lease liability A
Total non-current trade and other payables
2018
$’000
2017
$’000
833
359
7,732
43,112
52,036
13,665
13,665
833
1,194
7,211
47,656
56,894
13,565
13,565
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
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.
Page 74
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Employee entitlements
a) 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.
b) 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 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 (in $)
2018
$’000
2017
$’000
462,777
468,085
(329,911)
(330,553)
(176,141)
(179,053)
(43,275)
196,011
($0.22)
(41,521)
196,011
($0.21)
Page 75
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
4.0 CAPITAL MANAGEMENT
4.1
SHARE CAPITAL
Authorised, issued and paid up share capital
Balance at the beginning of the year
Balance at the end of the period
Accounting policy
2018
Number
2017
Number
2018
$’000
2017
$’000
196,011
196,011
196,011
360,363
360,363
196,011
360,363
360,363
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.
2018
$’000
2017
$’000
1,369
581
1,950
722
722
294
32
326
-
-
-
144
1,225
1,369
722
722
309
(15)
294
(6,373)
6,373
-
2,998
2,385
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
Balance at end of year
Foreign currency translation reserve
Balance at beginning of the year
Net exchange difference on translation of foreign operations
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
Page 76
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
4.2.1 Nature and purpose of reserves
Share based payments reserve
The share based payments reserve is used to recognise the fair value of the performance rights issued
but not yet vested as described in note 4.3.
Asset revaluation reserve
The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current
assets, as described in note 3.2. In the event of the sale of an asset, the revaluation surplus is transferred to
retained earnings.
Foreign currency translation reserve
Exchange differences arising on translation of any foreign controlled entities are taken to the foreign currency
translation reserve, as described in the basis of preparation.
Transactions with non-controlling interests reserve
The 2017 movement was the transfer to another category of equity as there were no non-controlling interests
in the Company at 31 December 2017.
4.3
SHARE BASED PAYMENTS
As at 1 January
Granted (2016 TIP) A
Granted (2017 TIP) B
Forfeited C
Exercised
2018
Average
price per
2017
Average
Number
price per right
right (Cents)
of rights
(Cents)
0.58
2,647,644
-
-
0.58
0.58
Number
of rights
745,301
70,236
0.90
(366,508)
0.90
1,933,927
-
-
-
-
0.58
(101,820)
-
-
As at 31 December
0.80
2,281,136
0.81
2,647,644
Page 77
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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 2018 to 31 December 2018, this will result in an additional 81,568 shares
being issued to the participants (2017: 96,862).
B
The number of shares granted in 2017 in respect of the 2017 TIP was an estimate based on information
available at the time the Financial Statements were prepared. In 2018 the actual shares to be granted
were determined with the sum being lower than originally calculated.
C
Two participants in the 2016 TIP departed in 2017 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:
Value of right
at grant date
(Cents)
0.58
0.90
Vesting date
31 Dec 2017
31 Dec 2018
Performance rights
2018
$’000
2017
$’000
414
1,411
1,825
581
414
1,741
2,155
1,225
2018
2017
12 months
12 months
21 months
34 months
Grant date
20 December 2016
25 September 2017
As at 31 December
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
Page 78
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 2018 TIP
No TIP has been offered for the 2018 Financial Year.
4.3.3 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
% of target opportunity awarded
< 95%
> 95% to 100%
> 100% to 110%
25%
Pro-rata vesting between 25% and 100%
Pro-rata vesting between 100% and 150%
Page 79
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
•
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 after the Board approved the TIP and the terms were communicated to the eligible
participants. The number of rights awarded are based on the Volume Weighted Average Price (“VWAP”)
of the Company’s shares for the first 5 trading days of the Performance Period.
Page 80
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 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.
4.3.4 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 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").
Page 81
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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 after the Board approved the TIP and the terms were communicated to the eligible
participants. The number of rights awarded are based on the Volume Weighted Average Price (“VWAP”) of the
Company’s shares 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 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.
Page 82
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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 performance period and the
service 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 21 February 2018, the Board of Directors declared a fully imputed final dividend for the year ended
31 December 2017 of 6 cents per share, paid on 3 May 2018 to registered shareholders as at 18 April 2018
(total sum paid $11,761,000). The Board of Directors also declared a supplementary dividend of 1.06 cents
per share, 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 (total sum
paid $1,404,000). On 22 August 2018, the Board of Directors declared a fully imputed interim dividend of
2.0 cents per share, paid on 26 October 2018 to registered shareholders as at 16 October 2018 (total sum
paid $3,920,000). The Board of Directors also declared a supplementary dividend of 0.3529 cents per
share, paid on 26 October 2018 to registered shareholders as at 16 October 2018, to those shareholders
who are not tax residents in New Zealand and who hold less than 10% of the shares in the Company (total
sum paid $460,000). 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).
4.4.1 Dividends declared after balance date
On 18 February 2019, the Board of Directors confirmed that NZME Ltd would not be declaring a final dividend
for the 2018 financial year.
Page 83
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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 Australian 30% tax rate for the Group
2018
$’000
2017
$’000
NZ$ 8,259
NZ$ 8,519
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 (2017: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
2018
$’000
2017
$’000
110,500
100,000
(508)
(212)
109,992
99,788
110,500
100,000
(508)
(11,717)
98,275
(212)
(9,570)
90,218
The change in the bank loans - secured balance for the year ended 31 December 2018 of $10,500,000 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 $507,760 for the year ended 31 December 2018 is due to
the new costs incurred in relation to the new loan facility and the amortisation of those capitalised borrowing
costs over the period of the loan.
The Group is funded from a combination of its own cash reserves and NZ$150 million bilateral bank loan
facility, which NZME refinanced on 21 November 2018, of which $110.5 million (2017: $100 million) is drawn
and $39.5 million (2017: $60 million) is undrawn as at 31 December 2018. The new facility limit will step down
by $10 million annually from 1 January 2020. This facility expires on 1 January 2022.
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.
Page 84
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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
2018
$’000
2017
$’000
16,332
55,014
55,336
16,389
48,973
62,185
Commitments not recognised in the financial statements
126,682
127,547
Page 85
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
4.7
CASH FLOW INFORMATION
Reconciliation of cash
Cash at end of the year, as shown in the statements of cash flows, comprises:
Cash and cash equivalents
11,717
9,570
2018
$’000
2017
$’000
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
Non-cash lease transactions
Net loss on sale of non-current assets
Change in current / deferred tax payable
Revaluation / impairment of financial assets
Share based payment expense
Changes in assets and liabilities net of effect of acquisitions:
Trade and other receivables
Inventories
Prepayments
Trade and other payables and employee benefits
11,572
24,555
119
99
59
(9,263)
2,249
581
(2,801)
61
(571)
(4,818)
20,885
24,946
106
142
216
2,837
-
1,225
(187)
299
(1,505)
(9,509)
Net cash inflows / (outflows) from operating activities
21,842
39,455
Accounting policy
For the purposes of presentation on the statement of cash flows, cash and cash equivalents includes
cash on hand and short term deposits held at call with finance institutions, net of bank overdrafts.
Page 86
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 manage 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
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 2018, a change in interest rates of +/-1% per
annum with all other variables being constant would impact post-tax profit and equity by $1.1 million lower
/ higher (2017: $1.0 million lower/higher).
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.
Page 87
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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, NZME’s credit control department 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:
Past due
Less than one
One to three
Three to six
Current
$’000
month
$’000
months
$’000
months
$’000
Over six
months
$’000
Total
$’000
0.0%
31,168
31,168
0.7%
11,802
(84)
11,718
4.6%
2,493
(115)
2,378
11.9%
1,868
(222)
1,646
42.0%
822
(345)
477
48,153
(766)
47,387
Past due
Less than one
One to three
Three to six
Current
$’000
month
$’000
months
$’000
months
$’000
Over six
months
$’000
Total
$’000
0.0%
30,308
0.6%
10,601
(65)
30,308
10,536
4.6%
1,929
(89)
1,840
13.7%
1,258
(172)
1,086
37.2%
715
(266)
449
44,811
(592)
44,219
2018
Expected loss rate
Trade receivables
Impaired receivables
2017
Expected loss rate
Trade receivables
Impaired receivables
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 2018, trade receivables of $4,501,000 (2017: $3,375,000) were past due but not impaired.
The maximum exposure to credit risk at 31 December 2018 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 88
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 2018
Trade payables and accruals
Bank loans
Gross liability
Less: interest
Total financial liabilities
31 December 2017
Trade payables and accruals
Bank loans
Gross liability
Less: interest
Total financial liabilities
Less than
Between one
Between two
Over
one year
and two years
and five years
five years
$’000
$’000
$’000
$’000
43,112
4,193
47,305
(4,193)
43,112
47,656
4,022
51,678
(4,022)
47,656
-
-
4,193
4,193
(4,193)
-
-
4,022
4,022
114,693
114,693
(4,193)
110,500
-
104,022
104,022
(4,022)
(4,022)
-
100,000
-
-
-
-
-
-
-
-
Page 89
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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)
Financial assets
There are no financial assets carried at fair value. Other financial assets of $3,787,765
(2017: $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
2018
$’000
2017
$’000
1,165
131
1,296
1,165
377
1,542
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.
Page 90
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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 2018 or
31 December 2017 (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 2018, the borrowing rates were determined to be between
3.3% and 4.5% (2017: between 3.3% 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 for its freehold land and buildings (classified as property, plant and
equipment in note 3.2), less subsequent depreciation for buildings, with sufficient regularity to ensure that the
carrying value of the assets is materially consistent with their fair value. All resulting fair value estimates for
properties are included as Level 3.
Page 91
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
5.0 TAXATION
5.1
INCOME TAX
Reported income tax expense / (benefit) comprises:
Current tax expense / (benefit)
Deferred tax expense / (benefit)
(Over) / under provision in prior years
Income tax expense
Income tax is attributable to:
Profit from continuing operations
Total income tax expense
Income tax expense differs from the amount prima facie payable as follows:
Profit from operations before tax
Prima facie income tax at 28%
Non assessable asset sales and exempt distribution receipts
Non-deductible expenses
Differences in international tax rates
Other
(Over) / under provision in prior years
Income tax expense
2018
$’000
2017
$’000
6,318
(791)
(711)
4,816
4,816
4,816
16,388
4,589
(35)
980
(7)
-
(711)
4,816
10,529
(1,972)
(110)
8,447
8,447
8,447
29,332
8,213
(27)
675
(8)
(296)
(110)
8,447
Page 92
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
5.2 DEFERRED TAX
Deferred tax assets and liabilities are attributable to:
Balance
$’000
Recognised
in income
Recognised
in equity
Other
movements
$’000
$’000
$’000
Balance
$’000
2017
Tax credits
Employee benefits
Doubtful debts
Accruals/restructuring
Intangible assets
Property, plant and equipment
Other
2018
Tax credits
Employee benefits
Doubtful debts
Accruals/restructuring
Intangible assets
3
1,433
291
1,102
(529)
(5,370)
(141)
(3,211)
-
765
(126)
(560)
37
1,720
136
1,972
3
-
2,198
(1,164)
165
542
(492)
49
372
37
Property, plant and equipment
(3,650)
1,497
Other
(5)
(1,239)
-
791
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
2,198
165
542
(492)
(3,650)
(5)
(1,239)
3
1,034
214
914
(455)
(2,153)
(5)
(448)
There are unrecognised tax losses of $1,835,141 (AUD1,744,812) (2017: $1,917,077 (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 was not offset against the deferred
tax liabilities of the rest of the Group because they are levied by a different tax authority.
Page 93
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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.
Page 94
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
6.0 GROUP STRUCTURE AND INVESTMENTS IN OTHER ENTITIES
6.1
CONTROLLED ENTITIES
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 2018.
2018
Ownership
interest
2017
Ownership
interest
Name of entity
Adhub Limited C
ESKY Limited C
GrabOne Limited
Idea HQ Limited C
Mt Maunganui Publishing Co Limited C
NZME 2014 Limited C
NZME Australia Pty Limited A
NZME Digital Limited C
NZME Educational Media Limited
NZME Finance Limited C
NZME Holdings Limited
NZME Investments Limited
NZME Online Limited C
NZME Print Limited
NZME Publishing Limited
NZME Radio Investments Limited
NZME Radio Limited B
NZME Specialist Limited
NZME Trading Limited C
Regional Publishers Limited C
Sell Me Free Limited C
Sella Limited C
Stanley Newcomb & Co Limited C
The Hive Online Limited
New Zealand Radio Network Limited
The Radio Bureau Limited
Trade Debts Collecting Co Limited C
W & H Interactive Limited C
OneRoof Limited D
N/A
N/A
100%
N/A
N/A
N/A
100%
N/A
100%
N/A
100%
100%
N/A
100%
100%
100%
100%
100%
N/A
N/A
N/A
N/A
N/A
100%
100%
100%
N/A
N/A
80%
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%
N/A
Page 95
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
A
B
C
D
Incorporated in, and operates in, Australia.
One “Kiwi Share” held by the Minister of Finance. The rights and obligations are set out in the
NZME Radio constitution.
Effective 31 May 2018, these entities were amalgamated into NZME Specialist Limited.
OneRoof Limited was incorporated on 20 March 2018. On 21 August, the Group transferred 20% of the
share capital in OneRoof Limited to Hougarden.com Limited as consideration for the final payment of
$1.1 million for the acquisition of the platform on which the OneRoof website and related apps are built.
The acquisition of the platform has been treated as an asset acquisition and the subsequent issue of
shares has been accounted for as an equity settled share-based payment transaction valued at the fair
value of the asset received.
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.
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.
Page 96
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
6.2
INTERESTS IN OTHER ENTITIES
6.2.1 Associates, joint ventures and joint operations
The Group has the following associates, joint ventures and joint operations:
Name of entity
Chinese New Zealand Herald Limited A
Eveve New Zealand Limited A
KPEX Limited A
2018
Ownership
interest
2017
Ownership
interest
50%
40%
25%
50%
40%
25%
New Zealand Press Association Limited A
38.82%
38.82%
Restaurant Hub Limited A
The Beacon Printing & Publishing Company Limited A
The Gisborne Herald Company Limited
(held through Essex Castle Limited as a trust company for NZME Publishing Limited) A
The Radio Bureau B
The Wairoa Star Limited A
Ratebroker Limited D
The Newspaper Publishers Association of New Zealand Incorporated C
Online Media Standards Authority Incorporated C
New Zealand Press Council C
Radio Broadcasters Association Incorporated C
40%
21%
49%
50%
40%
21%
49%
50%
40.41%
40.41%
50%
20%
A
B
C
D
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).
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.
These are bodies with which entities in the Group have memberships, but no ownership interest.
In January 2018, the Group acquired an additional 30% of the shareholding in Ratebroker Limited
from existing shareholders. The Group has joint control of Ratebroker Limited and classifies it as a
joint venture. (See note 6.3.2)
Page 97
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Accounting policies
Associates
Associates are all entities over which the Group has significant influence but not control or joint
control. Where the impact of the equity method of accounting is material, interests in associates
are accounted for in the consolidated financial statements using the equity method (see below),
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 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.
Where the impact of the equity method of accounting is material, 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 are immaterial, investments are carried at cost.
Page 98
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
6.3.2 Other financial assets
Shares in other corporations
Total other financial assets
2018
$’000
3,788
3,788
2017
$’000
5,988
5,988
Shares in other corporations consist of investments in entities that are not consolidated or equity accounted
(see also note 6.2.1). These investments are carried at cost.
NZME has written off its investment in Ratebroker Limited.
Page 99
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
7.0 OTHER NOTES
7.1
RELATED PARTIES
7.1.1
Key management compensation
Total remuneration for Directors and other key management personnel:
Short term benefits
Termination benefits
Dividends (relating to shares held in the Company during the year)
Share-based payments
2018
$’000
2017
$’000
5,429
499
70
581
6,579
5,935
364
33
1,225
7,557
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.
7.1.2 Other transactions with related parties
During the year, the Group purchased print services worth $2,363,784 (2017: $3,385,000) from Beacon
Printing & Publishing Company Limited, a company in which the Group holds an interest in and paid $300,695
(2017: nil) to Beacon Printing & Publishing Company Limited for redundancies as per the print agreement
between the parties.
In November 2015, the Company, Fairfax Media, TVNZ and MediaWorks launched a new local advertising
exchange service, KPEX Limited, offering media agencies and clients a programmatic option for purchasing
online advertising. The group received advertising revenue of $2,571,450 (2017: $2,768,773) and paid
commission of $306,342 (2017: $412,931).
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, valued at $27,992 (2017:$66,879),
Restaurant Hub, valued at $260,040 (2017:$281,923) and Ratebroker, valued at $nil (2017: $1,174,394).
The outstanding balances for future services are included in the table below, along with other receivables
and payables.
Page 100
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2018
2017
2018
2017
Receivables
Receivables
Payables
Payables
$’000
$’000
$’000
$’000
Balances with related parties
KPEX Limited
Chinese New Zealand Herald Limited
Eveve New Zealand Limited
Restaurant Hub Limited
Ratebroker Limited
940
1,028
-
-
-
-
-
-
-
-
Total related party receivables and payables
940
1,028
7.2
CONTINGENT LIABILITIES
7.2.1 Claims
The Group did not have any significant contingent liabilities as at 31 December 2018.
7.3
SUBSEQUENT EVENTS
The directors are not aware of any material events subsequent to the balance sheet date.
127
19
124
89
-
359
148
43
28
449
526
1,194
Page 101
Page 102
Page 103
Page 104
Page 105
Page 106
Spending on growth
initiatives continues to
impact earnings ahead
of revenue generation
but these investments
offer very exciting
prospects as we
progress our strategy.
Page 107
DIRECTORY
REGISTERED ADDRESS
NZME Limited
2 Graham St
Auckland 1010
New Zealand
REGISTERED OFFICE CONTACT DETAILS
Postal Address:
Phone:
Website:
Email:
Private Bag 92192
Victoria St West
Auckland 1142
New Zealand
+64 9 397 5050
www.nzme.co.nz
Investor_Relations@nzme.co.nz
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:
www.linkmarketservices.co.nz
enquiries@linkservices.co.nz
Street Address:
Level 11, Deloitte House,
Postal Address:
Phone:
Fax:
80 Queen Street,
Auckland
PO Box 91976,
Auckland 1142
09 375 5998
09 375 5990
Page 108
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