KEEPING
KIWIS IN
THE KNOW.
ANNUAL REPORT
NZME LIMITED
For the year ended 31 December 2019
2 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 3
CONTENTS.
04
07
08
10
12
14
18
26
28
30
44
96
Operational Highlights
2019 Financial Results Summary
Chair’s Report
Chief Executive Officer’s Report
Keeping Kiwis in the Know
Financial Results and Channel Commentary
Our Sustainability Commitment
The NZME Board
The NZME Executive Team
Corporate Governance
Consolidated Financial Statements
Independent Auditors Report
101
Directory
This annual report is dated 24 February 2020 and is signed on
behalf of the Board of Directors by:
Peter Cullinane
Chair
Carol Campbell
Director
We have the channels, brands, talent and audience to fulfil our
commitment to Kiwis and to lead the future of news and journalism
in New Zealand. We empower, enrich and enliven our audiences
and connect them to the people, events, and decisions that matter.
4 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 5
OPERATIONAL
HIGHLIGHTS.
PRINT
35
print publications across
New Zealand1
1.7 million
NZ Herald weekly brand
audience2
RADIO
9
radio brands serving
all key demographics
2.0 million
weekly listeners5
1.3 million
weekly readers3
465,000
average issue readership2
46.9%4
Print advertising revenue market
share for 12 months to Dec 2019
(up from 44.8% for 12 months to
Dec 2018)
NewstalkZB
Number one commercial radio
network and ZB’s Mike Hosking
Breakfast Show the most popular
breakfast show6
35.9%7
Radio audience market share
(up from 34.9% in Dec 2018)
ZM Breakfast
#1 breakfast show for all
New Zealanders Under 406
39.5%8
Radio Revenue market share for
12mths to Dec 2019 (up from
39.0% for 12mths to Dec 2018)
iHeartRadio Growth to 944k registered users (up 14%) and 3.9 million average
monthly listening hours (up 18%)9, growing revenue 40%
DIGITAL
2.3 million
Digital users per month across
our digital platforms3
OneRoof
241,000 monthly unique
audience10, 75% of residential for
sale listings in New Zealand and
95% of residential for sale listings
in Auckland11
46,000
subscribers access NZ Herald
Premium including 21,000 paid
digital subscribers
1.7 million
Monthly unique audience
on nzherald.co.nz10
DRIVEN
Over 40,000 for sale vehicle
listings, 127,000 monthly unique
audience10
GrabOne
352,000 monthly unique
audience10
1 Print publications include 7 Metro and Regional newspapers, 20 Community newspapers and 8 Newspaper Inserted Magazines. 2 Nielsen CMI Fused Q4 18 -
Q3 19, People 15+. 3 Nielsen CMI Fused Q4 18 - Q3 19, People 10+. 4 PwC NPA quarterly performance comparison report, December 2019. 5 GfK Radio Audience
Measurement, Commercial Stations, NZME and Partners, Cumulative Audience, S4 2019 AP10+. 6 GfK Radio Audience Measurement, Commercial Stations, Total
NZ, S4 2019, Share (%). 7 GfK Radio Audience Measurement, Commercial Stations, NZME and Partners in major markets, S4 2019, Monday-Sunday 12mn-12mn,
station share %, AP 18-54. 8 PwC Radio advertising market benchmark report, December 2019. 9 AdsWizz and StreamGuys, December 2019. 10 Nielsen Online
Ratings, December 2019. 11 OneRoof listings as a percentage of residential for sale listings on TradeMe.
6 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 7
2019
FINANCIAL
RESULTS
SUMMARY.
$50.6m
$371.7m
Operating Revenue1
Operating EBITDA1
$19.7m
Operating NPAT1
2018 $388.9m
4%
2018 $54.7m
7%
2018 $18.9 m
4%
10.0cps
Operating Earnings per Share1
($165.2m)
Statutory Net Loss After Tax
2018 9.6cps
4%
2018 Stat. NPAT $11.6m
2%
Radio
Growth
Strong radio revenue
growth of 5% in the
second half of the year,
up 2% year on year
4%
Cost
Savings
Focus on cost savings
reduces operating
expenses by 4%
$23.6m
Net Debt
Down
Net debt reduction to
$74.7 million and leverage
ratio reduced to 1.5 times
Operating EBITDA
1 Operating results are presented excluding the impact of NZ IFRS 16 and exceptional items to allow for a like for like comparison between 2018 and 2019 financial
years. Please refer to slide 33 and 34 of the 2019 Full Year results presentation for a detailed reconciliation.
8 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 9
CHAIR’S REPORT.
In 2019 we communicated our overriding purpose of keeping Kiwis in the know,
highlighting for me the significant role New Zealand Media and Entertainment (NZME)
plays in keeping New Zealanders connected to local, national and global events.
I’m pleased that NZME continues to deliver
on its core purpose of keeping Kiwis in
the know; continues to deliver excellent
results for its advertising partners; and has
improved its balance sheet as we strive to
maintain a vibrant business that delivers
sustainable growth for shareholders.
I’m proud that NZME has always based its business decisions on a
strong set of values focused on supporting our communities, our
people and our environment. NZME’s Sustainability Commitment
featured in this report, helps us share that story.
The framework that supports the news
value and are willing to pay for high quality
specialist insights and reporting into the
There have been reports during the year
that fosters innovation, engagement
In 2019 we have reported a statutory Net
teams in bringing these stories to all
local and international journalism through
real estate market. This value proposition
about NZME’s potential opportunity to
and inclusion, and taking a responsible
Loss After Tax of $165.2 million. 2019 Net
New Zealanders is a passionate media
NZ Herald Premium content on-line. We
is starting to result in significant revenue
purchase Stuff. We firmly believe that NZME is
approach to the environment.
business with diversified portfolios; multiple
now have over 21,000 paid premium digital
contribution.
platforms; and strategies for sustainable
subscribers, with an additional 25,000 print
growth with an unrelenting focus on
delivering for our audiences.
subscribers who access premium content
via their print bundle packages.
Profit was impacted by the impairment
of intangible assets of $175.0 million. This
is an accounting charge only with no
change to cash flows and no impact on
bank covenants.
2019 Operating Net Profit After Tax
(“NPAT”)1 of $19.7 million and Operating EPS
of 10.0 cents were up 4% compared to the
prior corresponding period.
In 2019 we championed the awareness of
many issues which impact New Zealanders
including; mental health, depression, and
New Zealand’s meth crisis. Events such
as the Christchurch mosque shootings,
the Grace Millane murder trial, the SkyCity
Our purpose has been underpinned
by three strategic key priorities - our
commitment to lead the future of news
and journalism in New Zealand, increasing
radio capability and performance, and
creating New Zealand’s leading real estate
platform. These have delivered measurable
results for the business.
NZME targeted the first of these
commitments firmly in 2019 with the
launch of our digital subscription news
Our focus on radio capability continues to
prove itself with award winning stations,
increased radio audience market share and
increased radio revenue market share. It
was fantastic to see radio revenue return to
growth with 5% growth in the second half
of the year and 2% growth year on year –
delivering on our key strategic priority of
increasing radio capability and performance.
Our initiative to create New Zealand’s
leading real estate platform continues to
gain momentum, with OneRoof increasing
its market share of residential for sale
listings in Auckland and New Zealand wide.
international convention centre fire and the
service. To achieve sustainable growth our
Whakaari/White Island volcanic eruption
business must be bold and be prepared
punctuate how important well-resourced and
to lead the market. It is pleasing to see
independent newsrooms are to New Zealand
and its communities. I am extremely proud
of the professionalism, camaraderie and
endurance our journalists, broadcasters and
producers demonstrated in conveying these
significant events to New Zealand.
the response from the tens of thousands
Unique browsers to the OneRoof website
of New Zealanders, who prove that Kiwis
continue to increase as audiences value
1 Operating results are presented excluding the impact of NZ IFRS 16 and exceptional items to allow for a
like for like comparison between 2018 and 2019 financial years. Please refer to slide 33 and 34 of the 2019
Full Year results presentation for a detailed reconciliation
The focus on our three key priorities of
news and journalism, radio, and OneRoof,
will continue to underpin our strategic
approach to 2020.
2019 was also a challenging year for
New Zealand media, and it was a year that
signaled some potentially extraordinary
changes ahead in the New Zealand
media landscape.
The impact of global players’ pressure on the
New Zealand advertising market continued to
impact the local media market. In an already
highly competitive industry, there simply
aren’t enough advertising dollars and not
a large enough audience market to sustain
New Zealand’s current industry structure.
the most logical owner of Stuff. An acquisition
of Stuff is aligned with NZME’s strategic
priorities and our commitment to protecting
the craft of journalism.
I’m proud that NZME has always based its
business decisions on a strong set of values
focused on supporting our communities,
our people and our environment. NZME’s
No agreement in relation to the transaction
Sustainability Commitment featured
has been reached, however we continue
in this report, helps us share that story.
to progress towards the required regulatory
Importantly, it also sets out how we deliver
approvals.
NZME has made excellent progress in our
capital management targets during the
on those values and how we’ll measure
the sustainability commitments that sit
alongside our financial performance.
year. Net Debt reduced to $74.7 million as
Finally, on behalf of the Board, I would like
at 31 December 2019 with leverage ratio
to thank our shareholders for their on-
reduced to 1.5 times Operating EBITDA. We
going support, our talented and dedicated
will continue to progress with our capital
Executive Team, and all our people for the
management commitment, to strengthen
hard-work, commitment and creativity that
our Balance Sheet by reducing both debt
they bring to NZME every day.
and leverage ratio, while maintaining the
ability to invest in growth opportunities
What has been pleasing to see is the great
across the business.
importance that New Zealanders place
I am also pleased to highlight in this report
on the need for quality local journalism,
the formalisation of NZME’s Sustainability
for trustworthy information, and for the
Commitment. This includes a measurable
opportunity to engage, as communities in
approach to connecting and empowering
the stories that impact close to home.
our communities, providing a workplace
PETER CULLINANE
Chair
10 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 11
CHIEF EXECUTIVE
OFFICER’S REPORT.
Each day around 1,400 people at NZME connect millions of Kiwis with one another
and with the world around them.
In 2019 1.3 million1 people read our
publications each week, 2.0 million2 Kiwis
listened to our radio broadcasters each
week, and 2.3 million1 people clicked,
viewed and engaged with our digital
platforms each month.
NZME’s enviable, high-powered blend of
print, digital, and radio brands continue
to power our success and provide the
platforms from which we will maintain
NZME’s enviable, high-powered blend of print, digital and radio brands
continue to power our success and provide the platforms from which
we will maintain our commitment to drive the sustainable future of
journalism and broadcasting into 2020 and beyond.
NZME’s key strategic priorities
improve print performance by reducing
Our Chair has discussed the achievements
subscriber churn and advertising revenue
declines.
our commitment to drive the sustainable
we have made in 2019 against our three
future of journalism and broadcasting into
strategic priorities - our commitment to
Our focus in radio widened this year to
2020 and beyond.
2019 Financial Results
Whilst NZME’s brands continue to deliver
our commercial partners and advertisers
with meaningful audience engagement,
media advertising markets were extremely
competitive across 2019, impacting on
lead the future of news and journalism in
New Zealand, increasing radio capability
and performance, and creating New
Zealand’s leading real estate platform.
include the growth of our digital radio
platform, iHeartRadio. The challenges
we set were to deliver radio revenue
growth driven by regional and digital
Our focus on these priorities is delivering
performance; to grow radio audience
NZME’s overall results.
into 2020.
and these will remain our key priorities
advertiser spend; and to grow digital audio
consumption in iHeartRadio, podcasts and
Total Operating Revenue3 was $371.7
million in 2019, down 4% compared to
Supporting the future of news and
other digital audio products.
journalism in New Zealand, we launched NZ
2018, primarily due to the decline in print
Herald Premium in 2019, and our ambitions
revenue but offset by pleasing results in
in this area encompass both digital and
radio and digital operations.
print. We are conscious that we operate in
The future of New Zealand media
During the last few months of 2019 there
were clear indications that businesses in
New Zealand have begun to feel more
confident about their future.
That said, the media industry in New
Zealand remains an incredibly competitive
sector and as such, media companies
remain significantly susceptible to
the local impact of global players like
Facebook and Google.
As demonstrated through our reduction
in debt and leverage ratio, NZME has
improved its balance sheet and is in
a financial position that allows us the
opportunity to forge our own path.
We’ve launched new ventures like NZ
Herald Premium and have continued
to invest in growth businesses such as
OneRoof. As a leading and successful
New Zealand media company, we are also
in the enviable position of being able to
continue to look for significant commercial
opportunities that will support our
commitment to lead the future of news
and broadcasting in New Zealand.
That position also means we can
start conversations with New Zealand
regulators, Nine Entertainment (Stuff’s
owners) and our shareholders regarding
the potential opportunity for NZME to
Changes in the NZME
executive team
In 2019 we said farewell to two members
of the executive team with Group Director
of Entertainment Dean Buchanan and
Chief Commercial Officer Matt Headland
Conclusion
I opened this report by highlighting the
role our people play in delivering on our
commitment to Keeping Kiwis in the know.
2019 demonstrated both how important
this role is to New Zealanders and how
challenging sustaining a business that
measurable results to the business,
in the key demographics that underpin
purchase Stuff.
In 2020 we will continue to drive the
has shifted significantly since then – and
and the leadership they displayed during
I thank our suppliers, business partners, and
development of OneRoof into a prominent
continues to do so. It is prudent for NZME
their time on the NZME Executive.
While we respect the previous decisions of
the Commerce Commission and Court of
leaving NZME. Both Dean and Matt made
supports that commitment can be. I thank
valuable contributions to the growth of
all our people for their commitment to
Appeal, we believe the media landscape
NZME and I thank them for their support
their craft, their audiences, and to NZME.
a print environment which is challenged by
growing media competition from local and
global players. In 2020, our focus is to grow
NZ Herald Premium digital subscriptions;
maintain the core NZ Herald site audience;
national brand as the property market
remains a significant driver of economic
activity in New Zealand. Growing OneRoof’s
popularity as a platform connecting home
buyers, sellers and real estate agents
remains a key strategic priority whilst
to ensure it is positioned to do what is
in the best interests of its audiences, its
people, and its shareholders.
As well as supporting NZME’s strategic
priorities, specifically leading the future
of news and journalism in New Zealand,
At the end of 2019 we welcomed Wendy
Palmer to the NZME executive as Chief
Radio and Commercial Officer, and
appointed Paul Hancox as a member
of the executive team in his role as Chief
you in the know every day.
Revenue Officer.
enhance the digital product offering; and
delivering continued revenue growth.
1 Nielsen CMI Fused Q4 18 - Q3 19, People 10+. 2 GfK Radio Audience Measurement, Commercial Stations,
NZME and Partners, Cumulative Audience, S4 2019, AP10+. 3 Operating results are presented excluding
the impact of NZ IFRS 16 and exceptional items to allow for a like for like comparison between 2018
and 2019 financial years. Please refer to slide 33 and 34 of the 2019 Full Year results presentation for
a detailed reconciliation.
the potential acquisition of Stuff would
Both Paul and Wendy are incredibly
create a stronger and more sustainable
experienced media executives, with
media presence; enhance our audience
a deep and proven understanding of
and advertising proposition; deliver cost
the business strategies required to
savings and synergy benefits; and deliver
connect content and audiences with
increased financial scale.
commercial partners.
advertisers for their ongoing support and
partnership during the year and thank you to
our audience of 3.2 million New Zealanders
for your continued engagement – we are
here to deliver news and entertainment from
New Zealand and around the world to keep
And finally, I would like to thank the Board
for their continued support and guidance.
Michael Boggs
Chief Executive Officer
Operating Earnings Before Interest, Tax,
Depreciation and Amortisation (“EBITDA”)3
was $50.6 million for the year, a decline of
7% against 2018. 2018 did benefit from an
additional publishing week in the year and,
adjusting for this, 2019 Operating EBITDA
decreased by 5% against 2018 and was in
growth of 4% in the second half of 2019
compared to the equivalent period in 2018.
Further commentary on our 2019 financial
results can be found on page 14.
12 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 13
KEEPING KIWIS
IN THE KNOW.
FOCUS ON CHRISTCHURCH.
On 15 March 2019, 51 people lost their lives and dozens more were wounded in an attack
on New Zealand’s Muslim community when a gunman opened fire in two Christchurch
mosques. This attack shattered hearts and struck at our belief that isolation, values and
security protected us from the sorts of tragedies that occur elsewhere in the world.
What followed in the NZ Herald newsroom
Our teams worked around the clock,
and for our teams on NewstalkZB will
delivering non-stop live coverage
be familiar to any news organisation at
on nzherald.co.nz and NewstalkZB,
the centre of a tragedy: professionalism,
accompanied by thematic print editions
camaraderie, endurance, inspiration,
of the NZ Herald distilling the surges of
and grief. Our journalists, from reporters
information, while maintaining a focus on
to social media producers to editors,
the victims and capturing a common spirit
produced their finest work.
of compassion and inclusivity.
The events in Christchurch on 15 March
This comprehensive coverage stretched
were unprecedented – for New Zealand
across many days as the story developed,
and its news media. From the moment
from the shock and fear created by the
news first broke on that Friday afternoon
attack itself, to mourning the loss of so
that shots had been heard at a mosque in
many New Zealanders, to anger and the
the city, our teams swung into action.
incredible soul searching that followed this
Our editorial teams went to work on the
terrible event.
story as reporters went to the multiple
Herald cartoonist and artist Rod
crime scenes and eyewitness accounts
Emmerson worked with editors to produce
began to flow in, along with police
the NZ Herald’s “They Are Us” edition of
updates and – shockingly – an apparent
March 18. A simple idea evolved into the
livestream of the atrocity itself.
powerful 50 Hearts front page – reflecting
More than a dozen reporters and visual
journalists worked around the clock
to capture the stories surrounding the
event and its aftermath. They acted with
the death toll at the time – which became
a symbol of the compassion and empathy
that flowed throughout New Zealand as
Kiwis embraced our Muslim community.
sensitivity as they recorded first-hand
As the story widened to incorporate
accounts from survivors and those who
debates on gun control and the role of
David Fisher and Jared Savage looked at
the history of the gun lobby in New Zealand
and examined the security agencies behind
the scenes. Technology reporter Chris Keall
secured the first interview with Facebook
as it responded to its hosting of the alleged
had lost loved ones.
social media, investigative reporters
killer’s livestream.
The way our newsroom,
journalists and broadcasters
responded to the Christchurch
massacre will stay with me
forever - the personal stories,
insightful analysis and in-
depth reporting were world-
class, produced in horrific
circumstances. We remain
deeply affected by the events
of March 15 - but committed
to providing our readers the
facts and the context. We have
a leading and important role to
play in ensuring an event like
that is never repeated.
Shayne Currie, NZME Managing Editor
News and political angles from our gallery
team were accompanied with brilliant
writing by columnists Steve Braunias and
Simon Wilson, who went deeper to express
what the events meant for New Zealanders.
The events in Christchurch serve as an
indelible reminder of the important role
media plays in our society. Keeping our
communities informed, connected and
safe sit at the very core of NZME’s purpose
- to keep Kiwis in the know.
Many of those who will
have been directly affected by
this shooting will be migrants,
they will be refugees here.
They have chosen to make
New Zealand their home and
it is their home. They are us.
Jacinda Ardern, Prime Minister
On the day of March 15,
I watched and listened as our
editorial teams agonised over
how to best cover the story
and at the same time treat
the victims, their families and
our communities with respect
and compassion. That kind
of approach to journalism
comes from being a part of
communities we report from.
Being connected, being present,
being local is our future.
Michael Boggs, NZME CEO
14 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 15
FINANCIAL
RESULTS &
CHANNEL
COMMENTARY.
Total Operating Revenue1 was
and associated costs of restructuring to
This standard requires that most leases
$371.7 million in 2019, down 4%
achieve cost savings with the balance
be recognized as a lease liability on the
compared to 2018, primarily due to the
including costs associated with one off
Balance Sheet with a corresponding “right
decline in print revenue but offset by
projects and impairments.
growth in radio and digital operations.
A continued focus on cost savings
Loss After Tax of $165.2 million. 2019 Net
and increased efficiencies across the
Profit is impacted by the impairment of
business resulted in operating expenses1
intangible assets of $175.0 million.
In 2019 we have reported a statutory Net
reducing by 4% compared to the previous
corresponding period.
The impairment assessment recognises
that the difference between the value of
Operating Earnings Before Interest, Tax,
the company implied by its share price
Depreciation and Amortisation (“EBITDA”)1
and the accounting value of equity has
of use” asset. In the income statement
the operating lease cost is reclassified as
depreciation and interest. The impact of
this change for 2019 was that $15.1 million
of operating lease cost was reclassified
as $12.8 million of depreciation and
$4.8 million of interest expense. The net
result was a negative impact on NPAT of
$1.7 million interest costs are recognized
in the early years of a lease.
was $50.6 million for the year, a decline
increased to a level, which can no longer
Balance Sheet and Cash Flows
of 7% against 2018. As mentioned, 2018
benefitted from 53 publishing weeks in
the year, compared to 52 weeks in 2019.
Adjusting for this, 2019 Operating EBITDA
decreased by 5% against a comparable
period in 2018 and was in growth of 4% in
the second half of 2019 compared to the
equivalent week period in 2018.
The underlying depreciation expense
excluding the impact of NZ IFRS 16 was
$5.7 million lower than 2018 due to some
assets fully depreciated in 2018 and the
extension of life of some assets.
In 2019 there was $9.9 million of
exceptional items (excluding impairment
of intangible assets) which was slightly
be supported without an accounting
Net debt was $74.7 million at
adjustment. This is an accounting charge
31 December 2019, a significant
only with no change to cash flows and
reduction from $98.3 million as at
no impact on bank covenants.
31 December 2018. We have made
Please refer to note 3.1 of the consolidated
financial statements for further details.
2019 Operating Net Profit After Tax
(“NPAT”)1 of $19.7 million and Operating
EPS1 of 10.0 cents were up 4% compared
to the prior corresponding period.
Adjusting for the extra week in 2018,
significant progress in our capital
management objective of reaching
a Net debt to Operating EBITDA target
range of 1.0 to 1.5 times, with Net debt
to Operating EBITDA of 1.5 times as at
31 December 2019, a reduction from
1.8 times for the 2018 financial year.
Operating cash flow was $25.1 million
Operating NPAT was up 10% compared
higher than 2018 due to positive
Print
Print revenue was $192.4 million in 2019,
down 9% compared to 2018. However
as mentioned, 2018 benefitted from 53
publishing weeks in 2018 compared to
52 publishing weeks in 2019. Adjusting
for this impact, 2019 total print revenue
declined 8% against a comparable 52
weeks in 2018.
Print advertising revenue decreased 10%
to $102.2 million compared to total print
advertising market which decreased 13.7%
in the year3 and print agency advertising
demand which declined 10.9%4 in the
year. Print circulation revenue declined
6% to $76.3 million. Excluding the extra
publishing week in 2018, print circulation
revenue declined 5% due to a print
and Viva winning Best Newspaper-Inserted
coverage of the Christchurch terrorist
Magazine at the Voyager media awards
attacks and “They are us” concept.
volume decrease of 8% and partially offset
in 2019.
by a 4% increase in yield.
At the 2019 International News Media
Our print fundamentals remain strong.
Association (INMA) Global Media
The NZ Herald remains the most read
Awards in New York, the NZ Herald
newspaper in New Zealand attracting
was named best in Asia/Pacific for its
an average issuer readership of 465,000
#NotforSale editorial campaign, which
kiwis. Across our 39 print publications
also won the Best Public/Community
We remain conscious that print continues
to operate in a tough market, against
many market headwinds. Despite many
challenges, 2020 will be an exciting time
for our reporting teams. There are already
many local and international events on
the agenda this year and we look forward
to reporting on these, and all the other
news stories which arise, to keep Kiwis in
the know in 2020.
to the equivalent period in 2018, with
movement in working capital in 2019,
throughout New Zealand, 1.3 million
Service Campaign, heading off several
21% growth in the second half.2
$9.5 million lower taxes paid in 2019,
people read our papers each week.
international media brands.
higher than the $9.2 million in 2018. The
A new accounting standard NZ IFRS 16
majority of these related to redundancies
was adopted on 1 January 2019.
IFRS 16
and dividends paid in 2018.
Capital expenditure was $11.8 million in
2019, compared to $14.1 million in 2018.
Our journalists, reporters and producers
And at the Australasian 2019 News
were recognised again this year, with the
Media Awards, the NZ Herald won
NZ Herald winning Best Daily Newspaper5
the award for Best Use of print for the
1 Operating results are presented excluding the impact of NZ IFRS 16 and exceptional items to allow for a like for like comparison between 2018 and 2019 financial
years. Please refer to slide 33 and 34 of the 2019 Full Year results presentation for a detailed reconciliation. 2 Refer to Supplementary Information on Slide 36 of the
2019 Full Year results presentation for an analysis of 2019 Operating Results compared to 52 weeks Operating Results in 2018.
3 PwC NPA quarterly performance comparison report, December 2019. 4 Standard Market Index (SMI) NZ, December 2019 Data Release. 5 Newspaper of the Year
(more than 30,000 circulation).
16 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 17
FINANCIAL RESULTS &
CHANNEL COMMENTARY
CONT.
Radio
Digital
One of our key strategic priorities
iHeartRadio grew its registered
Digital revenue was $60.4 million for the
residential real estate listings12, 241,000
the YUDU site and leverage the power
is to increase radio capability and
users by 14% in the year to 944,000
2019 year, up 1% on prior year. While the
average unique audience every month13,
of NZ Herald as the vehicle for our
performance and we are pleased
registered users9 and average
to deliver on this in 2019. Radio
revenue grew 2% compared to the
previous corresponding period to
$110.9 million in 2019, with particularly
strong growth of 5% in the second
half of 2019.
NZME increased its New Zealand
radio advertising revenue market
share to 39.5%6 for the 12 months
to December 2019 compared to
39.0% in the 12 months to December
2018. New Zealand agency radio
revenue grew 3.8% in the year to
December 20197.
Radio audience market share
increased in December 2019 to
monthly listening hours grew 18%
year on year to 3.9 million hours10.
NZME is proud of its strong radio
brands, which deliver radio revenue
growth through building audience
listening and engagement across
brands and digital platforms. We
were thrilled to welcome new talent
and programming to our stations in
2019 including Simon Barnett and
Phil Gifford in the afternoons and
Heather Du Plessis-Allan hosting the
Drive show on Newstalk ZB. Anika
Moa and Mike Puru also joined our
radio talent teams in 2019, and we
look forward to welcoming Jono
Pryor and Ben Boyce to the team
35.9%8 from 34.9% in December 2018.
in April 2020.
NZME is proud of its strong radio brands, which
deliver radio revenue growth through building
audience listening and engagement across brands
and digital platforms.
first half of 2019 saw challenges in the
digital space, the second half of the year
saw total digital revenue growth of 5%
compared to the second half of 2018.
Digital revenue comprises digital
advertising revenue, digital classified
revenue from listings on OneRoof and
DRIVEN, digital subscription revenue
from NZ Herald premium subscribers,
and revenue from our ecommerce
website GrabOne.
Digital advertising revenue declined 4%
on prior year to $45.9 million, impacted
by a decline in digital display agency
advertising market demand which was
down 2.4% in the year to December
201911. NZME saw an improvement
in the second half of the year with a
much lower rate of decline of 1% in
and over 150,000 app downloads14.
OneRoof is now making a significant
impact with $2.8 million of revenue
in 2019 and we expect OneRoof to
continue to grow in 2020.
While the first half of 2019
saw challenges in the digital
space, the second half of the
year saw total digital revenue
growth of 5% compared to the
second half of 2018.
DRIVEN is also proving to be a strong
digital classified platform with over
40,000 for sale vehicle listings and
employment market strategy, launching
JobMarket within the NZ Herald website
in December 2019.
We are very pleased with the
performance of NZ Herald premium
digital subscriptions, which delivered
$1.7 million revenue for eight months
since its launch on 30 April 2019 – with
subscriptions and revenue well ahead of
expectations.
We now have over 21,000 paid premium
digital subscribers, plus an additional
25,000 print subscribers who also
access premium content with their print
bundle packages. NZME is the first global
customer of the Arc Digital Subscription
product and it has been a resounding
success. We have further developments
on the horizon including a new NZ Herald
digital advertising revenue compared
127,000 average unique audience
app, corporate subscription options,
to the second half of 2018, a significant
every month13 attracting car buyers
and new payment gateways all planned
improvement from the 8% decline
experienced in the first half of 2019
compared to the first half 2018.
However, this was offset by strong
growth in digital classifieds revenue
which grew to $3.2 million in 2019, up
from $0.9 million in 2018.
OneRoof continues to grow in listings,
audience and revenue, with over 75% of
and motoring enthusiasts who value
for 2020.
specialist insights into the automotive
industry. DRIVEN delivered revenue of
$0.4 million in 2019 and will be boosted
by lead generation revenues which
commenced in January 2020.
This year we took the strategic decision
to refocus our approach to the
employment sector to better suit the
NZME launched its own programmatic
desk after the closure of the industry-
led KPEX platform in September 2019,
allowing advertisers and agencies to
book programmatic digital advertising
directly with NZME and is showing strong
signs of revenue growth.
total New Zealand residential for sale real
evolving needs of recruiters and jobs
estate listings and 95% of total Auckland
seekers. We made the decision to close
6 PwC Radio advertising market benchmark report, December 2019. 7 Standard Media Index (SMI) NZ December 2019 Data Release 8 GfK Radio Audience
Measurement, Commercial Stations. NZME & Partners in Major Markets, S4/2019. Station Share %, AP 18-54. 9 iHeartMedia, Adobe Analytics, 2018-2019.
10 AdsWizz and StreamGuys, 2018-2019.
11 Standard Media Index (SMI) NZ December 2019 Data Release. 12 OneRoof’s listings as a percentage of residential for sale listings on Trade Me.
13 Nielsen Online Ratings, December 2019. 14 Google Analytics, November 2019.
18 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 19
OUR
SUSTAINABILITY
COMMITMENT.
Keeping Kiwis in the know requires a broad commitment to sustainable
practices and the well-being of our people and the wider community.
Keeping Kiwis in the know makes a powerful
For NZME, doing the right thing requires
NZME’s commitment to sustainable
promise: that New Zealand Media and
a commitment to the craft of journalism
practices contributes to the prosperity
Entertainment (NZME) will make each day
livelier, more informed, and more connected
to the people and things that matter.
Delivering on our promise requires a
genuine commitment to doing right by
our customers, employees, and the wider
community. When the people important to
our business prosper and live better lives,
and broadcasting; making NZME a
of our business and the future of our
safe and inspiring place to work; and
communities, our people, and our
championing the diversity of voices that
environment.
make us Kiwis.
In 2019 we completed our materiality
NZME’s sustainability programme is
matrix and assessed these results to
aligned to the guidelines set out in the
determine NZME’s Corporate Social
UN Sustainable Development Goals –
Responsibility Framework. We have
an international blueprint to achieve
identified the key initiatives and
a better and more sustainable future
objectives for each pillar. These are
only then can we say we did the job we set
for everyone. Combined with our
detailed in the following pages and form
out to do.
promise to keep Kiwis in the know,
the framework that we will report against
commencing in the 2020 financial year.
When the people important to
our business prosper and live
better lives, only then can we
say we did the job we set out
to do.
We are committed to protecting the craft of journalism and
broadcasting to keep Kiwis in the know.
OUR COMMUNITIES
OUR PEOPLE
OUR ENVIRONMENT
We connect and empower
our communities.
We provide a workplace
that fosters innovation,
engagement and inclusion.
We take our responsibility
to the environment
seriously.
Responsible
reporting
Promoting a healthy,
diverse and safe
workplace
Recycling
Connecting
communities
Championing
the craft
Best practice
Sharing our
platforms
Equipping our
people
Responsibility
20 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 21
OUR
COMMUNITIES.
We connect and empower
our communities.
Through our extensive range of
NZME recognises the responsibility that
publications, radio networks and digital
comes with acting as a voice of record
platforms NZME is proud to support
for New Zealand. We use this reach to
communities right across New Zealand.
address key topics and conversations
We share their stories and support local
important to New Zealanders. In 2019
campaigns to better their communities and
this included: A Not for Sale, B Fighting
we represent New Zealanders fighting for
the Demon, C Radio Hauraki “We’re not
those less advantaged.
talking” and D Jessica’s Tree.
INITIATIVE
OBJECTIVE
MEASUREMENTS
RESPONSIBLE REPORTING
AND BROADCASTING
Through best practice broadcasting and journalism,
we will provide a diverse and balanced reporting
platform, promoting the law and holding the
powerful to account.
Adhere to our Editorial Code of Ethics and the
Number of upholds.
principles and standards of the NZ Media Council
and the Broadcasting Standards Authority.
Where justified in the interests of freedom of
Number of challenges.
expression, open justice and holding the powerful
to account, we will invest in legal challenges of
suppression, take down orders, access to court files
and other media law challenges as appropriate.
Maintain our commitment to the regions through
Number of local journalists/ broadcasters
the presence of local journalists and broadcasters.
in the regions.
CONNECTING COMMUNITIES
We are deeply involved in our communities and
as one of New Zealand’s largest media platforms
we will facilitate conversations about the topics
that matter to Kiwis.
Participate in and support the Local Democracy
Number of LDRs in NZME newsrooms.
Reporters (LDR) - NZ On Air funded journalists.
Support an increase in the diversity of content
Policies and initiatives that support this.
and contributors across our platforms.
Examples of diverse perspectives shared
through our platforms.
Use our platforms to fight for New Zealanders,
Examples of initiatives.
including the disadvantaged, and to hold the
powerful to account.
Partner to champion charitable causes and
List of charitable partnerships.
facilitate conversations that matter.
SHARING OUR PLATFORMS
We will use our wide reach across New Zealand
to provide a range of opinion and ensure a diversity
of voice.
A
NZ Herald 'Not for Sale'
– raising awareness and
opening the conversation
to end exploitation of
girls caught in modern
day slavery.
C
Radio Hauraki 'We’re not talking' – raising awareness
of men's mental health and depression.
B
NZ Herald 'Fighting the Demon'
– addressing New Zealand’s meth crisis.
D
NZ Herald 'Jessica’s Tree' – raising awareness and in-depth
conversation of suicide and mental health in New Zealand.
22 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 23
Maintain a Diversity Committee to address
Employee Diversity Committee in place
as an employer of choice in the media industry.
OUR
PEOPLE.
We provide a workplace that fosters innovation, engagement and inclusion.
INITIATIVE
OBJECTIVE
MEASUREMENTS
PROMOTING A HEALTHY, DIVERSE
communications.
Minimise health and safety incidents.
Measurement of incidents.
Increase awareness and engagement with
Number of communications through
health and safety initiatives through effective
the year.
AND SAFE WORKPLACE
We will embed a high performing health and
safety culture and will regularly report on our
performance. We will strive for a collaborative
and welcoming place to work. We will adopt and
employee engagement on diversity and
and initiatives actioned during the year
inclusiveness and drive diversity and inclusion
in accordance with Committee Framework
initiatives across the business.
and Strategy.
strengthen policies for the promotion of gender
Aim to reduce the gender pay gap across
Policies and initiatives that support reduction
equality and diversity.
the business.
in gender pay gap.
Strive for diversity at Board, Exec and SLT level.
Gender and ethnicity stats at each level.
Policies and initiatives that support this.
Support flexible working for diverse needs and
Policies and initiatives that support this.
shared responsibility within the household.
Train our journalists and broadcasters to equip them
Number of hours.
to comply with media law and regulation.
Provide internships and cadetships for journalists
Number of internships and cadetships.
CHAMPIONING THE CRAFT
and broadcasters.
We will ensure we are mentoring the next
generation of journalists and broadcasters.
Support the value of the fourth estate in NZ society
Published profiles.
We will develop our people to maintain and
through profiling and promoting journalists and
grow the craft.
broadcasters.
Provide effective and relevant on-the-job training
Number of hours provided.
and reskilling for our people.
EQUIPPING OUR PEOPLE
We will commit to offering our staff relevant and
impactful training to create new opportunities for
growth and innovation.
NZME believes its primary responsibility to its people is
to provide an inclusive, safe and healthy workplace. Our
people, policies and practices are based on providing our
people with opportunities for learning and development,
the ability to choose how to manage a healthy work-
life balance, a focus on diversity across all spectrums
(including a commitment to aim to reduce the gender pay
gaps across the business) and a commitment to health,
safety and wellness. NZME strives to maintain its position
NZME PEOPLE
AS AT 31 DECEMBER 2019
GENDER / LEVEL
INCLUDING UNDECLARED
FEMALE
MALE
44%
56%
41%
59%
55%
45%
EXECUTIVE
SENIOR LEADERSHIP TEAM
STAFF
LENGTH OF SERVICE
e
l
p
o
e
p
f
o
r
e
b
m
u
N
350
300
250
200
150
100
50
0
<1Y
1-2Y
3-5Y
6-10Y
11-20Y
21-30Y
31+Y
ETHNICITY
INCLUDING UNDECLARED
OTHER
ETHNICITY
2%
PACIFIC
PEOPLES
1%
UNDECLARED
17%
AGE GROUP
35-44Y
24%
<25-34Y
26%
<25Y
11%
CONTRACT TYPE
FULL TIME
71%
NZ EUROPEAN
58%
MIDDLE EASTERN /
LATIN AMERICAN /
AFRICAN
1%
MĀORI
4%
EUROPEAN
8%
ASIAN
9%
45-54Y
21%
55+
18%
PART TIME
9%
CASUAL
16%
CONTRACTOR
4%
24 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 25
OUR
ENVIRONMENT.
We take our responsibility to the environment seriously.
NZME aims to review the actual and
potential impact its business practices have
on the environment. NZME continues to
put in place policies and methods to enable
it to measure this impact. This will in turn
enable NZME to reduce environmental
impacts through recycling, greenhouse gas
("GHG") emissions reduction and sustainable
procurement policies. NZME’s editorial
platforms also cover environmental issues
raising community awareness.
NZME constantly reviews the
actual and potential impact its
business practices have on the
environment. With a suite of
policies to support this approach,
NZME can measure and act to
reduce environmental impacts.
Particular focus areas for NZME in 2020
include recycling, the development of
a sustainable procurement policy and
reducing the impact of our domestic travel
including reducing flights and seeking
efficiencies in our motor vehicle fleet.
INITIATIVE
OBJECTIVE
MEASUREMENTS
RECYCLING
We will separate our internal waste streams
– including paper, food and green waste,
and recyclables – to optimise value and reduce
environmental impacts.
We aim to have recycling facilities in all offices and
Details of recycling facilities and initiatives
to teach our people how to properly recycle.
at major offices and training and support
offered.
Reduce use of plastic in the production
Tonnes of plastic used in the production
process at the print plant.
process at the plant.
Reduce general waste at the print plant.
Tonnes of general waste removed
from the print plant.
Ensure we retain Enviromark Gold Certification.
Certification.
We will put in place a Responsible Sourcing
Examples of sustainable suppliers
Policy and adhere to that policy for our sourcing
we work with.
BEST PRACTICE
We will maintain our print operation’s Environmental
requirements.
Management System.
We will aim to reduce domestic travel.
Kilometres travelled.
We will collaborate with our suppliers and partners
We will continue to seek efficiencies with our
GHG emissions.
to ensure best practice sustainable operations.
motor vehicle fleet.
We will continue to optimise our distribution
GHG emissions.
network with our suppliers.
Where appropriate, we will use our platforms to
Examples of stories in the year
share stories and initiatives to raise awareness of
on environmental issues.
environmental issues (including climate change).
RESPONSIBILITY
Partner to promote environmental issues
Discuss environmental campaign
We will share our platforms to promote environmental
impacting Kiwis.
undertaken.
issues impacting Kiwis including carbon emissions
and climate change.
We have commenced our journey of
measuring our GHG emissions and are
actively identifying our Scope 1, 2 and 3
carbon emission activities. We are currently
assessing the boundaries of what emissions
we report on.
To quantify and report our GHG emissions
we have commenced collecting data and
thinking about how we collect this in the
future, to be able to convert this into a robust
and comparable emissions number.
Our newspapers are 100 per cent
recyclable, with newsprint made in
New Zealand largely from waste or
byproduct fibre from sustainable
softwood resources using geothermal
steam. We are very proud of our efforts
around sustainability for print.
Matt Wilson, NZME Chief Operating Officer
26 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 27
THE
NZME
BOARD.
Barbara Chapman
Independent Director
Barbara Chapman served as Chief Executive and Managing
Director of ASB Bank Limited from 2011 until February 2018. She
has extensive business experience gained through a successful
career in banking and insurance. During her career she has held a
number of senior and executive roles in retail banking, marketing,
communications, human resources and life insurance. Barbara is
passionate about people and culture, and promoting best practice
in community, governance and sustainability. She is the Chair of
Genesis Energy Limited and holds independent directorships on the
boards of Fletcher Building Limited and IAG New Zealand Limited.
She is also Deputy Chair of The New Zealand Initiative, Patron of
the New Zealand Rainbow Tick Excellence Awards, Chair of the
CEO Summit Committee for APEC 2021 and holds seats on the
Reserve Bank Act Review Panel and the Prime Minister’s Business
Advisory Council.
David Gibson
Independent Director
Sussan Turner
Independent Director
David Gibson has a strong background in strategy and finance
with over 20 years’ investment banking experience, including as
For the past 25 years Sussan has held senior leadership roles
across media companies, including Group CEO of MediaWorks,
Co-Head of Investment Banking in New Zealand for Deutsche Bank
Managing Director of Radio Otago and CEO of RadioWorks. She is
and Deutsche Craigs. During his finance career David has advised
currently Group CEO and Director of Aspire2 Group Limited, one
on many of New Zealand’s largest capital market transactions,
of the leading private tertiary education groups in New Zealand
including within the media industry. David is also a trustee for
and is passionate about building executive teams and company
Diocesan School for Girls and a director of Rangatira Limited.
cultures. Sussan has extensive experience as a director and is
currently Pro-chancellor of Auckland University of Technology and
Co-Chair of Organic Initiative Limited.
Peter Cullinane
Independent Chair
Peter is widely respected in global advertising and marketing, and
has extensive knowledge and expertise in both Australasian and
global markets. Peter is the Founder and Chairman of Lewis Road
Creamery Limited and is also an independent director of Sanford
Limited. He was formerly Chief Operating Officer of Saatchi &
Saatchi (Worldwide), and its Chief Executive Officer (New Zealand)
and Chairman (Australasia). Peter was previously on the boards of
HT&E Limited (listed on the ASX), WPP AUNZ Limited and SKYCITY
Entertainment Group.
Carol Campbell
Independent Director
Carol Campbell is a Chartered Accountant and Chartered member
of the Institute of Directors. Carol was a partner at Ernst & Young
for over 25 years and has been a professional Director for the last
9 years. Carol has extensive financial experience and a sound
understanding of efficient board governance. Carol is a director
of NZ Post Limited, Kiwibank Limited, T&G Global Limited, Asset
Plus Limited, Chubb Insurance Limited and a number of other
private companies.
28 NEW ZEALAND MEDIA AND ENTERTAINMENT
THE NZME
EXECUTIVE TEAM.
C
Paul Hancox
Chief Revenue Officer
Paul joined the NZME Executive Team as
Chief Revenue Officer in 2019. In this role
Paul is accountable for agency and key
customer revenues, including programmatic,
trading and integration performance. Prior
to joining the NZME Executive team, Paul
led a significant commercial portfolio at
NZME as Head of Agency, Enterprise, Events,
Partnerships, Government and Rural, a role
he took up in January 2018.
Prior to this, Paul spent 9 years in various
senior roles at MediaWorks including
as Group Head of Revenue where he
successfully designed, implemented and
managed the integration of the TV and radio
sales teams. Paul brings with him 25 years of
experience in the media industry including
a 9-year stint with The Radio Network early
in his career, operating in a variety of roles
including as NewstalkZB and Radio Sport
Sales and Marketing Manager.
D
Wendy Palmer
Chief Radio and
Commercial Officer
Wendy joined the NZME Executive Team
in November 2019. As Chief Radio and
Commercial Officer, she is accountable for
revenue growth with the Commercial Direct
team across all NZME platforms. Wendy’s role
includes responsibility for the radio business
and the content delivery to support audience
and revenue growth across NZME’s radio
networks. Before starting at NZME Wendy
spent 12 years at MediaWorks, where she
held senior roles including being appointed
Chief Executive of its radio business in 2014.
Wendy is an experienced broadcast media
executive with wide industry experience.
She has served as Chair of The Radio
Bureau and as a Board member of the
Radio Broadcasters Association and the
Broadcasting Standards Authority.
C
E
B
D
A
Michael Boggs
Chief Executive Officer
Michael was appointed CEO of New
Zealand Media and Entertainment (NZME) in
March 2016. Prior to that he held the Chief
Financial Officer position at NZME. Michael’s
core focus at NZME has been to develop
and implement a group wide strategy to
accelerate growth across NZME’s brands
particularly in the areas of subscription
and classified offerings, digital and video
content, while ensuring the sustainable
growth of the company’s traditional print
and radio platforms.
Michael has extensive senior executive
experience including as Chief Financial
Officer at leading insurance company Tower
Limited. While at Tower, Michael managed
the company’s multibillion-dollar assets,
its Pacific Islands operations, earthquake
recovery programme and the sale of
Tower’s life insurance, health insurance
and investment management businesses.
This industry leading work was recognised
in 2014 when Michael was awarded CFO
of the year at the annual New Zealand
CFO Awards. Michael also has significant
background in the telecommunications and
technology sectors with executive roles
in the finance, commercial and business
functions of major organisations including
Telstra’s New Zealand operations.
B
David Mackrell
Chief Financial Officer
David was appointed Chief Financial Officer
of NZME in March 2019, leading NZME’s
Finance, Technology and Strategy functions.
He moved to NZME from Heartland Bank
where he was their Chief Financial Officer.
David started his professional career at
Ernst & Young as an Auditor before joining
Air New Zealand in 1992. His career at Air
New Zealand spanned 25 years and a large
gamut of senior financial and commercial
roles, finishing with the company as Deputy
Chief Financial Officer.
E
Allison Whitney
General Counsel and
Company Secretary
Allison joined NZME in 2013. As General
Counsel she heads up the legal team and
manages the provision of legal advice and
company secretarial services across NZME.
Prior to commencing her role at NZME,
Allison held roles both in-house and in
private practice, including five years as Legal
Counsel at Westpac, six years as Group Legal
Advisor to a London-based international
media group and three years in private
practice at Kensington Swan.
Allison brings over 20 years of legal
experience to her role spanning areas from
corporate and commercial to intellectual
property, consumer and media law.
F
Matthew Wilson
Chief Operations Officer
Matt was appointed Chief Operations
Officer in December 2016. In this role, Matt
is responsible for NZME’s print product
performance; driving NZME’s Operations
functions including print, distribution, print
and digital subscriptions and advertising
production; and leading NZME’s Culture &
Performance function. Prior to that, Matt’s
role was GM Print Operations for NZME.
His passion for media has resulted in over
two decades of experience working across
NZME’s newspaper brands, including
finance roles in print, commercial, content
and corporate through to leading the
Newspaper Sales, Print and Herald product
functions. During his time, Matt has led
the consolidation of newspaper sales and
distribution functions across NZME, the
development of NZME’s highly successful
distribution services business, and customer
streams for the launch of Herald on Sunday
and NZH Premium digital subscribers. Matt’s
focus on operating performance has driven
a strong passion for NZME’s people, their
engagement and the culture fostered in
the company.
G
Laura Maxwell
Chief Digital Officer
Laura was appointed Chief Digital Officer in
August 2017 and is responsible for growing
digital business across NZME, including
OneRoof, DRIVEN and GrabOne. Laura’s
connection to NZME began in 2013 when
she started out at The Radio Network as
a Commercial Director, moving in 2014
to the position of Group Director Digital
Media across the APN group. In 2015, Laura
was appointed Group Revenue Director, a
role that transitioned to Chief Commercial
Officer as part of the NZME transformation.
Prior to joining the NZME group, Laura held
the position of General Manager/Director for
Yahoo! New Zealand and previously held the
role of Sales Director for both APN Outdoor
and Buspak New Zealand. Laura has over
25 years of experience in media and has
held the role of Chair of the Interactive
Advertising Bureau and The Radio Bureau.
A
F
G
H
ANNUAL REPORT 2019 29
H
Katie Mills
Chief Marketing Officer
Katie joined the NZME Executive Team
in December 2018 assuming leadership
of the company’s Marketing and
Communications functions. Immediately
prior, Katie held the role of Group Marketing
Director at Aspire2 Group Limited and
was previously General Manager (Global)
Marketing & Communications at Opus
International Consultants.
Along with Katie’s wide marketing industry
experience, she also brings to her role, more
than 20 years of media-specific experience.
15 of those years were spent at MediaWorks
in senior leadership positions including as
Head of Marketing, successfully developing
and delivering marketing and brand
strategies for a portfolio of radio, digital,
event and television ventures.
I
Shayne Currie
Managing Editor
Shayne was appointed Managing Editor in
2015 and is responsible for NZME's 300-plus
journalists and the company's editorial and
news strategy. His role includes overseeing
NZME’s unique mix of digital, print, audio and
visual storytelling across the New Zealand
Herald, nzherald.co.nz, Newstalk ZB, Radio
Sport, NZME’s five regional daily newspapers
and more than 20 community titles.
In 2019, Shayne helped oversee the
successful launch of NZ Herald Premium
digital subscriptions and he has helped lead
some of the most significant projects at the
Herald in the past 15 years including the
launch of the Herald on Sunday in 2004 and
the Herald's move to compact format in 2012.
In 2019, Shayne celebrated his 30th year in
journalism, including two decades in
senior editorial leadership roles
across New Zealand. In 2016
he was awarded the Wolfson
Scholarship at Cambridge
University in the UK,
studying audience patterns
in the digital age.
I
30 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 31
CORPORATE
GOVERNANCE.
GOVERNANCE FRAMEWORK
NZME Limited ("the Company") is listed on the NZX Main Board
and as a Foreign Exempt Listing on the ASX (both under the
ticker code “NZM”). The ASX Foreign Exempt Listing category is
based on a principle of substituted compliance recognising that,
for secondary listings, the primary regulatory role and oversight
rests with the home exchange and the supervisory regulator
in that jurisdiction. As such, NZME is required to comply with a
limited set of ASX Listing Rules.
The Company’s corporate governance framework, as described
in this section, therefore primarily takes into consideration
contemporary standards in New Zealand, incorporating the NZX
Corporate Governance Code (“NZX Code”).
The Group is committed to having a strong governance
framework and therefore complies with the recommendations
of the NZX Code (unless specifically stated otherwise). The
corporate governance policies referred to in this section reflect
the Group’s governance framework as at 31 December 2019
(unless otherwise stated) and are available on the Company’s
website: www.nzme.co.nz/corporate-governance.
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 with the public’s right to know.
Securities Trading Policy
The Securities Trading Policy details the Company’s trading
policy and guidelines, including trading restrictions on dealing
in the Company’s quoted financial products. This policy applies
to the directors and all employees. The Securities Trading Policy
places additional trading restrictions on the directors, the Chief
Executive Officer (“CEO”) and his direct reports (and employees
reporting directly to them) and all participants in any NZME
Employee Incentive Plan.
PRINCIPLE 2 - BOARD COMPOSITION
& PERFORMANCE
To ensure an effective Board, there should be a balance
of independence, skills, knowledge, experience and
perspectives.
PRINCIPLE 1 - CODE OF ETHICAL BEHAVIOUR
Role of the Board
Directors should set high standards of ethical behaviour,
model this behaviour and hold management accountable for
these standards being followed throughout the organisation.
Code of Conduct & Ethics
The Company’s Code of Conduct & Ethics governs the Company
and its subsidiaries’ commercial operations and the conduct
of directors, employees, consultants and all other people when
they represent the Company and its subsidiaries. The Code of
Conduct & Ethics comprises certain fundamental principles and
demonstrates the high standards of conduct expected of us.
The current Code of Conduct & Ethics was updated 11 April 2019.
Reporting of breaches of the Code is encouraged and steps for
doing so are set out in the Code of Conduct & Ethics and the
Whistleblower Policy. The Company has provided training on the
Code of Conduct & Ethics in the form of a video series on key
points relevant to employees.
The business and affairs of the Company is managed under
the direction and supervision of the Board. The directors
acknowledge their duty to act in good faith and in the best
interests of the Company. The objective of the Company is to
generate growth, corporate profit and shareholder gain from
the activities of the Group. In pursuing this objective, the role
of the Board is to assume accountability for the success of
the Company by taking overall responsibility for the strategic
direction and monitoring of operational management of
the Group in accordance with good corporate governance
principles. More details regarding the main functions of the
Board can be found in the Board Charter.
Director Independence and Profile
All of the Company’s directors are independent directors
for the purposes of the NZX Listing Rules. The profile for
each director is available on the Company’s website
(www.nzme.co.nz/corporate-governance/board-members) and
on page 26 and 27 of the 2019 Annual Report. The roles of the
Chair and CEO are exercised by different persons.
Nomination and Appointment
Directors are appointed by the Company’s shareholders, with
rotation and retirement being determined by the Constitution
and the NZX Listing Rules. The Board may appoint directors to
fill casual vacancies. Directors appointed to fill casual vacancies
are required to retire and stand for election at the first annual
shareholders’ meeting after their appointment. The Governance
& Remuneration Committee recommends to the Board potential
candidates for appointment as directors.
Induction and Access to Information and Advice
On appointment to the Board a director will be given a copy of
the Board Charter, an appointment letter covering the role of the
Board, the Board’s expectations of the director and any particular
terms of his or her appointment. The director will be offered
induction training as to the responsibilities of the directors and
to enable the director to become familiar with the Company’s
operations and sites. All directors have access to the advice
and assistance of the General Counsel on the Board’s affairs
and governance matters. In addition, all directors may access
such information and seek independent advice as they consider
necessary to fulfil their duties and responsibilities.
Skills and Experience
The Governance & Remuneration Committee reviews,
and makes recommendations to the Board, regarding the
composition of the Board on an ongoing basis to ensure that it
is comprised of members who provide the required breadth and
depth of experience and knowledge to achieve the objectives
of the Board. It also considers and recommends to the Board
the appointment of additional directors to provide the expertise
to achieve the strategic and economic goals of the Company.
Directors are expected to maintain their knowledge of the latest
governance and business practices in order to perform their
duties and the Company supports their development.
Directors and Officers Insurance
In accordance with Section 162 of the Companies Act 1993
and the Company’s Constitution, NZME has indemnified and
arranged insurance for all directors and executive officers to
the extent permitted by law for liabilities arising out of the
performance of their normal duties as directors and officers.
The total amount of insurance for directors and officers contract
premiums was $501,463.
Performance Review
The Chairperson meets annually with directors of the Company
to discuss individual performance of directors. The Board
reviews its performance as a whole, and the performance of its
committees, on an annual basis. The Board may choose to use
external facilitators, where appropriate, to assist with reviewing
the performance of directors, the Board and its committees.
Diversity and Inclusion
The Diversity and Inclusion Policy details the Company’s
approach to diversity and inclusion, including specifying the
principles adopted by the Company, oversight and sponsorship,
programmes and initiatives and the requirement for the Board,
in consultation with the CEO, to set measurable objectives for
achieving diversity and assess progress in achieving them.
The Group believes that a diverse workforce is essential for it
to be able to deliver its strategic objectives and continue to
meet its responsibilities to its customers, its employees, the
communities in which it works, and its shareholders.
The Group is currently operating in accordance with, and
applying the principles of, its Diversity and Inclusion Policy,
which was updated in December 2019 and is available on the
Company’s website. The Our People section on page 22 of the
2019 Annual Report contains more information on our diverse
workforce and the diversity objectives and measurements for
2020 are included in our sustainability commitment.
32 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 33
CORPORATE GOVERNANCE.
CONT.
The table below includes the quantitative breakdown as to the gender composition of NZME’s Board and Officers A.
Corporate Social Responsibility Committee
• Board Charter
As at
Board
Officers A
31 December 2019
31 December 2018
Male
2
2
Female
3
3
Male
5
5
Female
4
4
PRINCIPLE 3 - BOARD COMMITTEES
The Board should use committees where this will enhance its
effectiveness in key areas, while retaining Board responsibility.
The Board has three standing Committees, the Audit & Risk
Committee, the Governance & Remuneration Committee and
the Corporate Social Responsibility Committee, to assist in
carrying out its responsibilities. The Committees operate under
Board approved charters which are available on the Company’s
website: www.nzme.co.nz/corporate-governance.
The Board may establish other committees from time to
time to deal with specific projects or matters relating to the
Company’s various activities. The Board does not have a
separate Health & Safety Committee, but Health & Safety is
considered by the full Board. The Board did not identify a
need for any other standing Board committees. The Company
also has an NZME Takeover Response Manual (not publicly
available) as recommended by Recommendation 3.6 of the
NZX Code (adopted 12 December 2017).
Audit & Risk Committee
The Committee consists of at least three non-executive
directors, with the majority being also independent directors
(one of whom has an accounting and financial background).
The functions of the Committee are to:
• Review, consider and if necessary, investigate any reports or
findings arising from any audit function either internally or
externally;
• Evaluate financial information submitted to it, along with
relevant policies and procedures; and
• Assess the effectiveness of risk management throughout
the Group.
The Committee is also responsible for communicating and
engaging with the external auditors and for oversight and review
of the risk management framework. For further information,
also refer to the Committee’s charter which is available on the
Company’s website.
For the year ended 31 December 2019, directors Barbara
Chapman and David Gibson were members of the Audit & Risk
Committee and it was chaired by Carol Campbell. Employees
and external parties may attend meetings of the Audit & Risk
Committee at the invitation of the Audit & Risk Committee.
Governance & Remuneration Committee
The Governance & Remuneration Committee ensures that
remuneration policies and practices are consistent with the
strategic goals of the Group and are relevant to the achievement
of those goals. The Committee also reviews the remuneration
of the CEO and, in consultation with the CEO, the remuneration
packages of executives reporting directly to the CEO.
The Governance & Remuneration Committee also makes
recommendations to the full Board regarding the composition
of the Board, filling of vacancies, appointing additional directors
to the Board, and to review and adopt corporate governance
policies and practices which reflect contemporary standards
in New Zealand, incorporating principles and guidelines issued
by the Financial Markets Authority and the NZX. For further
information, refer to the Committee’s charter available on the
Company’s website.
For the year ended 31 December 2019, directors Peter Cullinane
and Sussan Turner were 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.
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 Officer (“CEO”) and any person reporting to the CEO or the Board directly. The numbers above therefore
include the CEO and other members of the Group Executive Team.
The Corporate Social Responsibility Committee supports NZME’s
values, strategic plan and corporate reputation by ensuring
that the Company’s Corporate Social Responsibility (CSR)
strategy is best practice and supports to the highest level its
CSR objectives. The Committee also ensures CSR objectives,
policies and practices are consistent with the strategic goals of
the Group.
For the year ended 31 December 2019, directors Peter Cullinane
and Sussan Turner were members of the Corporate Social
Responsibility Committee and it was chaired by Barbara
Chapman. Employees and external parties may attend meetings
of the Corporate Social Responsibility Committee at the
invitation of the Corporate Social Responsibility Committee.
• Code of Conduct and Ethics
• Remuneration Policy
• Diversity and Inclusion Policy
• Editorial Code of Ethics
•
Fraud Policy
• Market Disclosure Policy
• Whistleblower Policy
• Securities Trading Policy
• Audit & Risk Committee Charter
• Governance & Remuneration Committee Charter
PRINCIPLE 4 - REPORTING & DISCLOSURE
• Risk Management Policy
• Corporate Social Responsibility Committee Charter
The Board should demand integrity in financial and non-
financial reporting, and in the timeliness and balance of
corporate disclosures.
Constitution
Market Disclosure Policy
The Board has policies and procedures in place to keep investors
and staff informed of material information about the Company
and to ensure compliance with the continuous disclosure
obligations under the Financial Markets Conduct Act 2013 and
the NZX Listing Rules.
The Market Disclosure Policy is designed to ensure that:
• There is full and timely disclosure of the Company’s activities
and material information to shareholders and the market; and
• All stakeholders (including shareholders, the market and
other interested parties) have an equal opportunity to receive
and obtain externally available information issued by the
Company.
The Company will immediately notify the market of any material
information concerning the Company in accordance with
legislative and regulatory disclosure requirements.
Charters and Policies
The following charters and policies have been adopted by the
Company and are available on the Company’s website under
the Corporate Governance section (www.nzme.co.nz/corporate-
governance):
The Company’s constitution (“Constitution”) is filed on the
Companies Office website (http://www.companies.govt.nz/
co/1181195). The Constitution specifies that the maximum
number of directors (other than alternate directors) is eight.
As at 31 December 2019, the Company had five directors.
The Constitution contains, amongst other things, the
requirements regarding appointment and rotation of directors,
filling vacancies on the Board, meetings of the Board and Board
Committee proceedings, and appointing alternate directors. The
Constitution also requires the Company to comply with the NZX
Listing Rules for so long as it is listed on the NZX.
The Constitution was updated and approved by shareholders at
the 2019 Annual Meeting in June 2019.
Financial Reporting and Disclosure
The Company is committed to providing financial reporting that
is balanced, clear and objective. The Audit & Risk Committee
oversees the quality, integrity and timeliness of external
reporting. The Group’s Consolidated Financial Statements for the
year ended 31 December 2019 are set out on pages 48 to 95 of
this 2019 Annual Report. Also refer to the reports from the Chair
and the CEO in this 2019 Annual Report and the NZME 2019 Full
Year results presentation (available on the Company’s website)
for additional information.
34 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 35
CORPORATE GOVERNANCE.
CONT.
Non-Financial Reporting and Disclosure
The Company provides non-financial disclosures relating to
Health & Safety, Risk Management, our interaction with our
communities, people and our environment. We also include
information about our performance against our operational
priorities during the year.
NZME announced its Sustainability Commitment at the 2019
Annual Shareholders’ Meeting in June 2019. NZME’s Sustainability
Commitment aligns with the UN Sustainability Development
Goals – an international blueprint to achieve a better and more
sustainable future for everyone. Combined with our promise
to keep Kiwis in the know, NZME’s commitment to sustainable
practices contributes to the prosperity of our business and our
communities, people and the environment.
In 2019 we completed our materiality matrix and assessed these
results to set the focus for NZME’s Sustainability Commitment.
We have identified the key initiatives and objectives for
each of the three pillars of our Sustainability Commitment:
Our Communities, Our People and Our Environment. In this
year’s Annual Report, we have released further details of our
Sustainability Commitment including the initiatives, objectives
and measurements against which we will report on for the 2020
financial year. This is discussed on pages 18 to 25 of the 2019
Annual Report.
PRINCIPLE 5 - REMUNERATION
The remuneration of directors and executives should be
transparent, fair and reasonable.
Remuneration Policy
The Remuneration Policy outlines the Company’s approach
to the remuneration of its directors and executives. The
Governance & Remuneration Committee is responsible for
reviewing non-executive directors’ remuneration and benefits.
The pool available to be paid to non-executive directors is
subject to shareholder approval. The levels of fixed fees payable
to non-executive directors should reflect the time commitment
and responsibilities of the role. The Governance & Remuneration
Committee will obtain independent advice, as necessary,
and will also consider the results of market comparison and a
benchmarking assessment in setting the fixed fees payable to
non-executive directors.
While the Company does not pay equity-based remuneration to
its non-executive directors, it encourages those directors to hold
shares in the Company to better align their interests with the
interests of other shareholders.
The Governance & Remuneration Committee is also responsible
for reviewing the remuneration of the CEO and any executive
directors and, in consultation with the CEO, for reviewing the
remuneration packages of executives reporting directly to the
CEO. The Company conducts external benchmarking analysis
in order to determine the market rate for a role. The Company
provides a combination of cash and non-cash benefits and
takes a total remuneration approach. The Company reviews
remuneration with the objective of achieving pay equity,
including by gender.
Directors’ Remuneration
The fees paid to each director depends on the duties of the director, including committee work. Current fees per annum are as
follow:
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
Director
Date first
appointed
Chairman of
the Board
Board Member
Committee
Chair
Committee
Member
Total
Peter Cullinane
24 June 2016
150,000
-
-
20,000
170,000
Carol Campbell
24 June 2016
David Gibson
8 December 2017
Barbara Chapman
18 April 2018
Sussan Turner
16 July 2018
Total fees paid
-
-
-
-
100,000
100,000
100,000
100,000
20,000
20,000
20,000
-
10,000
10,000
120,000
130,000
130,000
20,000
120,000
670,000
The table below shows number of attendances at Board and Committee meetings by directors for the year ended 31 December 2019.
Director
Peter Cullinane
Carol Campbell
David Gibson
Barbara Chapman
Sussan Turner
Board
9 of 9
9 of 9
9 of 9
9 of 9
9 of 9
Audit & Risk
Governance &
Remuneration
Corporate Social
Responsibility
N/A
4 of 4
4 of 4
4 of 4
N/A
6 of 6
N/A
6 of 6
N/A
6 of 6
3 of 3
N/A
N/A
3 of 3
3 of 3
Michael Boggs
Salary A
806,260
Bonus B
-
TIP C
204,459
Benefits D
Total
24,188
1,034,907
A Salary includes normal basic salary and paid leave. B Bonus payments are those paid during the current accounting period and excludes any bonus accrual
not yet paid. C TIP relates to the value of shares issued under the Group's Total Incentive Plan ("TIP") in relation to the 2016 scheme. D Benefits relate to company
contributions for KiwiSaver.
Michael Boggs held 475,282 shares in the company as at
31 December 2019. In addition to the remuneration disclosed
above as at 24 February 2020, Michael Boggs held 827,738
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. The number above includes rights for dividends
foregone in the period 1 January 2018 to 31 December 2019
in relation to the 2017 TIP.
Directors of Subsidiary Companies
As at 31 December 2019, Michael Boggs (CEO) and David
Mackrell (CFO) 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
2019. Michael Boggs, David Mackrell and Laura Maxwell (Chief
Digital Officer) were directors of the subsidiary OneRoof Limited,
in which an 80% interest was held, as listed in Note 6.1 of the
Consolidated Financial Statements. Other than Mark O’Sullivan
who received $9,004 for his services as a director of NZME
Australia Pty Limited, they did not receive any fees or other
benefit for their services as directors to any of these companies.
Michael Boggs, David Mackrell and Laura Maxwell receive
remuneration as employees of the Company which are not
related to their duties as directors of these companies.
36 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 37
CORPORATE GOVERNANCE.
CONT.
Directors of Associates, Joint Ventures and Joint Operations
Employee Remuneration
Associates, joint ventures and joint operations are listed in Note 6.2 of the Consolidated Financial Statements. As at 31 December
2019 the following roles were held by Officers A:
Associates, Joint Ventures and Joint Operations
Officer A
Designation
New Zealand Press Association Limited
Michael Boggs
Shayne Currie
Director
Director
Newspapers Publishers Association
Michael Boggs
Member – Board of control
Shayne Currie
Member – Board of control
Chinese New Zealand Herald Limited
Laura Maxwell
Director (resigned 23 December 2019)
Restaurant Hub Limited
Eveve New Zealand Limited
KPEX Limited
Ratebroker Limited
Matthew Wilson
Laura Maxwell
Dean Buchanan
Laura Maxwell
Dean Buchanan
Michael Boggs
Michael Boggs
Director (resigned 23 December 2019)
Director (resigned 8 April 2019)
Director (resigned 31 October 2019)
Director (resigned 8 April 2019)
Director (resigned 29 November 2019)
Director
Director (resigned 14 February 2019)
The Radio Bureau (unincorporated joint venture)
Paul Hancox
Chair – Board
Matt Headland
Representative – Board
(resigned 31 October 2019)
Katie Mills
Representative – Board
Herald Foundation
Michael Boggs, Matt Wilson,
Allison Whitney
Trustee
Radio Broadcasters Association Incorporated
Dean Buchanan
Member - Board
(resigned 31 October 2019)
Wendy Palmer
Member – Board
A Only roles held by “Officers” of NZME as defined in the NZX Listing Rules are included. The Officers did not receive any fees or other benefit for their services
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 roles with these companies.
The Group paid remuneration including benefits in excess of $100,000 to employees (other than directors) during the year ended 31
December 2019. The salary banding for these employees are disclosed in the following table (bands with zero number of employees
have been excluded):
Remuneration Amount
Employees
Remuneration Amount
Employees
$100,000 - $110,000
$110,001 - $120,000
$120,001 - $130,000
$130,001 - $140,000
$140,001 - $150,000
$150,001 - $160,000
$160,001 - $170,000
$170,001 - $180,000
$180,001 - $190,000
$190,001 - $200,000
$200,001 - $210,000
$210,001 - $220,000
$220,001 - $230,000
$230,001 - $240,000
$240,001 - $250,000
$250,001 - $260,000
$260,001 - $270,000
$270,001 - $280,000
$280,001 - $290,000
$290,001 - $300,000
$300,001 - $310,000
$310,001 - $320,000
$320,001 - $340,000
$340,001 - $350,000
$350,001 - $360,000
$360,001 - $370,000
$370,001 - $380,000
$390,001 - $400,000
$440,001 - $450,000
$450,001 - $460,000
$460,001 - $470,000
$520,001 - $530,000
$530,001 - $540,000
$890,001 - $900,000
$1,030,001 - $1,040,000
66
61
47
55
29
25
23
10
13
14
11
9
8
5
2
9
2
2
3
1
1
1
2
1
1
3
3
4
1
1
1
1
1
1
1
Total number of employees that were paid remuneration of $100,000+
418
The remuneration above includes all remuneration paid to permanent employees, including fixed remuneration, employer KiwiSaver
contributions, medical aid contributions, bonuses, commission, settlements and redundancies.
38 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 39
CORPORATE GOVERNANCE.
CONT.
PRINCIPLE 6 - RISK MANAGEMENT
Directors should have a sound understanding of the material
risks faced by the issuer and how to manage them. The Board
should regularly verify that the issuer has appropriate processes
that identify and manage potential and material risks.
Risk Management Framework
The Audit & Risk Committee is responsible for the oversight and
independent review of the Group’s Risk Management Framework
and Guidelines, and assisting the Board to discharge its oversight
responsibility for risk management, including:
• Review and approval of the risk management policy;
• Receiving and considering reports on risk management;
• Assessing the effectiveness of the Group’s responses to risk;
and
• Providing the Board with regular reports on risk management.
The Group has a formal Risk Management Policy and is
committed to the consistent, proactive and effective monitoring
and management of risk throughout the organisation, in
accordance with best practice and the NZME Risk Management
Framework and Guidelines.
The Board is ultimately responsible for the effectiveness,
oversight and implementation of the Group’s approach to risk
management.
The CEO is responsible for:
• The management of strategic, operational and financial risk
of the Group;
• Continually monitoring the Group’s progress against financial
and operational performance targets;
• The day-to-day identification, assessment and management
of risks applicable to the Group;
•
Implementation of risk management controls, processes and
policies and procedures appropriate for the Group; and
• Driving a culture of risk management throughout the Group.
The NZME Risk Committee (a management committee) acts as
a governance forum to assist the CEO and the Group Executive
in fulfilling their corporate governance responsibilities. This
Committee provides assurance that the following aspects are
managed appropriately:
• Strategic and operational risk management;
• Workplace Health & Safety matters;
•
Legal, regulatory and policy compliance;
• Technology and security matters; and
• 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 different types of risk including, but not limited to cyber
security, legal and regulatory compliance, financial and
market, government policy and political, reputation and brand,
operational risks and trading conditions.
The Group recognises that in order to achieve its strategic
objectives it must be willing to take and accept informed risks.
Risks relating to innovation, attracting and retaining talent, and
content to drive audiences and address the needs of advertisers
are encouraged within defined parameters. However, in doing so,
it is not acceptable to trade off financial or strategic returns by
compromising compliance with the law, the safety of our people,
or our reputation as a responsible corporate citizen and provider
of news, sport and entertainment.
When setting the appetite for taking and accepting risk, the
Group also considers the risk posed by inaction in what is a fast-
paced and disrupted market.
The Group’s approach to risk management is assessed at
least annually by the Audit & Risk Committee of the Board
in order to make a recommendation to the full Board on the
appropriateness of NZME’s Risk Management Framework and
Guidelines. The NZME Head of Risk & Compliance reports to
the NZME Risk Committee and Chief Financial Officer (“CFO”)
on the progress of the implementation of the Risk Management
Framework and Guidelines. The CFO reports to the CEO and the
Audit & Risk Committee on the progress of the implementation
of the Risk Management Framework and Guidelines.
For additional information on financial risks, please also refer to
Note 4.7 of the Consolidated Financial Statements.
Health & Safety
The NZME Board Charter states that the role of the Board includes
ensuring that the Group Health & Safety and environmental
practices and culture comply with legal requirements, reflects
best practice and are recognised by employees and contractors
as key priorities for the Group. As noted earlier, NZME does not
have a separate Board-level Health & Safety Committee as Health
& Safety is dealt with by the full Board.
Health & Safety is included on the NZME Board Risk Register. The
NZME Annual Health & Safety Plan captures the projects and
objectives for the year to respond to the identified risks. NZME
records and monitors critical Health & Safety risks in a separate
Health & Safety Risk Register. Currently that register is reviewed
and monitored by the Risk Committee, who meet monthly and
receive and review reporting on Health & Safety performance,
trends and updates, with key matters and progress against the
annual plan being reported to the Board.
Health & Safety advice and direction are overseen by the Culture
and Performance team and a Health, Safety and Wellbeing
Manager. NZME utilises the online safety management system
“Vault” as the framework for how safety is managed within
the business. Vault is used for incident reporting, contractor
management, hazard and risk management, management of
hazardous substances, risk monitoring and reporting.
Worker engagement and involvement is recognised as an
important part of growing a positive workplace Health & Safety
culture. At NZME, being actively involved in and contributing
to Health & Safety is included in the GuideMe performance
review template as a KPI for all employees and reviewed as part
of the performance review process. Health & Safety training
forms part of induction and ongoing training schedules to
ensure awareness of NZME’s Health & Safety obligations, critical
risks and the resources available to satisfy these. To ensure
effective worker involvement, NZME has multiple Health &
Safety Committees in place across New Zealand that actively
contribute to the management of risk and the effectiveness
of controls in place around the business. Health & Safety
performance is communicated throughout all levels of NZME
through regular Senior Leadership team meetings and internal
business communications.
NZME maintains Wellness and Safety pages on its intranet with
sections for Safety (which includes training manuals, emergency
procedures and safety induction documents) and Wellness
(which includes information about our Employee Assistance
Programme, wellness videos and wellness success stories).
PRINCIPLE 7 - AUDITORS
The Board should ensure the quality and independence of the
external audit process.
Refer to note 2.2.4 of the Consolidated Financial Statements for
fees paid to the auditors, PricewaterhouseCoopers, for the year
ended 31 December 2019.
The Audit & Risk Committee Charter requires the Committee to
assess the following:
• The independence of the auditor;
• The ability of the auditors to provide additional services
which may be occasionally required;
• The competency and reputation of the auditors;
• The projected audit fees; and
• Review the appointment, performance and remuneration
of external auditors.
The Audit & Risk Committee also monitors and approves any
services provided by the auditors other than in their statutory
role and receives confirmation from the auditors as to their
independence from the Company. This is undertaken on a
service by service basis and assesses whether the service is
permissible under Professional and Ethical Standard 1 (“PES 1”)
issued by the New Zealand Auditing and Assurance Standards
Board, ensuring that any potential threat to independence is
identified and appropriate safeguards to eliminate the threat or
reduce the threat to an acceptable level are established. The
Audit & Risk Committee receives an annual confirmation from
the auditor as to their independence from the Group. The auditor
is also required to provide the Audit & Risk Committee with a
detailed analysis of fees relating to non-audit services provided
during the year, including a description of potential threats to
their independence and the applicable safeguards implemented
by the auditor and the Company to either mitigate those threats
or reduce them to an acceptable level as required by PES 1.
The Audit & Risk Committee takes the nature of the services
provided, the quantum of the fee, the reason for the additional
services and whether the services are likely to be one-off or
repetitive in nature into consideration when evaluating and
concluding on auditor independence.
For the year ended 31 December 2019, given the nature of the
services provided and based on the Committee’s continuous
monitoring of auditor independence, the Audit & Risk Committee
do not believe that the non-audit services provided by the
auditors compromised their objectivity and independence.
40 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 41
CORPORATE GOVERNANCE.
CONT.
The Company requires the external auditor to attend the
Annual Shareholders Meeting (“ASM”) to answer questions
from shareholders in relation to the audit. The Group’s auditor,
PricewaterhouseCoopers, attended the last ASM on 12 June 2019.
Internal Audit
The Audit & Risk Committee is responsible for reviewing the
integrity and effectiveness of the internal audit function. NZME
operates a co-sourced internal audit programme that utilises
a mix of self-certifications, scheduled control testing by Group
Financial Services, ad hoc assignments, investigations by Risk
& Compliance and a structured internal audit programme
executed by an external firm.
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.
NZME seeks to regularly engage with shareholders to ensure
they are informed about our activities and our progress against
our stated priorities. NZME employs an Investor Relations
Manager to ensure any questions or feedback from shareholders
are responded to promptly.
The NZME website has a dedicated Investor Relations section
containing NZX / ASX announcements, presentations &
webcasts, financial reports, frequently asked questions and
other information that might be useful to our shareholders. The
share registry is maintained by Link Market Services and their
contact details are available under the Investor Relations section
of the Company’s website. Shareholders can elect to receive
communications electronically.
Following each results announcement, NZME holds an investor
call to present the results and to allow investors to ask questions.
This is followed by an investor roadshow during which the CEO,
CFO and other members of the Executive aim to meet with as
many shareholders as possible.
Shareholders are entitled to exercise their voting rights as
provided for under the applicable legislation and listing rules.
INTERESTS REGISTER
The general disclosures of interests made by directors of Company during the accounting period, pursuant to section 140(2) of the
Companies Act 1993, are shown below.
Director
Company
Peter Cullinane
Sanford Limited
David Gibson
Rangatira Limited
Barbara Chapman
The New Zealand Initiative
APEC 2021 - CEO Summit Committee
Position
Director
Director
Deputy Chair
Chair
Sussan Turner
Waitemata District Health Board Well Foundation
Trustee (resigned 9 December 2019)
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.
DIRECTORS INTERESTS IN NZME SHARES
Ordinary shares held by directors and parties associated with them are as follows:
Director
Peter Cullinane
Carol Campbell
David Gibson
Barbara Chapman
31 December 2019
68,286
50,000
50,000
50,000
There were no individual directors’ share dealings entered in the Interests Register of the Company under section 148(2) of the
Companies Act 1993 during the year ended 31 December 2019.
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 product holders in the Company as at 31 December 2019 are noted below:
Shareholder
Date of substantial
product notice
Number of shares held
% of shares held
Auscap Asset Management Limited
30/10/2018
Renaissance Smaller Companies Pty Limited
7/09/2018
Spheria Asset Management Pty Ltd
Forager Funds Management Pty Limited
29/10/2019
19/09/2017
37,722,980
24,298,829
20,158,249
12,408,486
19.25
12.40
10.28
6.33
The total number of ordinary shares issued by the Company as at 31 December 2019 was 196,555,998. The Company did not have
any other quoted voting products.
42 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 43
CORPORATE GOVERNANCE.
CONT.
OTHER INFORMATION
Waivers from the NZX
The Company transitioned to the new NZX Listing Rules dated
1 January 2019 on 1 June 2019, and relied on the class waivers
and rulings granted by NZX Regulation on 19 November 2018 in
relation to the transition.
The Company did not receive any other 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 $6,105 during the
year ended 31 December 2019. In addition, the Group provided
in excess of $2.8 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 2019, the NZX did not exercise
any of its disciplinary powers under Rule 9.9.3 of the NZX Listing
Rules in relation to the Company.
Direct director appointments under the Company Constitution
Rule 2.4.1 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 2019,
none of the Directors were appointed pursuant to Rule 2.4.1.
Number of shares held
% of shares held
49,090,288
36,087,641
24,788,674
9,143,094
8,940,645
8,301,984
7,000,000
3,309,558
3,000,000
1,156,817
1,084,178
1,049,420
1,013,223
971,029
940,756
899,506
832,470
711,000
700,000
698,427
24.98
18.36
12.61
4.65
4.55
4.22
3.56
1.68
1.53
0.59
0.55
0.53
0.52
0.49
0.48
0.46
0.42
0.36
0.36
0.36
Top 20 shareholders
As at 20 February 2020
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
HSBC Custody Nominees (Australia) Limited
Citibank Nominees (NZ) Ltd
Accident Compensation Corporation
National Nominees Limited
Walling Pty Limited
Forsyth Barr Custodians Limited
Pax Pasha Pty Ltd
HSBC Nominees (New Zealand) Limited
Xu Li & Zhen Zhen
UBS Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
HSBC Custody Nominees (Australia) Limited Gsco Eca
BNP Paribas Nominees Pty Ltd
CS Third Nominees Pty Limited
Howard Cedric Zingel
Forsyth Barr Custodians Limited
Goolestan Dinshaw Katrak
Rudie Pty Ltd
Spread of Quoted Security Holders
As at 20 February 2020
Range of Securities Held
1-1000
1001-5000
5001-10000
10001-50000
50001-100000
Greater than 100000
Total
Number of
Investors
% of Total
Investors
3,516
1,072
316
431
72
79
64.09
19.54
5.76
7.86
1.31
1.44
Shares
Held
904,426
2,589,151
2,428,654
10,053,349
5,148,205
175,432,213
5,486
100.00
196,555,998
% of Shares
Issued
0.46
1.32
1.24
5.11
2.62
89.25
100.00
44 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 45
CONSOLIDATED
FINANCIAL
STATEMENTS.
NZME LIMITED
For the year ended 31 December 2019
46 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 47
CONTENTS.
Consolidated Financial Statements
for the year ended 31 December 2019
DIRECTORS'
STATEMENT.
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
Related Parties
Contingent Liabilities
Subsequent Events
Independent Auditor's Report
The directors are pleased to present the consolidated financial
consolidated financial statements that present fairly, in all material
statements of NZME Limited (the "Company") and its subsidiaries
respects, the financial position of the Group as at 31 December 2019
(together the "Group") for the year ended 31 December 2019,
and the results of the Group's operations and cash flows for the year
incorporating the consolidated financial statements and the
then ended.
auditor's report.
The directors are responsible, on behalf of the Company, for
on pages 48 to 95 are signed on behalf of the Board of Directors,
presenting these consolidated financial statements in accordance
and are authorised for issue on the date below.
The consolidated financial statements for the Group as presented
with applicable New Zealand legislation and generally acceptable
accounting practices in New Zealand in order to present
For and on behalf of the Board of Directors
47
48
49
50
51
52
53
54
62
76
87
90
94
95
95
96
* In an attempt to make these financial statements easier to read, the notes to the financial statements have been grouped into nine
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 boxed 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 page 53.
Peter Cullinane
Director
Carol Campbell
Director
Date: 24 February 2020
48 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 49
CONSOLIDATED INCOME
STATEMENT.
for the year ended 31 December 2019
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME.
for the year ended 31 December 2019
2019
$’000
2018
$’000
371,079
388,269
Net (loss) / profit after tax
1,319
769
Other comprehensive income
372,398
389,038
Items that may be reclassified to profit or loss
(315,829)
(343,459)
Effective gain on hedging instruments
(31,672)
(24,555)
(Less): recycling of cash flow hedge reserve
Tax impact of hedging transactions
Net gain / (loss) on hedging instruments
Exchange differences on translation of foreign operations
Other comprehensive income, net of tax
Total comprehensive income
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Revenue
Finance and other income
Total revenue and other income
Expenses from operations before finance costs, depreciation, amortisation
Depreciation and amortisation
Profit before interest, income tax and impairment of intangibles
Finance costs
Impairment of intangible assets
(Loss) / profit before income tax expense
Income tax expense
Net (loss) / profit after tax
(Loss) / profit for the year is attributable to:
Owners of the Company
Non-controlling interests
Note
2.1
2.1
2.1
2.2.1
2.2.2
2.2.3
2.4.2
24,897
(9,495)
(175,000)
(159,598)
5.1
(5,574)
(165,172)
(164,665)
(507)
(165,172)
21,024
(4,636)
-
16,388
(4,816)
11,572
11,735
(163)
11,572
Earnings per share attributable to the ordinary shareholders
of the Company
Basic earnings per share
2.3
(83.77)
5.99
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
Cents
Cents
Note
2019
$’000
(165,172)
2018
$’000
11,572
4.2
4.2
4.2
4.2
265
(17)
(70)
178
12
190
-
-
-
-
32
32
(164,982)
11,604
(164,475)
(507)
(164,982)
11,767
(163)
11,604
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
50 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 51
CONSOLIDATED
BALANCE SHEET.
as at 31 December 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income taxation
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Capital work in progress
Other financial assets
Other receivables and prepayments
Derivative financial instruments
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current lease liabilities
Current tax provision
Total current liabilities
Non-current liabilities
Trade and other payables
Non-current lease liabilities
Interest bearing liabilities
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total Company interest
Non-controlling interests
Total equity
Note
4.6
3.5
3.1
3.2
3.3
3.4
6.2.2
3.5
3.8
3.6
3.3.3
3.6
3.3.3
4.5
5.2
4.1
4.2
2019
$’000
2018
$’000
14,416
52,449
1,943
-
68,808
150,263
39,902
75,538
13,633
4,123
1,329
248
285,036
353,844
51,483
11,076
254
62,813
-
84,807
89,149
605
174,561
237,374
116,470
360,768
2,984
(247,712)
116,040
430
116,470
11,717
57,125
1,866
898
71,606
329,911
47,145
-
8,758
5,357
-
-
391,171
462,777
52,036
-
-
52,036
13,665
-
109,992
448
124,105
176,141
286,636
360,363
2,998
(77,662)
285,699
937
286,636
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY.
for the year ended 31 December 2019
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 2018
360,363
2,385
(73,716)
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
Balance at 31 December 2018
360,363
2,998
(77,662)
285,699
937
286,636
Adoption of NZ IFRS 16
3.3.1
-
-
(5,931)
(5,931)
-
(5,931)
Restated balance at 1 January 2019
360,363
2,998
(83,593)
279,768
937
280,705
Net loss after tax
Other comprehensive income
Total comprehensive income
Deferred tax on share based payments
Share based payments expense
4.2
-
-
-
-
-
-
(164,665)
(164,665)
(507)
(165,172)
190
-
190
-
190
190
(164,665)
(164,475)
(507)
(164,982)
-
311
546
-
546
311
(110)
-
-
-
546
311
(110)
Settlement of 2016 TIP
405
(515)
Balance at 31 December 2019
360,768
2,984
(247,712)
116,040
430
116,470
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
52 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 53
CONSOLIDATED STATEMENT
OF CASH FLOWS.
for the year ended 31 December 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest paid on bank facilities
Interest paid on leases
Income taxes paid
Note
2019
$’000
2018
$’000
1.0 BASIS OF PREPARATION
368,454
378,082
(307,562)
(338,289)
108
87
143
80
(4,752)
(4,096)
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'
3.3.4
(4,824)
-
(together the "Group") principal activity during the financial year was
(4,540)
(14,078)
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 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.
1.3
SIGNIFICANT ACCOUNTING ESTIMATES
AND JUDGEMENTS
The preparation of the consolidated financial statements requires
the use of certain significant judgements, accounting estimates and
assumptions, including judgements, estimates and assumptions
concerning the future. The estimates and assumptions are based on
historical experiences and other factors that are considered to be
relevant. The resulting accounting estimates will by definition, seldom
equal the related actual results and are reviewed on an ongoing basis.
A list of those areas of significant estimation or judgement and a
reference to the notes containing further information is provided below:
Areas of significant accounting estimates or judgements
Note
The principal accounting policies adopted in the preparation of
Determination of the number of reportable segments
the financial statements are either set out below, or in the relevant
Intangible assets with indefinite useful lives
45,500
107,400
presented, unless otherwise stated. These consolidated financial
note. These policies have been consistently applied to all the years
Assumptions used in testing for impairment
of indefinite life intangible assets
statements are presented for the Group and were approved for issue
by the Board of Directors on 24 February 2020.
Right-of-use assets
2.4.1
3.1
3.1.1
3.3
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).
1.4
NEW STANDARDS AND INTERPRETATIONS
ADOPTED IN THE CURRENT PERIOD
NZ IFRS 16: Leases was adopted on 1 January 2019. The new standard
requires a lessee to recognise a lease liability that reflects future lease
payments and a ‘right-of-use' asset for virtually all lease contracts.
Interest and depreciation charges on the lease liability and right-of-use
assets replace the operating expenses that were incurred under NZ
IAS 17. Note 3.3.1 provides further information on the impact on the
Group of adopting NZ IFRS 16.
There have been no other changes to accounting policies and no
other new standards adopted during the period.
Net cash inflows / (outflows) from operating activities
4.6
46,971
21,842
Cash flows from investing activities
Payments for property, plant and equipment and intangible assets
(including work in progress)
Proceeds from sale of joint venture
Proceeds from sale of property, plant and equipment
Payments for investment in other entities
(11,840)
(14,080)
125
11
(20)
-
30
(49)
Net cash inflows / (outflows) from investing activities
(11,724)
(14,099)
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Payments for borrowing cost
Dividends paid to Company's shareholders
4.5
4.5
(66,500)
(96,900)
(36)
-
(415)
(15,681)
-
Payments for lease liability principal
3.3.4
(11,512)
Net cash inflows / (outflows) from financing activities
(32,548)
(5,596)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
2,699
11,717
Cash and cash equivalents at end of the year
4.6
14,416
2,147
9,570
11,717
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
54 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 55
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
2.0 GROUP PERFORMANCE
2.1
DISAGGREGATION OF REVENUE AND OTHER INCOME
Print
$’000
Radio
$’000
Digital &
e-Commerce
$’000
Total
$’000
For the year ended 31 December 2018
Advertising
Circulation and subscription
External printing and distribution
Other
Segment revenue from integrated media and
entertainment activities
Print
$’000
Radio
$’000
Digital &
e-Commerce
$’000
Total
$’000
114,159
81,498
8,805
7,137
107,613
58,932
280,704
-
-
-
-
606
1,022
81,498
8,805
8,765
211,599
108,219
59,954
379,772
102,163
76,322
7,616
6,281
110,111
55,796
268,070
-
-
1,667
77,989
-
7,616
759
2,966
10,006
Shared services centre
192,382
110,870
60,429
363,681
Events
3,414
5,083
388,269
143
516
30
689
80
769
389,038
3,377
4,021
371,079
108
475
11
638
1,232
87
1,319
372,398
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
Accounting policies
The Group applies the following accounting policies in
street performances etc. These activities are highly integrated
relation to revenue:
Advertising
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
The Group operates an integrated media and entertainment
are provided by external parties and the Group acts as the
business and contracts with customers to provide advertising
principal in those instances. These campaigns are typically
on multiple platforms consisting of a series of distinct services
run over a short period of time and are typically completed
that are substantially the same and that have the same pattern
and billed for in the same reporting or billing period. Where
of transfer to the customer. Advertising is often bundled
the Group provides advertising for non-cash consideration,
to include print, radio and/or digital components. In most
revenue is recognised at the fair value of the consideration
cases each component of the bundle is treated as a distinct
received, unless the Group cannot reasonably estimate the fair
performance obligation and the transaction price is allocated
value of the non-cash consideration; in which case revenue
on a relative stand-alone selling price basis. Experiential
is recognised by reference to the stand-alone selling price of
campaigns are a type of bundling focused on providing an
the advertising promised to the customer. When advertising is
experience utilising a mix of traditional advertising mediums
exchanged for advertising, revenue is recognised on a gross
with bespoke elements like competitions, product sampling,
basis as set out above.
For the year ended 31 December 2019
Advertising
Circulation and subscription
External printing and distribution
Other
Segment revenue from integrated media and
entertainment activities
Shared services centre
Events
Total revenues from external customers
Dividends
Rental income from sub-leases
Gain on disposal of property, plant and equipment
Gain on change in scope of lease
Other income
Finance income
Total finance and other income
Total revenue and other income
56 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 57
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
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 promoted on the GrabOne platform.
Shared services centre
The Group provides back-office support services to
customers. These services consist of a number of functions
that are largely consistent on a month-to-month basis.
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. Given the nature of the Group’s
activities, this is expected to be rare.
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
Loss on sale of joint venture
Asset write-downs and business closures
Impairment of financial asset
Repairs and maintenance costs
Travel and entertainment costs
Other
2019
$’000
2018
$’000
150,342
154,509
67,313
50,690
6,720
2,729
6,043
210
-
869
7,550
3,272
72,997
52,728
22,023
1,632
5,289
-
89
2,249
7,541
4,007
20,091
20,395
Total expenses from operations before finance costs, depreciation, amortisation
315,829
343,459
2.2.2 Depreciation & amortisation
Depreciation on owned assets
Depreciation on right-of-use assets
Amortisation
Total depreciation and amortisation
2.2.3 Finance costs
Interest and finance charges – other entities
Interest income on interest rate swaps
Borrowing cost amortisation
Total finance costs
8,853
12,817
10,002
31,672
9,320
(17)
192
9,495
14,664
-
9,891
24,555
4,517
-
119
4,636
58 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 59
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
2.2.4 Fees paid to auditors
2019
$’000
2018
$’000
Accounting policies
Basic earnings per share
Diluted earnings per share
Fees paid to the Group's auditors, PricewaterhouseCoopers, consist of:
Basic earnings per share is determined by dividing:
Diluted earnings per share adjusts the figures used in the
Audit or review of financial statements A
Other services
Other assurance services B
Tax services C
Other services D
Total other services
Total fees paid to auditors
389
5
12
41
58
447
A Includes the fee for both the audit of the annual financial statements and the independent review of the interim financial statements.
B Includes payroll assurance, and, in 2018, circulation assurance.
C Includes services relating to transactional advice and tax compliance services.
D Includes Treasury related financial markets risk analysis and commentary and agreed upon procedures for the benchmarking of market revenue data.
2.3
EARNINGS PER SHARE
Reconciliation of earnings used in calculating basic / diluted earnings per share ("EPS")
(Loss) / profit attributable to owners of the parent entity
(Loss) / profit attributable to owners of the parent entity used in calculating EPS
2019
$’000
(164,665)
(164,665)
383
22
71
26
119
502
2018
$’000
11,735
11,735
Weighted average number of shares
Weighted average number of shares in the denominator in calculating basic EPS
196,555,998
196,011,282
Adjusted for calculation of diluted EPS
3,024,181
-
Weighted average number of shares in the denominator in calculating diluted EPS
199,580,179
196,011,282
2019
Number
2018
Number
Basic / diluted earnings per share
Basic earnings per share
Diluted earnings per share
2019
Cents
(83.77)
(82.51)
2018
Cents
5.99
-
•
•
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.
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.
2.4 SEGMENT INFORMATION
2.4.1 Determination and description of segments
Significant judgements: 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 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.
60 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 61
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
2.4.2 Segment revenues and results
The segment information provided to the Directors and Executive Team for the year ended 31 December 2019 is as follows:
Revenues from external customers by channel
Print
Radio
Digital and e-Commerce
2019
$’000
2018
$’000
192,382
211,599
110,870
108,219
60,429
59,954
Segment revenue from integrated media and entertainment activities
363,681
379,772
Revenue from shared services centre
Events
Total revenues from external customers
Dividend income
Rental income from sub-leasesA
Gain on disposal of property, plant and equipment
Expenses from operations before finance costs, depreciation, amortisation
and exceptional items
Total segment adjusted EBITDAB
Depreciation and amortisation on owned assets
Depreciation on right-of-use assets
Total depreciation and amortisation
Interest income
Finance cost
Gain on change in scope of Ellerslie Lease
Exceptional items
Loss on sale of joint ventureC
Loss on disposal of propertiesD
Redundancies and associated costsE
Costs in relation to one off projectsF
Impairment of financial assetsG
Impairment of intangible assetsH
3,377
4,021
3,414
5,083
371,079
388,269
108
475
11
143
516
-
(305,978)
(334,200)
65,695
54,728
(18,855)
(24,555)
(12,817)
-
(31,672)
(24,555)
87
80
(9,495)
(4,636)
638
(210)
-
(6,043)
(2,729)
(869)
(175,000)
-
-
(59)
(5,289)
(1,632)
(2,249)
-
Net (loss) / profit before tax
(159,598)
16,388
A Rental income of $283,937 was received from the sub lease of right-of-use assets.
B 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.
C Loss on disposal of the Group's interest in the Chinese New Zealand Herald Limited.
D Loss on disposal of properties is the final adjustment on Greymouth land in 2018.
E The redundancies and associated costs relate to the restructuring and integration of the New Zealand operations.
F 2019 costs are primarily in relation to the ongoing work in connection with acquiring Stuff Limited, the disposal of the Group's investment in Ratebroker Limited and historical
holiday pay adjustments. 2018 costs relate to the provision for historical holiday pay adjustments, residual costs in relation to the Stuff Ltd merger appeal and one off project costs.
G 2019 cost relates to the impairment of KPEX Limited and the loan to Jugl Limited while the 2018 cost is in relation to the investment in Ratebroker Limited.
H Cost relates to the impairment of the indefinite life intangible assets. (See note 3.1.1)
.
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.
2.4.3
Impact of NZ IFRS 16 on the segment results and earnings per share
The following table shows the adjustments to profit or loss for the period as a result of the adoption of NZ IFRS 16:
For the year ended 31 December 2019
Total revenue and other income excluding interest income
and gain on lease.
Segment expenses
Total segment adjusted EBITDA
Depreciation and amortisation
Finance costs
Interest income
Gain on change in scope of Ellerslie Lease
Exceptional items
Pre NZ IFRS 16
$’000
Adjustment
$’000
NZ IFRS 16
$’000
371,673
-
371,673
(321,048)
15,070
(305,978)
50,625
15,070
65,695
(18,855)
(12,817)
(31,672)
(4,671)
(4,824)
(9,495)
87
-
(184,851)
-
638
-
87
638
(184,851)
Loss before income tax expense
(157,665)
(1,933)
(159,598)
Tax expense
Net loss after tax
(5,807)
233
(5,574)
(163,472)
(1,700)
(165,172)
(Less): non-controlling interests
(507)
-
(507)
Attributable to the owners of the Company
(162,965)
(1,700)
(164,665)
Earnings per share attributable to the ordinary shareholders of the Company
Basic earnings per share
Diluted earnings per share
Cents
Cents
Cents
(82.91)
(81.66)
(0.86)
(0.85)
(83.77)
(82.51)
62 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 63
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
3.0 OPERATING ASSETS & LIABILITIES
3.1
INTANGIBLE ASSETS
Significant judgement: The Directors have determined that masthead brands and brands have indefinite lives and are therefore not
amortised. Refer to the accounting policies below for further information.
As at 1 January 2018
Cost
Goodwill
$’000
Software
$’000
Masthead
Brands
$’000
Radio
Licences
$’000
Brands
$’000
Total
$’000
166,397
59,384
146,976
77,547
59,079
509,383
Accumulated amortisation and impairment
(95,614)
(44,874)
-
(38,342)
-
(178,830)
Net book value
70,783
14,510
146,976
39,205
59,079
330,553
For the year ended 31 December 2018
Opening net book amount
70,783
14,510
146,976
39,205
59,079
330,553
Additions
Amortisation
Transfers from capitalised work in progress
-
-
-
2,103
(6,935)
7,146
-
-
-
-
(2,956)
-
-
-
-
2,103
(9,891)
7,146
Goodwill
$’000
Software
$’000
Masthead
Brands
$’000
Radio
Licences
$’000
Brands
$’000
Total
$’000
As at 1 January 2019
Cost
166,397
68,633
146,976
77,547
59,079
518,632
Accumulated amortisation and impairment
(95,614)
(51,809)
-
(41,298)
-
(188,721)
Net book value
70,783
16,824
146,976
36,249
59,079
329,911
For the year ended 31 December 2019
Opening net book amount
70,783
16,824
146,976
36,249
59,079
329,911
Additions
Amortisation
Impairment
Transfers from capitalised work in progress
Net book value
As at 31 December 2019
-
-
-
-
344
(7,042)
-
-
-
(2,960)
-
-
344
(10,002)
(70,783)
-
(74,336)
5,010
-
-
-
(29,881)
(175,000)
-
5,010
15,136
72,640
33,289
29,198
150,263
Cost
166,397
73,987
146,976
77,547
59,079
523,986
Accumulated amortisation and impairment
(166,397)
(58,851)
(74,336)
(44,258)
(29,881)
(373,723)
Net book value
70,783
16,824
146,976
36,249
59,079
329,911
Net book value
-
15,136
72,640
33,289
29,198
150,263
As at 31 December 2018
Cost
166,397
68,633
146,976
77,547
59,079
518,632
Accumulated amortisation and impairment
(95,614)
(51,809)
-
(41,298)
-
(188,721)
Net book value
70,783
16,824
146,976
36,249
59,079
329,911
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 on page 64).
Software
Costs incurred in developing systems, acquiring software
and licences are capitalised to software. Costs capitalised
include materials, services, payroll and payroll related costs
of employees involved in development. Amortisation is
calculated on a straight line basis over the useful life of the
asset (typically 3 to 10 years).
Radio Licences
Commercial radio licences are accounted for as identifiable
assets and are initially recognised at cost. The current New
Zealand radio licences expire on 31 March 2031 and are being
amortised on a straight line basis to that date.
Masthead Brands
Masthead brands, being the titles, logo's and similar items of
the integrated media assets of the Group are accounted for
as identifiable assets and are initially recognised at cost. The
Directors believe the masthead brands have indefinite lives
as there is no foreseeable limit over which they are expected
to generate net cash inflows for the Group. Accordingly,
masthead brands are not amortised but are tested for
impairment each year (refer to note 3.1.1 on page 64).
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 on page 64).
64 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 65
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
3.1.1 Year-end impairment review
Significant judgement: As disclosed in note 2.4 the Directors have determined that the Group has one reportable segment –
being “Integrated Media and Entertainment”. The Directors have also determined that this is the only cash generating unit ("CGU")
for impairment testing because this is the lowest level for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets. Accordingly all goodwill and intangibles with indefinite useful
lives are allocated to one CGU. This note also includes details of certain key estimates and assumptions made during the impairment
testing process.
A comprehensive impairment review was conducted at 31 December 2019. 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
Discount Rate
The post tax discount rate used in the fair value assessment was 9.5% (2018: 9.5%).
Terminal Value
For the purpose of calculating the terminal value within the fair value assessment an "exit multiple method" has been used with
a 4.5 times EBITDA multiple applied. Using this methodology equates to a terminal growth rate assumption of -1.2% (2018 0%).
Forecasts prepared over the forecast period (2020 - 2024)
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. The key forecast assumptions used were:
Key Assumptions
Reasonably Possible Changes
Upside
Downside
Movement
change in
CAGRA %
Impact
on value
recoverable
amount
$'m
Impact
on value
recoverable
amount
$'m
Movement
change in
CAGRA %
+1%
+3%
+3%
+5%
+5%
-0.2%
30
96
35
15
12
26
-1%
-1%
-2%
-5%
-5%
+0.2%
(28)
(30)
(22)
(13)
(11)
(26)
CAGRA
-6.5%
1.1%
1.3%
28.6%
45.2%
-1.4%
Print revenue
Radio revenue
Digital advertising revenue
Digital Classifieds revenue
Digital Subscriptions revenue
Operating expenses
A CAGR = compound annual growth rate. Impacts in the table above assume that each of the changes is in isolation and that all other factors are consistent.
Based on the above assumptions an impairment of intangible
assets of $175 million has been recognised in the income
statement. The impairment has been allocated to reduce
goodwill by $70.8 million, masthead brands by $74.3 million
and brands by $29.9 million. The impairment review has resulted
from a set of assumptions which are more conservative than
the company's medium term plans but recognises that the
difference between the Company's total market capitalisation
and the carrying value of net assets has increased beyond a
reasonable level.
The forecasts used in impairment testing require assumptions
and judgements about the future, such as discount rates, long
term growth rates, forecasted revenues, to which the model is
sensitive and which are inherently uncertain.
The table on page 64 shows the key assumptions. For each key
assumption management, has identified reasonably possible
changes, based on expected ranges which would significantly
impact the recoverable amount. In addition, if a terminal growth
rate of 0% was used, the recoverable amount would be around
$15 million higher. If a discount rate of 10% was used, the
recoverable amount would be around $9 million lower.
The impairment in 2019 has been identified using the
recoverable amount determined by management's value
in use model, as this was higher than the fair value less costs
of disposal. Following the current year impairment of intangible
assets the recoverable amount of the CGU is equal to its
carrying amount.
The Group compares the carrying amount of net assets with
the market capitalisation value at each balance date. The share
price at 31 December 2019 was $0.41 equating to a market
capitalisation of $80.6 million. This market value excludes any
control premium and may not reflect the value of 100% of
NZME’s net assets. The carrying amount of NZME’s net assets
at 31 December 2019 was $116.5 million ($0.59 per share) (post
impairment of intangible assets recognised of $175 million).
Management considered the reasons for this difference and
whether all relevant factors had been allowed for in their value
in use model.
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.
66 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 67
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
3.2 PROPERTY, PLANT AND EQUIPMENT
As at 1 January 2018
Cost or fair value
Freehold landA
$’000
BuildingsA
$’000
Plant and
equipmentB
$’000
Total
$’000
1,165
14,764
330,021
345,950
Accumulated depreciation and impairment
-
(4,485)
(285,434)
(289,919)
Net book amount
1,165
10,279
44,587
56,031
Year ended 31 December 2018
Opening net book amount
1,165
10,279
44,587
56,031
Additions
Disposals
Depreciation
Transfers from capitalised work in progress
Net book amount
As at 31 December 2018
Cost or fair value
-
-
-
-
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
Year ended 31 December 2019
Opening net book amount
1,165
8,443
37,537
47,145
Accounting policies
Land is not depreciated. Depreciation on other assets is
calculated using the straight line method to allocate their
cost or revalued amounts, net of their residual values, over
their estimated useful lives, as follows:
•
Furniture and fittings
• 3 to 25 years
• Buildings
•
Leasehold improvements
•
•
10 to 50 years
2.5 to 50 years
• Motor vehicles
• 5 to 10 years
• Plant & equipment
•
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.
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.
Additions
Disposals
Depreciation
Transfers from capitalised work in progress
Net book amount
As at 31 December 2019
Cost or fair value
-
-
457
(1)
457
(1)
-
-
-
-
(1,224)
(7,629)
(8,853)
3.3
RIGHT-OF-USE ASSETS
-
1,154
1,154
1,165
7,219
31,518
39,902
1,165
14,697
337,165
353,027
Accumulated depreciation and impairment
-
(7,478)
(305,647)
(313,125)
Net book amount
1,165
7,219
31,518
39,902
A Freehold land and buildings include leasehold improvements with a net book value of $7,104,280 (2018: $8,311,993) 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 (2018: $442,270)
and the net book value of buildings would have been $317,103 (2018: $327,038). The last revaluation was performed for the year ended 31 December 2015.
B A review of the useful life of Ellerslie Print Plant assets has resulted in the extension of some assets lives to 2023 with the depreciation charge for the year $3.2 million lower than it
would have been had the extension not occurred.
Significant judgments: The Group has elected to use the Modified Retrospective Approach in adopting NZ IFRS 16 and has further
decided to recognise the right-of-use assets in relation to the Graham Street and Ellerslie Print Plant leases as if the standard had
been applied from the commencement date of these leases using the Group's incremental borrowing rate and recognising an equity
adjustment. For all other leases the right-of-use asset recognised on adoption is equal to the lease liability calculated on 1 January
2019. The Group has also elected not to reassess whether a contract is, or contains a lease, at the date of initial application. Instead,
for contracts entered into before the transition date the Group relied upon its assessment made applying NZ IAS 17 and NZ IFRIC 4.
The Group has used the practical expedient of applying a single discount rate to a portfolio of assets and has further applied the same
incremental borrowing rate of 5% to each portfolio of assets. In determining the discount rate to use, Management reviewed publicly
available rates for Government Bonds, Westpac swap rates and Treasury Risk-free discount rates and then applied an adjustment to
these rates to apply a company specific credit risk. The Group has also used the practical expedient of relying on previous assessments
of whether leases are onerous.
68 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 69
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
Buildings
$’000
Transmission
$’000
Vehicles
$’000
Other
$’000
Total
$’000
For the year ended 31 December 2019
At adoption
Additions
Depreciation
69,149
-
9,419
371
(8,291)
(3,641)
Changes in scope or lease terms
6,695
70
1,949
561
(775)
(5)
Net book amount
67,553
6,219
1,730
130
16
80,647
948
(110)
(12,817)
-
36
6,760
75,538
Accounting policy
The Group leases various offices, transmission towers,
vehicles and other equipment which were all classified as
operating leases until 31 December 2018. Payments made
under operating leases (net of any incentives received from
the lessor) were charged to profit or loss on a straight line
basis over the period of the lease.
From 1 January 2019, leases are recognised as a right-of-use
asset and a corresponding lease liability. Each lease payment
is allocated between the lease principal and finance costs.
Finance costs are charged to profit or loss over the lease
period and the right-of-use asset is depreciated over the
shorter of the asset's useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
•
•
•
•
fixed payments (including in-substance fixed payments),
less any lease incentives receivable,
variable lease payments that are based on an index
or a rate,
amounts expected to be payable by the lessee under
residual value guarantees,
the exercise price of a purchase option if the lessee
is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the
lease term reflects the lessee exercising that option.
3.3.1
Impact of NZ IFRS 16 adoption
At 31 December 2018 the Group had lease commitments of $126,681,834 and lease liabilities of $14,497,818 in relation to lease
incentives received on operating leases and NZ IAS 17 accruals. The commitments included leases for property, transmission sites,
motor vehicles and other equipment. The table below shows adjustments made to the balance sheet on adoption of NZ IFRS 16 on
1 January 2019.
As at 1 January 2019
Right-of-use assets
Accumulated depreciation
Total assets
Current lease incentive
Current lease liabilities
Non-current NZ IAS 17 lease adjustment
Non-current lease incentive
Non-current lease liabilities
Deferred tax liabilities A
Total liabilities
Net assets
EQUITY
Retained earnings adjustment on adoption of NZ IFRS 16
Total Company interest
Total
$’000
104,612
(23,965)
80,647
(833)
11,505
(4,637)
(9,028)
88,820
751
86,578
(5,931)
(5,931)
(5,931)
A At adoption of NZ IFRS 16 the outstanding portion of the Graham Street lease incentive gave rise to a deferred tax liability which was partially offset by a deferred tax asset in
relation to the interest on lease liabilities, and depreciation on the right-of-use assets, being greater than the sums paid to lessors under the lease agreements in relation to the
Graham Street and Ellerslie Print Plant leases.
70 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 71
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
3.3.2 Reconciliation of lease commitments to lease liabilities
3.3.4 Impact of NZ IFRS 16 on the statement of cash flows for the twelve months ended 31 December 2019
Operating lease commitments disclosed as at 31 December 2018
As at 1 January 2019
Discounted at the incremental borrowing rate at the date of initial application
Add: CPI increases not contained in lease commitments schedule
Add: motor vehicles not in 31 December lease commitments
(Less): service component of motor vehicle leases included in lease commitments
Net present value of future lease liabilities
Current lease liabilities
Non-current lease liabilities
Total future lease liabilities
Total
$’000
126,682
100,203
369
105
(352)
100,325
11,505
88,820
100,325
3.3.3
Impact of NZ IFRS 16 on the balance sheet at 31 December 2019
Assets and liabilities have both increased as a result of the change in accounting policy in relation to leases. At 31 December 2019 the
balance sheet accounts affected by the change are detailed in the table below:
Right-of-use assets
Impact on total assets
Current lease incentive
Current lease liabilities
Current tax provision
Non-current NZ IAS 17 lease adjustment
Non-current lease incentive
Non-current lease liabilities
Deferred tax liabilities
Impact on total liabilities
Impact on net assets
Pre NZ IFRS 16
$’000
Adjustment
$’000
-
833
-
67
4,204
8,195
-
274
75,538
75,538
(833)
11,076
187
(4,204)
(8,195)
84,807
331
83,169
(7,631)
NZ IFRS 16
$’000
75,538
-
11,076
254
-
-
84,807
605
Cash outflows from leases for the twelve months ended 31 December 2019 are detailed below. For the period ended
31 December 2018 the equivalent cash outflows were included in the cash flows from operating activities as payments to suppliers
and employees.
Year ended 31 December 2019
Interest paid on leases (operating activities)
Payments for lease liability principal (financing activities)
Total cash outflows from leases
3.4
CAPITAL WORK IN PROGRESS
As at 1 January
Additions
Transfers to intangible assets
Transfers to property plant and equipment
As at 31 December
Total
$’000
(4,824)
(11,512)
(16,336)
2018
$’000
8,694
12,428
(7,146)
(5,218)
8,758
2019
$’000
8,758
11,039
(5,010)
(1,154)
13,633
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.
72 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 73
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
3.5
TRADE AND OTHER RECEIVABLES
3.6
TRADE AND OTHER PAYABLES
Trade receivables
Provision for impairment
Amounts due from related companies (note 7.2)
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
Other receivables and prepayments
Total non-current trade and other receivables
2019
$’000
44,988
(632)
44,356
49
8,044
52,449
766
369
(503)
632
1,329
1,329
2018
$’000
48,153
(766)
47,387
940
8,798
57,125
592
566
(392)
766
-
-
3.5.1 Classification
3.5.2 Fair values of trade and other receivables
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 and
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. If collection is
expected to be in greater than one year they are classified
as non-current.
Due to the short-term nature of the current receivables,
their carrying amount is considered to be the same as their
fair value.
3.5.3
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 4.7.3 for credit risk and note 4.8 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 to the income statement
against the impairment losses on receivables.
Current payables
Lease liability A
Amounts due to related companies (note 7.2)
Employee entitlements
Trade payables and accruals
2019
$’000
-
104
5,829
45,550
2018
$’000
833
359
7,732
43,112
Total current trade and other payables
51,483
52,036
Non-current payables
Lease liability A
Total non-current trade and other payables
A Lease liability includes lease incentives received on operating leases.
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.
Employee entitlements
Wages and salaries and annual leave.
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be wholly settled
within 12 months from the reporting date are recognised
in payables and accruals in respect of employees’ services
up to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled. Amounts
to be settled more than 12 months after the reporting date
are recognised as a non-current payable. Liabilities for non-
accumulating sick leave are recognised when the leave is
taken and measured at the rates paid or payable.
-
-
13,665
13,665
Short-term incentive plans
A liability for short-term incentives is recognised in trade
payables when there is an expectation of settlement and
at least one of the following conditions is met:
•
•
there are contracted terms in the plan for determining
the amount of the benefit;
the amounts to be paid are determined before the time
of completion of the financial statements; or
• past practice gives clear evidence of the amount
of the obligation.
Liabilities for short-term incentives are expected to be
settled within 12 months and are recognised at the amounts
expected to be paid when they are settled.
Refer to note 4.3 for disclosures relating to share based
payments and note 7.1 for key management compensation.
74 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 75
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
3.7
NET TANGIBLE ASSETS
3.8
DERIVATIVE FINANCIAL INSTRUMENTS
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 $)
2019
$’000
2018
$’000
353,844
462,777
(150,263)
(329,911)
(237,374)
(176,141)
(33,793)
(43,275)
196,556
($0.17)
196,011
($0.22)
3.7.1
Impact of NZ IFRS 16 on the Group's net tangible assets per share as at 31 December 2019
Total assets
(Less): intangible assets
(Less): total liabilities
Net tangible assets
Pre NZ IFRS 16
$’000
Adjustment
$’000
NZ IFRS 16
$’000
278,306
75,538
353,844
(150,263)
-
(150,263)
(154,205)
(83,169)
(237,374)
(26,162)
(7,631)
(33,793)
Number of shares issued (in thousands)
Net tangible assets per share (in $)
($0.13)
196,556
($0.17)
Accounting policies
For each cash flow hedge relationship, the effective part
of any gain or loss on the derivative financial instrument is
recognised directly in other comprehensive income. Gains or
losses that are recognised in other comprehensive income
are transferred to the income statement in the same period
in which the hedged exposure affects the income statement.
The ineffective part of any gain or loss is recognised
immediately in the income statement at the time hedge
effectiveness is tested.
Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated or exercised,
or no longer qualifies for hedge accounting. At that point
in time, any cumulative gain or loss on the hedging
instrument recognised in other comprehensive income is
kept in other comprehensive income until the forecasted
transaction occurs. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss
recognised in other comprehensive income is immediately
transferred to the income statement.
In August 2019 the Group entered into some cash flow hedging arrangements to minimise the Group's interest rate risk.
The Group has $30 million invested in five different interest rate swaps with maturity dates from August 2021 to August 2023.
At 31 December 2019 the Group has a non-current asset of $248,291 and has recycled interest income of $17,089 through other
comprehensive income.
76 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 77
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
4.2.1 Nature and purpose of reserves
Share based payments reserve
Asset revaluation reserve
4.0 CAPITAL MANAGEMENT
4.1
SHARE CAPITAL
Authorised, issued and paid up share capital
2019
Number
2018
Number
2019
$’000
2018
$’000
Cash flow hedge 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.
Balance at the beginning of the period
196,011
196,011
360,363
360,363
Shares issued during the year
545
-
405
-
Balance at the end of the period
196,556
196,011
360,768
360,363
4.3 SHARE BASED PAYMENTS
The cash flow reserve is used to record unrealised gains
or losses on hedging instruments that are recognised directly
in equity.
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.
Accounting policies
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
4.2 RESERVES
Share based payments reserve
Balance at the beginning of the year
Share based payment expense
Settlement of 2016 TIP
Balance at end of the year
Cash flow hedge reserve
Fair value gains
Recycling of cash flow hedge reserve
Tax impact of hedging transactions
Balance at end of the year
Asset revaluation reserve
Balance at beginning of the year
Balance at end of the year
Foreign currency translation reserve
Balance at beginning of the year
Net exchange difference on translation of foreign operations
Balance at end of the year
Total reserves
2019
Average price
per right (cents)
Number
of rights
Average price
per right (cents)
As at 1 January
Granted (2017 TIP)A
Granted (2019 TIP)B
Surrendered C
Issued D
As at 31 December
0.80
2,281,136
0.78
0.55
0.66
0.66
0.58
216,431
1,510,650
(556,163)
(427,873)
3,024,181
2018
Number
of rights
2,647,644
(366,508)
-
-
-
0.58
0.90
-
-
-
0.80
2,281,136
A In 2019 the Board approved that under the 2017 Plan, participants will be entitled to additional shares when the rights are exercised (on 31 December 2020) for any dividends
foregone during the period 1 January 2018 to 31 December 2020. For dividends declared during the period 1 January 2018 to 31 December 2019, this has resulted in an additional
216,431 shares being issued to participants. 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.
B The number of performance rights granted in 2020 in respect of the 2019 TIP.
C Two participants have left and surrendered their rights under the 2016 TIP and 2017 TIP with an additional 210,744 shares surrendered by the remaining 2016 TIP participants in lieu
of PAYE owing on the issue of shares.
D The rights granted under the 2016 TIP were exercised on 31 December 2019 with 544,716 shares being issued of which 116,843 were in relation to dividends foregone during 2017
and 2018. These dividends were not included in the 31 December 2018 rights number in the table above. The share price at the date of issue was $0.41.
Share rights outstanding at the end of the year have the following exercise date and grant day price per right:
Grant date
Vesting date
Exercise date
20 December 2016
31 Dec 2017
31 Dec 2019
25 September 2017
31 Dec 2018
31 Dec 2020
0.58
0.90
1,513,531
1,567,420
29 March 2019
31 Dec 2020
31 Dec 2022
0.55
1,510,650
-
As at 31 December
3,024,181
2,281,136
Grant price per
right (cents)
2019
Number
of rights
2018
Number
of rights
713,716
2019
$’000
2018
$’000
1,950
311
(515)
1,746
265
(17)
(70)
178
722
722
326
12
338
1,369
581
-
1,950
-
-
-
-
722
722
294
32
326
2,984
2,998
automatically convert to ordinary shares
Weighted average remaining time until rights outstanding at the end of the period
2019
2018
24 months
21 months
78 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 79
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
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 2019 and 2017 TIP Schemes
Performance measures
• Financial performance conditions (50% to 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
% of target opportunity awarded
< 95%
0%
> 95% to 100%
> 100% to 110%
Pro-rata vesting between
25% and 100%
Pro-rata vesting between
100% and 150%
• Business Unit Goals (0% to 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%
25%
> 95% to 100%
> 100% to 110%
Pro-rata vesting between
25% and 100%
Pro-rata vesting between
100% and 150%
•
Individual performance conditions (25%): This portion is
determined against individual performance conditions, as
determined for each participant. The TIP award is earned
if all of the individual performance conditions have been
achieved, although the Board has discretion to award less
than a 100% of the target for partial performance and more
than a 100% of the target for exceptional performance.
Awards under the TIP are granted to participants following the
assessment of performance. To the extent that performance
measures are met:
• 50% of awards are made in cash; and
• 50% of awards are granted in rights to acquire fully paid
ordinary shares in the Company for nil consideration
("Rights").
The performance period for the awards is a twelve month
period commencing on 1 January of the relevant year. 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 at that date, 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 each Performance Period.
In February 2019 the Board approved the allocation of shares to
participants of the 2017 TIP equal to the value of dividends that
were payable whilst holding the unvested and/or vested rights.
The fair value of these rights is based on the NZME share price
on the date that the dividend was paid. 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
each Performance Period.
Model inputs
The following is a summary of the key inputs in calculating the share-based payment expense under the 2019 TIP:
• Performance Period
• Service Period
1 January 2019 to 31 December 2019
1 January 2020 to 31 December 2020
• Vesting Period (being the Performance Period and the Service Period)
1 January 2019 to 31 December 2020
• Deferral Period
• Share price at grant date
• VWAP
1 January 2021 to 31 December 2022
55 cents
50.4 cents
The following is a summary of the key inputs in calculating the share-based payment expense under the 2017 TIP:
• Performance Period
• Service Period
1 January 2017 to 31 December 2017
1 January 2018 to 31 December 2018
• Vesting Period (being the Performance Period and the Service Period)
1 January 2017 to 31 December 2018
• Deferral Period
• Share price at grant date
• VWAP
1 January 2019 to 31 December 2020
90 cents
59.4 cents
It is assumed that all participating employees will remain employed with the Company until the end of the Vesting Period.
4.3.3 2018 TIP
4.3.4 2016 TIP
No TIP was offered for the 2018 Financial Year.
The rights owing to the participants of the 2016 TIP were
settled on 31 December 2019 with the issue of 544,176 shares.
80 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 81
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
service and non-market performance vesting conditions.
Non-current interest bearing liabilities
4.5
INTEREST BEARING LIABILITIES
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
4.4 DIVIDENDS
4.4.1 Dividends paid
No dividends were paid during 2019.
4.4.3 Franking and imputation credits
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.
4.4.2 Dividends declared after balance date
On 24 February 2020, the Board of Directors confirmed that
NZME would not be declaring a final dividend for the 2019
financial year.
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
2019
$’000
2018
$’000
NZ$ 12,596
NZ$ 8,289
AU$ 0A
AU$ 0A
A Although the Company does not have any franking credits available for use, other entities within the Group have AU$10,828,676 (2018:AU$10,828,676) available that might become
available to the Company in future periods.
Bank loans – secured
Deduct:
Capitalised borrowing costs
Total non-current interest bearing liabilities
Net debt
Cash and cash equivalents
Total debt less cash and cash equivalents
2019
$’000
2018
$’000
89,500
110,500
(351)
(508)
89,149
109,992
(14,416)
74,733
(11,717)
98,275
The change in the bank loans - secured balance for the year
ended 31 December 2019 of $21 million is due to proceeds
from borrowings / repayments of borrowings as reflected in the
consolidated statement of cash flows. The capitalised borrowing
costs of $351,072 at 31 December 2019 is the amount of
capitalised borrowing costs incurred on acquiring the loan less
accumulated amortisation to 31 December 2019 with the costs
being amortised 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
$89.5 million (2018: $110.5 million) is drawn and $60.5 million
(2018: $39.5 million) is undrawn as at 31 December 2019.
The 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 BKBM 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.
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 policy
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.
82 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 83
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
4.6 CASH FLOW INFORMATION
4.7
FINANCIAL RISK MANAGEMENT
2019
$’000
2018
$’000
4.7.1 Capital and risk management
4.7.2 Market risk
The Group's objectives when managing capital are to:
Cash flow and fair value interest rate risk
Reconciliation of cash
Cash at end of the year, as shown in the statements of cash flows, comprises:
Cash and cash equivalents
14,416
11,717
Reconciliation of net cash inflows / (outflows) from operating activities
to profit for the year:
(Loss) / profit for the year
Depreciation and amortisation expense
Borrowing cost amortisation
Non-cash lease transactions
Net (gain) / loss on sale of non-current assets
Change in current / deferred tax payable
Net loss on sale of investment
Impairment of intangible assets
Gain on change in scope of lease
Revaluation / impairment of financial assets
Share based payment expense
(165,172)
31,672
192
-
(11)
1,034
210
175,000
(638)
869
311
11,572
24,555
119
99
59
(9,263)
-
-
-
2,249
581
Changes in assets and liabilities net of effect of acquisitions:
Trade and other receivables
4,030
(2,801)
Inventories
Prepayments
Trade and other payables and employee benefits
Net cash inflows / (outflows) from operating activities
(78)
(630)
182
46,971
61
(571)
(4,818)
21,842
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.
• 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.
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
has undertaken hedging transactions to mitigate this risk (note
3.8). Current interest bearing debt is fixed for 30 days on a rolling
basis.
NZME’s interest rate risk is managed with interest rate
derivatives. Hedge accounting is applied to derivatives that are
effective in offsetting the changes in fair value or cash flows of
the hedged items. The hedge relationship is documented and
the effectiveness of such hedges is tested at regular intervals,
at least on a semi-annual basis.
Based on the outstanding net floating debt at 31 December
2019, a change in interest rates of +/-1% per annum with all other
variables being constant would impact post-tax profit and equity
by $0.6 million lower / higher (2018: $1.1 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.
4.7.3 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.
84 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 85
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
The table below sets out additional information about the credit quality of trade receivables net of the provision for doubtful debts:
4.7.4 Liquidity risk
2019
Expected loss rate
Trade Receivables
Impaired receivables
2018
Expected loss rate
Trade Receivables
Impaired receivables
Current
$’000
Less than
one month
$’000
One to three
months
$’000
Three to
six months
$’000
Over six
months
$’000
Total
$’000
0.5%
29,886
(160)
1.9%
9,151
(169)
29,726
8,982
3.7%
2,892
(108)
2,784
1.6%
2,298
(37)
2,261
20.7%
761
(158)
603
Current
$’000
Less than
one month
$’000
One to three
months
$’000
Three to
six months
$’000
Over six
months
$’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
44,988
(632)
44,356
Total
$’000
48,153
(766)
47,387
Trade receivables are generally settled within 30 to 45 days.
The Directors consider the carrying amount of trade receivables
approximates to 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.
The maximum exposure to credit risk at 31 December 2019 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.
As of 31 December 2019, trade receivables of $5,648,000
(2018: $4,501,000) were past due but not impaired.
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 2019
Trade payables and accruals
Bank loans
Gross liability
Less: interest
Total financial liabilities
31 December 2018
Trade payables and accruals
Bank loans
Gross liability
Less: interest
Total financial liabilities
4.8
FAIR VALUE MEASUREMENT
Less than
one year
$’000
Between one
and two years
$’000
Between two
and five years
$’000
Over five
years
$’000
45,550
4,016
49,566
(4,016)
45,550
43,112
4,193
47,305
(4,193)
43,112
-
-
4,016
4,016
(4,016)
-
-
4,193
4,193
93,516
93,516
(4,016)
89,500
-
114,693
114,693
(4,193)
(4,193)
-
110,500
-
-
-
-
-
-
-
-
-
-
The Group measures and recognises the following assets and
liabilities at fair value on a recurring basis:
• Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
• Financial assets at fair value through profit or loss (FVTPL);
• Land and buildings (excluding leasehold improvements).
• Level 2: inputs other than quoted prices included within level
1 that are observable for the asset or liability, either directly or
indirectly; and
4.8.1 Fair value hierarchy
NZ IFRS 13 requires disclosure of fair value measurements by
level of the following fair value measurement hierarchy:
• Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
86 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 87
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
5.0 TAXATION
5.1
INCOME TAX
Reported income tax expense / (benefit) comprises:
Current tax expense
Deferred tax benefit
Under / (over) provision in prior years
Income tax expense
Income tax is attributable to:
Taxable profit from continuing operations
Total income tax expense
Income tax expense differs from the amount prima facie payable as follows:
(Loss) / profit from operations before tax
Prima facie income tax at 28%
Non assessable asset sales and exempt distribution receipts
Non-deductible impairment
Non-deductible expenses
Differences in international tax rates
Under / (over) provision in prior years
Income tax expense
2019
$’000
2018
$’000
5,494
(132)
212
5,574
5,574
5,574
(159,598)
(44,687)
(3)
49,000
1,066
(14)
212
6,318
(791)
(711)
4,816
4,816
4,816
16,388
4,589
(35)
-
980
(7)
(711)
5,574
4,816
4.8.2 Recognised fair value measurements
Recurring fair value measurements
Financial assets (Level 2)
Derivative financial instruments
Financial assets (Level 3)
There are no financial assets carried at fair value. Other financial assets of $4,122,569
(2018: $5,356,765) are held at cost and therefore have been excluded from this table.
Total financial assets
Non-financial assets (Level 3)
Freehold land and buildings
Freehold land
Buildings (excluding leasehold improvements)
Total non-financial assets
All fair value measurements referred to above are either level 2
or level 3 of the fair value hierarchy and there were no transfers
between levels. The Group’s policy is to recognise transfers
between fair value hierarchy levels as at the end of the
reporting period.
4.8.3 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 2019 or 31 December 2018 (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 2019, the borrowing rates were determined
to be between 3.4% and 4.6% (2018: between 3.3% and
4.5%), 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).
2019
$’000
2018
$’000
248
248
1,165
115
1,280
-
-
1,165
131
1,296
4.8.4 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.
88 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 89
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
5.2 DEFERRED TAX
Deferred tax assets and liabilities are attributable to:
Balance
$’000
Recognised
in income
$’000
Recognised
in equity
$’000
Other
movements
$’000
Balance
$’000
2018
Tax credits
Employee benefits
Doubtful debts
Accruals / restructuring
Intangible assets
3
-
2,198
(1,164)
165
542
(492)
49
372
37
Property, plant and equipment
(3,650)
1,497
Other
2019
Tax credits
Employee benefits
Doubtful debts
Accruals / restructuring
Intangible assets
Property, plant and equipment
Leases
Share Schemes
Other
(5)
(1,239)
3
1,034
214
914
(455)
(2,153)
-
-
(5)
(448)
-
791
(3)
451
(37)
(795)
37
60
420
(6)
5
132
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(14)
-
(14)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(751)
546
(70)
3
1,034
214
914
(455)
(2,153)
(5)
(448)
-
1,485
177
119
(418)
(2,093)
(331)
526
(70)
(275)
(605)
There are unrecognised tax losses of $1,805,182 (AUD1,744,812)
(2018: $1,835,141 (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.
There is now a deferred tax asset in relation to share schemes
to recognise the income tax deduction now available.
The adoption of NZ IFRS 16 has resulted in the creation of
a deferred tax liability to recognises the difference between
the accounting and tax treatment of operating leases.
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.
90 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 91
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.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
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 2019.
Name of entity
Grabone Limited
NZME Australia Pty Limited A
NZME Educational Media Limited
NZME Holdings Limited
NZME Investments Limited
NZME Print Limited
NZME Publishing Limited
NZME Radio Investments Limited
NZME Radio Limited B
NZME Specialist Limited
The Hive Online Limited
New Zealand Radio Network Limited
The Radio Bureau Limited
OneRoof Limited
A Incorporated in, and operates in, Australia.
B One "Kiwi Share" held by the Minister of Finance. The rights and obligations are set out in the NZME Radio constitution.
2019
2019
Ownership
Ownership
Interest
Interest
2018
2018
Ownership
Ownership
Interest
Interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
92 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 93
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
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 E
Eveve New Zealand Limited A
KPEX Limited F
2019
2019
Ownership
Ownership
Interest
Interest
2018
2018
Ownership
Ownership
Interest
Interest
0%
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 Association C
New Zealand Media Council C
Radio Broadcasters Association Incorporated C
40%
21%
49%
50%
40%
21%
49%
50%
40.41%
40.41%
0%
50%
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.
A These entities are classified as joint ventures or associates. Because the effects of equity accounting are immaterial, these investments are carried at cost (refer note 6.2.2).
B The Radio Bureau is classified as a joint operation and the Group has included its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any
6.2.2 Other financial assets
jointly held or incurred assets, liabilities, revenues and expenses in these consolidated financial statements.
C These are bodies with which entities in the Group have memberships, but no ownership interest.
D In June 2019, the Group transferred all of its shares to the founding shareholders of Ratebroker Limited.
E In December 2019 the Group sold its share of the Chinese New Zealand Herald Limited to Chinese Herald Investments Limited.
F In August 2019 it was announced that KPEX Limited would be wound up.
Shares in other corporations
Loans to other companies
Total other financial assets
2019
$’000
3,308
815
4,123
2018
$’000
3,788
1,569
5,357
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.
94 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 95
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
CONT.
7.0 RELATED PARTIES
7.1
KEY MANAGEMENT COMPENSATION
Total remuneration for Directors and other key management personnel:
Balances with related party
20192019
$’000
20182018
$’000
2019
Receivables
$’000
2018
Receivables
$’000
2019
Payables
$’000
2018
Payables
$’000
Short term benefits
Termination benefits
Dividends (relating to shares held in the Company during the year)
Share-based payments
5,443
5,429
KPEX Limited
771
-
311
499
70
581
6,525
6,579
Chinese New Zealand Herald Limited
Eveve New Zealand Limited
Restaurant Hub Limited
The Wairoa Star Limited
The Beacon Printing & Publishing Company Limited
Total related party receivables and payables
-
-
-
47
1
1
49
940
-
-
-
-
-
-
-
26
78
-
-
940
104
127
19
124
89
-
-
359
8.0 CONTINGENT LIABILITIES
The Group did not have any significant contingent liabilities as at 31 December 2019.
9.0 SUBSEQUENT EVENTS
The directors are not aware of any material events subsequent to the balance sheet date.
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.
7.2 OTHER TRANSACTIONS WITH RELATED PARTIES
The Group did not purchase print services from The Beacon
Printing & Publishing Company Limited, a company in which
the Group holds a 21% interest in as the contract for supply
ended on 30 September 2018. In the year to 31 December 2018
purchases were $2,363,784. The Beacon Printing & Publishing
Company Limited purchased advertising from the Group during
the year ended 31 December 2019 totalling $3,559 (2018: $445)
and reimbursed $6,200 for paper used in 2018 (2018: nil).
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 $1,427,209
(2018: $2,571,450) and paid commission of $156,246
(2018: $306,342). On 19 August 2019 it was agreed that
KPEX Limited would be wound up.
The Group has commitments to provide future services (such
as house advertising, occupancy space at NZME offices,
business as usual finance and human resources support) to
certain joint ventures and associates. During the year such
services were provided to Eveve New Zealand Limited,
valued at $98,642 (2018: $27,992) and Restaurant Hub Limited,
valued at $10,752 (2018: $260,040). The outstanding balances
for future services are included in the table on page 95, along
with other receivables and payables.
During the year the Group received advertising revenue from
The Wairoa Star Limited totalling $8,931 (2018: $8,396). The
Wairoa Star Limited also purchased other services totalling
$1,207 (2018: $2,898) from the Group. The Group purchased
services from The Wairoa Star Limited totalling $1,286
(2018: $1,486) during the year.
The Group received advertising revenue totalling $89,929
(2018: $46,096) from The Chinese New Zealand Herald Limited
during the year and paid commission totalling $42,698
(2018: $33,328).
The transactions with Ratebroker Limited during the year
were $nil (2018: $nil).
The Group's transactions with the New Zealand Press Association
Limited during the year were $nil (2018: $nil).
96 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 97
Independent auditor’s report
To the shareholders of NZME Limited
Our audit approach
Overview
the consolidated balance sheet as at 31 December 2019;
the consolidated income statement for the year then ended;
We have audited the consolidated financial statements which comprise:
•
•
•
•
•
•
the consolidated statement of cash flows for the year then ended; and
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the notes to the consolidated financial statements, which include significant accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of NZME Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 31 December 2019, its financial performance and its cash flows for the year then ended
in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ
IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of taxation compliance and taxation
advisory services, treasury related financial markets risk analysis and commentary, agreed upon
procedures for the benchmarking of market revenue data, and payroll assurance services. In addition,
certain partners and employees of our firm may subscribe to NZME services on normal terms within
the ordinary course of the trading activities of the Group. The provision of these other services has not
impaired our independence as auditor of the Group.
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $1,260,000, which represents approximately 5%
of profit before tax, after adjusting to exclude exceptional expense items
incurred during the year.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users and is a generally accepted benchmark. We have
adjusted this benchmark for exceptional expenses (refer to note 2.4.2) to
reduce volatility and to reflect the underlying performance of the Group.
We have determined that there is one key audit matter being the
impairment testing of intangible assets.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
PwC
98 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 99
Key audit matter
Impairment testing of intangible assets
As at 31 December 2019 the total carrying
amount of the Group’s non-amortising
intangible assets, including masthead brands
and brands, amounted to $101.8 million after
recording an impairment charge of $175.0
million during the year, as disclosed in note
3.1.1.
The impairment testing of non-amortising
intangible assets is considered a Key Audit
Matter due to the existence of indicators of
impairment including the increased gap
between the market capitalisation of the
Company and the carrying amount of net
assets. There is also a significant level of
management judgement applied in
estimating the future performance and cash
flows of the business and other key
assumptions made in determining the
recoverable amount.
Management tests for impairment of these
assets on an annual basis by preparing a
value in use (VIU) assessment, using a
discounted cash flow model based on forecast
future performance to determine the
recoverable amount. Key estimates and
assumptions include:
• The assessment that the NZME business
constitutes one CGU
• The expected future trading results and
cash flows of the business which are
based on forecasts approved by the Board
of Directors
• The weighted average cost of capital of
9.5% used as the discount rate in the VIU
model
• The application of a negative long-term
growth rate of 1.2% for the purposes of
impairment testing.
Management also assessed recoverable
amount on a fair value less costs of disposal
(FVLCD) basis. The FVLCD assessment,
based on market capitalisation at balance
How our audit addressed the key audit
matter
We gained an understanding of the strategic
objectives of the business to assess the
appropriateness of using a value in use model. We
also gained an understanding of how the business is
managed and how the results are reported to
management and the directors in order to
understand management’s determination that
NZME constitutes one CGU.
We gained an understanding of the business
process and controls applied by management in
their impairment assessment.
We engaged an auditor’s expert to assist us in
testing and challenging management’s impairment
assessment, including the procedures below:
• We ensured that the impairment model used by
management was approved by the Board
• We assessed the Group’s forecasting accuracy
by comparing historical forecasts to actual
results
• We considered the reasonableness of key
assumptions in the cash flow forecasts, in
particular revenue growth for each channel,
forecast expenses and the terminal growth rate.
This was done with reference to the historical
performance of the Group, key initiatives being
undertaken by both the Group and businesses
operating in similar markets, and comparison
to third party industry forecasts and available
broker reports
• We considered the reasonableness of the
discount rate assumption by recalculating it
using our own inputs
• We tested the accuracy of the calculations in the
VIU model by reperforming the calculation of
the recoverable amount and the resulting
impairment
• We considered management’s FVLCD
assessment based on market capitalisation at
balance date and applied our estimate of the
appropriate control premium.
We obtained and evaluated management’s
sensitivity analysis to ascertain the impact of
reasonably possible changes and also considered
alternative possible scenarios and their potential
impact.
We reviewed the disclosures in the financial
statements to ensure that they are compliant with
the requirements of the relevant accounting
standards.
We have no other matters to report.
date and taking into account that market
capitalisation does not include any control
premium, indicated a lower recoverable
amount. Management considered the
reasons for this difference in finalising their
assessment of the recoverable amount.
In their assessment management determined
that the model was most sensitive to changes
in the assumptions relating to the growth
rates for print revenue, radio revenue, digital
advertising revenue, digital classifieds
revenue, digital subscriptions revenue and
operating expenses as well as the terminal
growth rate and discount rate.
As a result of the impairment review,
management identified an impairment in the
carrying value of goodwill, masthead brands
and brands.
Management also determined that
reasonably possible changes in key
assumptions could result in further
impairment, as disclosed in note 3.1.1.
Information other than the consolidated financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not express
any form of assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
PwC
PwC
100 NEW ZEALAND MEDIA AND ENTERTAINMENT
ANNUAL REPORT 2019 101
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Jonathan
Skilton.
For and on behalf of:
Chartered Accountants
24 February 2020
Auckland
DIRECTORY.
Registered Address
NZME Limited
2 Graham St
Auckland 1010
New Zealand
Registred Office Contact Details
Postal Address: Private Bag 92198
Victoria St West
Auckland 1142
New Zealand
Phone:
+64 9 379 5050
Website:
www.nzme.co.nz
Email:
Investor_Relations@nzme.co.nz
Auditors
PricewaterhouseCoopers
Principal Bankers
Westpac
Principal Solicitors
Chapman Tripp
Share Registry
Link Market Services
Share Registry Contact Details
Postal Address: PO Box 91976
Auckland 1142
Street Address: Level 11, Deloitte House
80 Queen Street
Auckland
Phone:
+64 9 375 5998
Fax:
+64 9 375 5990
Website:
www.linkmarketservices.co.nz
Email:
enquiries@linkmarketservices.co.nz
PwC
NEW ZEALAND
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