TVNZ profits plump up as Kenrick looks to review strategic direction

  • Media
  • September 4, 2012
  • Ben Fahy
TVNZ profits plump up as Kenrick looks to review strategic direction

TVNZ's balance sheet took a hit last year after the ill-fated TiVo investment was written off. But, despite an almost $4 million decrease in earnings, the bottom line is looking healthier, with after tax profit for the year ended 30 June 2012 increasing from $2.1 million in 2011 to $14.2 million this year. 

That rate of return isn't huge considering TVNZ's total revenue of $381 million, but a figure that size in the plus column would probably be considered a pretty bloody good result in this rather torrid media environment. 

Advertising revenue was $314 million, up $9 million on the year prior, and, compared to the 2011, TVNZ increased its share of television advertising revenue from 61.6 percent  to 62.2 percent and secured 92 percent of the total market growth. 

Underlying earnings of $27.9 million decreased by just under $4 million on the previous financial year, something TVNZ attributes to increases in the cost of television programming, particularly overseas programming (the Herald got things mixed up with a headline that read 'Programme costs blamed for TVNZ profit drop').

In a release, TVNZ's new chief executive Kevin Kenrick (see below for a transcript of what he said in his opening address at the TVNZ-NZ Marketing Awards) says the result is a satisfactory outcome and "reinforces the company’s position as New Zealand’s leading free to air broadcaster and digital media company".

"Both the network’s free to air channels exceeded their commercial targets this year, driven largely by strong local content on TV One and the continuing success of TV2, which has now held the lead in its targeted demographic of 18 to 39 year olds for an unbroken run of 44 consecutive months," he says. “... TVNZ Ondemand has also shown strong growth and distribution of the platform is currently being extended to devices such as Apple iPads, Samsung Galaxy Tablets, and  Samsung smart TVs once testing is complete."

The strength of the network’s content was reflected in the annual Top 20 list, with 17 out of the 20 most popular shows during the year coming from TVNZ. TVNZ also took a few industry accolades, with One News winning Best News at the annual AFTA awards for the fourth successive year and the company named by specialist recruitment and HR service provider Randstad as one of the top three most attractive employers in the country for the second year in a row. 

During the year TVNZ signed up for a 49 percent stake of pat TV platform Igloo with Sky TV, although it has been hampered by delays due to technical problems (it is expected to launch this month). It's thought there are some within TVNZ who believe the company should instead be investing its energy into the Freeview Interaction Channel, which would allow programmes to be streamed direct from Freeview's electronic programme guide and, much like the UK, would allow 'push the red button' interactivity and social media integration.

Of course, TVNZ's—and, by extension, the government's—commercial slant has also seen it attract a fair share of negative press this year, chiefly for the axing of digital channel TVNZ7, which was switched off following the expiry of its funding, and the decision to give NZ on Air funding to international format shows like New Zealand's Got Talent, which starts this Sunday at 7.30 and has led to its flagship current affairs programme Sunday being temporarily cut from one hour to 30 minutes. 

Kenrick, who can claim six months of this full-year report, says TVNZ is embracing the need to adapt and keep pace with media industry changes (sales director Jeremy O'Brien recently announced a restructure of the sales department) and has embarked upon an update of its strategic direction to determine how it will continue to deliver the most compelling content for New Zealanders and expected financial returns (it's thought he's more focused on creating inspiring content than on delivering it to 'every screen'). 

The after tax profit of $14.2 million includes the impairment of assets held for sale, like the Avalon studios in Wellington, and impairment and remediation costs associated with switching off the analogue transmission service for broadcasting television signals. The results also reflect a share of associates relating to the start-up operation costs of the Igloo joint venture.

This year, a dividend of $11.3 million will be paid to the government and, as in prior years, non-cash impairment charges were added back to the after tax profit when the board declared the dividend from this year’s operating results. 

The Annual Report is expected to be tabled in Parliament in early October.

  • Kevin Kenrick opened proceedings at the TVNZ-NZ Marketing Awards last week. Here's what he said. 

"Businesses now need to move on from restructuring, cost cutting, all those good things the financial people get really excited about and the auditors get into a frenzy over, and they need to start demonstrating growth. In the past few weeks we've seen the announcement of the full-year results of many organisations and many of them have seen their share prices reduce. And the reason for this is not because they haven't done a great job cutting costs; not because they haven't survived the GFC, but because they don't have a good enough growth story about the future of their industry and where they'e going to take things from here. I think it's time for marketers to step up. This is our time to shine. It is time to focus on what are the great ideas that are going to deliver benefits to consumers, grow the business, excite investors and deliver great returns for shareholders. 

The other area where I see a big change occurring is in terms of connections or connectivity. In recent years there's been this huge focus around networks and devices and apps and all the technical things that you can do. There's now nothing you can't connect with something else. Most people have more computing power in their pockets than they used to have in their homes. You can upload, you can download, you can send things, you can recive things and you can do it whenever you want, wherever you want. But the big connectivity opportunity that really needs to be seized today is the emotional connection between brands and consumers. 

My sense is that the best way to make that connection is through storytelling. The cut-through that you can achieve with a really compelling story is ahead of what you can do with just feeding information out via websites. There are so many streams you can put information on, but it's actually the storytelling and bringing them to life with video that is the most compelling way to create connections. 

For TVNZ, we're excited to be here. We're excited to be marketers. And we believe we're in the business of connecting New Zealanders. We connect with more than 90 percent of New Zealanders across the country every week. We connect with over 2.5 million New Zealdners every night of the week. We believe in brands. We believe in compelling storytelling and we believe in the power of video to create an emotional connection. So I do believe it's marketing's time to shine. I wish you all a fantastic night and I encourage you to come out of here and grow your businesses through emotional connections. I also think it would be a bloody good idea to spend more money on online, TV and video connections with TVNZ." 

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