MediaWorks worm turns as positive 2010 numbers announced

MediaWorks has been under a huge amount of financial pressure recently as its private equity paymasters Ironbridge attempt to cut costs and squeeze out some much-needed cash. And while the losses reported in 2009 were massive, things appear to be looking up slightly, with figures for the year ended August 2010 showing earnings before interest and tax of $50 million, an 11 percent improvement on the previous year’s total of $45 million. Consolidated revenue across the group was $258 million for the year, up one percent from $256 million the year before.

“[These results are] evidence of robust cost management and efficient, streamlined operations right across our radio, TV and interactive operations,” MediaWorks group managing director, Sussan Turner said in a statement. “This is a credible result in a challenging trading environment where many businesses have revised their marketing spend.”

For the year to August 31, 2009, Ironbridge reported a $314 million loss after it wrote off $258 million in goodwill, or more than 30 percent of price paid in 2007. And, as ad revenue slumped during the recession, the owners were weighed down with interest payments of $91 million a year.

As a point of comparison, TVNZ reported underlying earnings of $12.9 million for the financial year to 30 June 2010, a $2.8 million or 28 percent increase on the previous financial year. This was largely due to cost cutting, with total operating costs of $342 million down by $32 million (nine percent) and total revenue at $355 million. TVNZ maintained its share of advertising revenue at 61 percent.

In the current financial year, performance for the first five months (September 2010 to January 2011) has been “acceptable”, and close to prior year results. Of course, sending news teams around the country and broadcasting live is a very expensive exercise, even more so when you commit to commercial free broadcasts as TV3 and TVNZ both did during the earthquake. But such coverage like that seen at Pike River and last week in Christchurch is required if it’s to be seen as a respected news provider.

“The context of this week’s tragic event in Christchurch is an important reminder of the community role we play as a major media organisation,” Turner says. “Fortunately, our staff and their families are all safe and well, but the ongoing rescue and recovery places enormous pressure on them, and I am grateful for their commitment and professionalism in very trying circumstances. Our thoughts are with the entire Canterbury community at this tragic time.”

While it made sense to remove ads, it may not have made financial sense to Ironbridge: The Herald reported the lack of ad revenue during the coverage might have cost the networks up to $1 million a day and while TVNZ has public broadcasting commitments, the loss of income will be a slightly more difficult pill for TV3 to swallow.

As for the business’ highlights over the year, MediaWorks points to network radio brands The Edge and The Rock dominating audience surveys for music stations, 3 News winning the 18-49 demographic for 2010, record audience numbers for the final season of Outrageous Fortune and significant growth in online audiences on the back of an improved ondemand service.

”We are cautious on the outlook for the remainder of the financial year due to the ongoing issue of consumer confidence and the impact that this has on advertising expenditure levels,” says Turner. “The launch of our new channel FOUR has been well received in the market and we are already seeing improved spend levels on this brand, compared with its predecessor. This trend bodes well for the long-term.”

TVWorks chief executive Jason Paris recently announced ad revenue for the new channel was up 15 percent on the last quarter when it was still operating as C4 and, following Special Group’s launch campaign, viewer numbers during launch week were up 228 percent on the week previous. It will be interesting to see if these numbers will be affected by the launch of TVNZ’s youth-oriented channel U on 13 March. FOUR managed to increase its ratings in its slightly older 18-49 target by two percentage points, attracting six percent of its target audience, compared to four percent four weeks earlier.

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