Media company NZME has taken the opportunity of cleaning its balance sheet in preparation for its possible merger with Fairfax in New Zealand.
The difference between the operating profit from the 12 months ended December and the statutory net profit promoted by the company was very wide and marked by a settlement with Inland Revenue and the use of discontinued operations to boost the bottom line.
NZME said it reported "stable earnings" from its integrated media and entertainment business, despite the challenges faced in advertising markets.
However, the media release told only part of the story.NZME reported a profit from continuing operations of $13.5million for the 12 months ended December, a turnaround from a loss of $11.5million in the previous corresponding period.
It paid $64million in tax to post a loss of $50million from continuing operations in the period.
The notes said the tax expense of $64million included a $17million cash payment to fully settle historical tax disputes with the New Zealand Inland Revenue Department, the use of derecognition of historically recognised tax losses and other deferred tax balances related to the demerged business.
In June last year, the company and APN reached a binding heads of agreement with Inland Revenue to settle the dispute regarding the mandatory convertible note transactions. The settlement was for the total sum of $33.9million, with the cost shared between the company and a subsidiary of APN on a near-equal basis. The settlement utilised $56million of tax losses.
NZME then brought into the balance sheet a profit from discontinued operations of more than $125million for the year, compared with $53.2 million in the pcp.
Adding the $125million to an operating loss of $50million gave the company a profit for the year of $74.5million, of which much was made.
Earnings per share from continuing operations was a loss of 28c compared with a loss of 6.6c last year. But earnings per share when the continuing and discontinued operations profit was combined was 30.9c.Total revenue was down 5.3% in the period. Advertising revenue fell 6.2% to $295.1million and circulation and subscription revenue was down 7.3% to $86.8million.
NZME chief executive Michael Boggs said the continued focus on improving performance and investing in people and talent had enabled the company to out-perform the market in print and digital advertising revenue growth. He said the aim in the current financial year was to improve shareholder value through further growing audience reach, retaining revenue in print and making sure radio returns grew.
"We want to grow new revenue streams across the company while managing our costs and capital really well."
Developing its people and talent was fundamental to the success of NZME and it would do everything it could to complete the merger with Fairfax, he said.
