Kordia turns to a loss on difficult trading in Australia, end of NZ analogue revenue
Kordia Group, the broadcasting and telecommunications platform operator, turned to a loss last year as it faced increased rivalry and disputed contracts in its Australian unit, which accounts for about three quarter of its revenue, and its high-margin New Zealand analogue service was switched off.
State-owned Kordia posted a loss of $8.6 million in the 12 months ended June 30, from a profit of $3.7 million in the year earlier period, the Auckland-based company said in a statement. It had forecast a profit of $1.7 million in its Statement of Corporate Intent. Revenue fell 3 percent to $301.4 million, short of its $311.8 million forecast.
Kordia lost about $14 million in annual revenue and $10 million of profits when New Zealand's analogue television network was switched off in December last year. Ahead of the change, the company has been diversifying its earnings by expanding into providing data and voice services for New Zealand businesses including Fonterra Cooperative Group, the country's largest corporate. Kordia has also been expanding in Australia, where it typically gets about $200 million of revenue and $40 million of profit. However it said the Australian business has had a "a very difficult trading year" with margins squeezed, a significant contract ending with negative results, and a high New Zealand dollar crimping returns.
"Despite the analogue switch off and the associated drop in earnings, the Kordia New Zealand business remains profitable and had a strong performance for the year, with growth in both broadcast and telecommunications revenues," the company said in a two-page statement. "This strong performance was offset by Kordia Solutions Australia experiencing difficult trading conditions with the competitor pressure reducing margins, which, combined with some problematic contracts, have impacted profitability during the year."
In the second half of the financial year, the company cut back its Australian business, reducing costs and closing out unprofitable projects, it said. In March, Kordia appointed Ken Benson as the new chief executive of its Australian business, replacing Peter Robson who held the position for 10 years.
The company didn't provide further details of its Australian contract dispute. It has a two-year contract with Australia Pacific LNG worth about $80 million. The company said in March that the mining project's delivery date had slipped to September or October from June but was on track and not at risk of not going ahead.
Kordia didn't detail the revenue and profit for its Australian and New Zealand units.
In New Zealand, the company is facing increased competition from other broadcasters, such as pay-television operator Sky Network Television and Spark New Zealand, previously known as Telecom, which is starting its own subscriber video-on-demand service.
Kordia won't pay a dividend for the 2014 financial year, in line with its forecast, which cited the loss in earnings related to the switch-off of analogue television. It paid a $5 million dividend in 2013 and has flagged a $4.9 million dividend for 2015.
The company had net debt of $60 million at June 30, up from $52.8 million the year earlier, and said it had "plenty of headroom" to fund the ongoing requirements of the business. In July, the sale of its Orcon business to Callplus was completed, with an outstanding loan of $10 million repaid, it said.