Taxpayer shares in TVNZ down despite earnings lift

Taxpayers' funds in state broadcaster Television New Zealand have slumped 18 percent in the past year.

Equity in the company held for the nation by Finance Minister Bill English and Broadcasting Minister Johnathan Coleman dropped to $157 million in the six months to December, compared with $192.4m a year earlier.

The company's total assets plunged more, by 23 percent to $231.5m ($301m in December 2009).

Operating cashflow was $32.32m ($20.42m) and capital investment plummeted to $4.59m ($20.85m).

Despite these downturns, TVNZ today highlighted what it portrayed as a 136 percent improvement in operating earnings -- up from $14.175 million to $33.479m -- for the six months to December 2010.

The jump in earnings reflected strong advertising revenue and share growth and continued cost management, said the state broadcaster's chief executive, Rick Ellis, who noted the company was now "well-positioned" for the second half of the financial year to June.

Television advertising revenue for the half year rose 8 percent ($12.1m) to $163.0m on the same period last year, and exceeded the total television advertising market growth for the same period (7.6 percent).

Advertising Standards Association industry turnover figures for 2010 released last week showed that the television sector lifted its share from 27.9 percent to 28.4 percent -- an increase in value of 6.5 percent -- and Mr Ellis said TVNZ had been the primary driver and beneficiary of this growth.

The same industry data showed that newspapers' share of turnover fell to 29.3 percent from 30.5 percent.

But TVNZ's after-tax profit slumped to $4.88m from $8.86m in the same period the previous year, after recognition of a one-off non-cash accounting adjustment of $14.8m relating to share of losses and impairment of investment in Hybrid Television Services (ANZ) Pty Ltd.

Hybrid TV -- the exclusive licensee of TiVo products in Australia and New Zealand -- is owned by TVNZ (33 percent) and Australia's Seven Media Group (67 percent).

Mr Ellis said Hybrid faced a competitive market in Australia: operating margins could not be sustained and accounting convention required a non-cash write-down of the NZ stake

Impairment of TVNZ's investment in Hybrid did not hurt the operation or service for existing and new TiVo users, he said.

TVNZ generated operating cash flows of $32.3m ($20.4m in 2010) and Mr Ellis said that low debt showed a strong balance sheet, with operating revenue up to $205.4m ($186.96m) and operating expenses down on last year to $171.92m ($172.78m).

Increased costs included the Hybrid problems, re-organisation costs of $2.36m (nil), a doubled income tax bill of $8.82m ($4.06m) and losses on foreign currency and financial instruments of $978,000 ($307,000).