Good morning, everyone, and welcome to New Zealand Media and Entertainment's 2023 Annual Results Webcast. My name is Kelly Gunn, GM Communications at NZME. Presenting on the call today will be NZME's Chief Executive Officer, Michael Boggs, and NZME's Chief Financial Officer, David Mackrell. All attendees will be in listen-only mode for the duration of the presentation. Then we will open the webcast to shareholders and analysts for questions. At this time, if you wish to ask a question, please hover your mouse over the bottom of your screen and click Raise Hand. You will then be prompted to unmute your microphone on Zoom, and you'll be able to talk. Please note that only participants on the webcast will have the facility to ask a question. If you have any technical questions, please use the chat function also at the bottom of your screen.
I will now hand you over to our CEO, Michael Boggs.
Thanks, Kelly, and good morning, everyone, and thanks for joining David and I today as we'll be talking to you about NZME's 2023 Annual Results. If you are on the webcast, you'll be able to follow us as we take you through the presentation. Firstly, I'll present a summary of our results, an overview of the advertising revenue, and an overview of the progress across each of our platforms in 2023. David will then cover the financial results, and following that, I'll return to talk through the performance of each of our divisions and some commentary on the market and outlook for 2024. And as Kelly said, David and I will then be very happy to take your questions. I'm pleased to report that NZME has made good progress on our strategic transformation.
However, as previously foreshadowed, at the half-year and during the second half of the year, it has been a challenging economic environment. This has obviously significantly impacted our results for the year. Slide three shows our 2023 results summary. Operating revenue was NZD 346.6 million. This was 5% lower than last year due to this weak advertising market. The lower revenue was partially offset by a 3% reduction in the cost base, resulting in an operating EBITDA of NZD 56.2 million for the year. This brought us to a net profit after tax of NZD 12.2 million, with the bottom line impacted by a little more than half of that revenue decline. Operating Free Cash Flows were NZD 17.3 million, and that's 17% higher than last year. Now, out of this Free Cash Flow, there were distributions to shareholders during the year of NZD 16.5 million.
This left us with debt at the end of the year, which was NZD 500,000 higher than last year at NZD 18 million. Operating earnings per share were NZD 0.077 per share. Given this, the board has declared a fully imputed final dividend of NZD 0.06 per share after considering the outlook, the capital requirements of the business, and the continued strong cash flows. That brings total normal dividends declared for the year to NZD 0.09 per share. Despite the tough environment, we continued to focus on the 2023 targets that we set ourselves across each of those three strategic pillars of audio, publishing, and OneRoof. You'll see as we talk today, some of the highlights include that our radio market revenue share continued to grow. It's now reached 43.1%. That's the highest since measurement began in 2016. Our publishing subscriptions continued to grow. We now have 222,000 subscribers.
That includes 130,000 paid digital subscribers. Our OneRoof digital listings revenue was 5% higher than last year. That's despite a 12% reduction in new residential real estate listings that came to market during the year. I hope you'll agree that these metrics highlight the improvements we have been able to achieve and the key drivers of future profitability are good progress. On the top of Slide four, you'll see quarterly business confidence as measured by the ANZ Business Confidence Index. This highlights that for most of 2023, business confidence has been negative. It only turned positive in the fourth quarter of 2023 post the election. As expected, you see on the bottom left that higher interest rates have dampened consumer confidence. This also began to improve during the year. However, it remains well off the level of prior years.
On the right, you'll note that the real estate market was very subdued for most of the year, with new listings coming to market well down year-on-year. Signs of improvement started to emerge in the fourth quarter. However, new listings still remain well below the historical norms. Moving now to slide five, you'll see that the 2023 agency advertising revenue versus 2022 was significantly down. This highlights that NZME outperformed the market during this challenging period. You'll also see that the market and NZME improved during 2023, but November and December were particularly quiet. The chart on the right shows NZME's total advertising revenue. That's the agency and direct businesses combined, and that's compared to the prior year over the last two years. Once again, you can see the improvements in the second half of the year, but declines in November and December of 2023.
In November, NZME released its revised three-year strategic priorities across its audio, publishing, and OneRoof divisions. These are outlined on slide seven. The strategy is digital-led and focused on delivering superior returns across the business. Our updated strategic priorities that we shared with you are to be the number one in audio, to be New Zealand's leading news destination, and finally, for OneRoof to be your essential property platform. As you can see, we have key pillars of delivery under each priority, and I'll talk more about these a little later in today's presentation. Core to each of these strategic priorities is the compelling platforms for audiences and advertisers with an integrated multi-channel approach for our customers. We connect advertisers with our audio, publishing, and OneRoof audiences, and we reach over 85% of Kiwis who are over 15 years old.
Our audio brands include Newstalk ZB, ZM, The Hits, and Coast, reach 1.9 million people through traditional terrestrial radio, and we reach over 1.3 million via digital audio formats. We also have New Zealand's number one podcast network, with iHeartRadio remaining a significant growth opportunity for us. Our digital publishing platforms reach an audience of two million, and this now exceeds our print audience of 1.6 million. OneRoof reaches almost 900,000 people through both our OneRoof digital platform and our various dedicated property print publications. The charts on page nine show the strong growth of digital revenues over the last five years. Digital audio revenue maintained its growth momentum over the last year, increasing by 23%. Digital publishing advertising revenue was impacted by the weak economy. However, digital subscription revenue was 4% higher than last year.
OneRoof digital revenue grew by 5% despite the poor real estate market that we discussed earlier. Our strategy is firmly focused on growing revenue from these digital platforms. Let me hand you over to David. He'll take you through the financial results, and then I'll come back and talk a little more on each division.
Thanks, Michael, and thank you, everyone, for joining us on the call today. You'll see on slide 11 shows the EBITDA bridge from 2022 to 2023, resulting in an EBITDA of NZD 56.2 million, which is 13% lower than 2022. Audio performed better, with radio revenue holding up well along with strong growth in digital audio revenue. Digital publishing advertising revenue was weaker, but was partially offset by continued digital subscription revenue growth, resulting in a reduced contribution from digital publishing. Similarly, print publishing advertising revenue reduced, but was partly offset by increased external print and distribution revenue and effective cost management. Improved listings yield and upgrade conversion rates ensured that OneRoof delivered a solid performance in a weak real estate market.
Slide 12 shows the operating results for the year with an operating NPAT of NZD 14.1 million, lower than 2022 as a result of lower operating earnings and higher finance costs, with an increase in average debt and higher interest rates. The reduced operating earnings were driven by a 5% reduction in operating revenue and other income. Digital subscription revenue increased by 4% but was offset by a 6% decline in print circulation revenue, resulting in 4% lower reader revenue. Advertising revenue was down 6% on the prior year, with lower publishing advertising revenue the main driver. Other revenue represents increases in third-party print contracting, while the other income reduction reflects reduced grant funding. Operating expenses reduced by 3% compared to 2022, and I'll cover these on the next slide.
So you'll see on slide 13 highlights the key expense categories and the cost reduction delivered through targeted cost efficiencies and lower variable costs linked to revenue activity. People costs were 3% lower, reflecting efficiencies and lower incentive payments, offsetting inflationary pressure. Print and distribution costs were similar year-on-year, with increased paper and distribution costs offset by lower volumes. Agency commission and marketing costs reduced by 13% given the lower advertising revenues, while content costs were higher due to increased digital audio and publishing activity. Overall, other costs held flat year-on-year, with lower IT and communications costs offsetting higher property and other costs. And non-recurring expenses, which are primarily restructuring costs, were higher than last year. NZME continues to focus on ensuring it has an efficient cost base. Slide 14 highlights that the balance sheet remains strong.
Net Working Capital excluding cash has remained similar to last year, with lower receivables and payables reflecting the lower operating revenues and reduced inventory levels offset by lower tax payable due to lower earnings. Net debt was NZD 18 million, NZD 500,000 higher than 2022, with debt drawn at NZD 23.5 million. Moving now to the cash flow summary on slide 15, strong operating cash flows were maintained despite the lower operating earnings. The cash flows from operations for the year were NZD 4 million higher than last year at NZD 41.5 million, primarily due to lower tax payments during the year. Tax paid in the year was more normal, with last year higher given the stronger prior year earnings and additional dividend payments. Capital expenditure was similar to 2022, and spend at this level ensures that we continue our product development to progress our digital transformation.
Distributions to shareholders were higher last year due to the capital return program, which included a special dividend and a share buyback program. Turning now to the capital management on slide 16, the board continues to maximize distributions within the existing debt facilities. Distributions to shareholders totaled NZD 16.5 million during the year, which comprised the final dividend for 2022 of NZD 0.06 that was paid in March and the interim dividend of NZD 0.03 per share that was paid in September. The board has also declared a fully imputed final dividend of NZD 0.06 per share, which is payable on the 20th of March this year.
The graph on the left of the page shows how the company reduced its Leverage Ratio to zero at the end of 2021 and then lifted debt levels to the bottom of the target range through the capital return program I mentioned in 2022.
The net debt position of NZD 18 million at the end of December is at the lower end of the target leverage ratio. However, after the payment of the final dividend and the first half tax payments, we expect the leverage ratio to peak at around 0.9 times EBITDA, with gross debt around NZD 40 million. I'll now hand back to Michael to cover off the divisional performance.
Thanks for taking us through that, David. So let me take you through the performance of each of the divisions for the year together with an update on the key strategic initiatives. So let's now first look at audio. Slide 18 shows the key audience metrics for both terrestrial radio and digital listening. The continued strength of radio is shown across our brands, with weekly radio listeners just under 2 million in the graph on the left. The center graph shows NZME's audience market share. The darker section of each bar reflects the music station's contribution to audience, and the lighter section, the share made up by the talk audience. Newstalk ZB remains New Zealand's number one radio station. Its strength was highlighted with significant growth during key news periods, which includes times of COVID and the election.
This has been core to our overall audience and revenue share while we've been positioning our music stations for growth. The average monthly listening hours on NZME's digital audio platform, iHeartRadio, has continued to increase, and that's shown in the chart on the right. It is now consistently over 7 million hours per month. The dotted line shows the growth trend over the last two years. The graph on the left of slide 19 shows the 30% CAGR growth in podcast downloads, which is over the last two years. NZME has led podcast rankings in New Zealand for 29 consecutive months. That's when measurement started. The chart on the right highlights that NZME's average monthly downloads are more than 10 times our closest competitor. This is giving us real strength in our audio division. The financial performance of the audio division is shown on slide 20.
You'll see digital audio revenue growth of 23% reflects the strength of the digital audio offering of radio streaming and podcasts that I just noted. We believe we've got significant opportunity to continue to grow with these products. Radio advertising was 2% lower during the year. We see that as a really positive result, with share gains mitigating the impact of a 6% total market revenue decline. People costs were flat year-on-year as we ensured that efficiency gains offset underlying inflationary pressure. With lower agency revenues, the costs of supporting these revenues were reduced within the agency commission and marketing costs. The content and other cost increases primarily relate to increased distribution costs for both the transmission and digital audio. In summary, EBITDA for audio was NZD 23.3 million, which was 2% better than last year and resulted in an EBITDA margin of 13% for the year.
On slide 21, we outline our strategic targets for 2026 and the initiatives that we're undertaking in 2024 to deliver on our strategy. Audience share finished the year at 37.5%, and we have made a number of changes in our programming that sets us up well for further audience growth. We're focusing on two key growth brands while ensuring the remaining brands deliver for their audiences. We absolutely remain committed to delivering music radio station audience share growth. Our radio revenue market share has continued to grow, as I mentioned earlier, hitting its high since measurement began in 2016. Adding our strong performance in digital audio sees our overall share grow to 44.5%. While we work to grow the overall market as an industry, we will use our strength to grow share further.
Given the high share we have in digital audio, we will continue to focus on growing the product rapidly. The ability to bundle with other NZME products to deliver innovative campaigns is market-leading and is helping us with that growth. As noted during November 23 Investor Day, revenue growth, while maintaining disciplined cost control, is expected to deliver profitability margin improvements in years ahead. Let me now move to cover our publishing business. Our digital transition continues for our publishing business while we focus on maintaining the profitable print business for our readers and our advertisers. The chart on the left of slide 23 shows the trend for print subscriber volumes and the yield over the last three years. You'll see that Cyclone Gabriellele led to increased temporary cancellations, deferred yield management, and reduced acquisition for the period.
This resulted in a negative impact to the normal trend that we would see. The percentage chart shows the continued growth of our digital products. We now have 222,000 subscriptions across our digital and print platforms, and more than 80% of subscribing customers engage with us digitally. The right-hand chart shows the continued growth in paid digital subscribers. The green line shows the individual subscriptions, and the black line shows subscribers through corporate subscriptions. Digital-only subscribers now total more than 130,000. The dotted lines show the yield trend for each. The corporate yield trend is negative as some large corporates have increased engagement with our product. As we explained before, as renewals occur, pricing is expected to better reflect the usage moving forward. Let's move to page 24 to review publishing's financial performance. Digital subscription revenue growth continues as market conditions impact advertising revenues.
The digital subscription growth of 4% partially offsets the declining print subscriptions and retail outlet sales, with total reader revenue down 4% year-on-year. As just noted, the print decline was higher than expected during the year due to those Cyclone Gabriellele impacts earlier in the year. Advertising revenues were 10% lower than 2022, a reflection of the difficult market. Digital advertising was volatile during the year as customers made decisions to reduce advertising given the overall market impacts on their businesses. Other revenue was flat year-on-year with increases in third-party print and distribution, offsetting lower grant and other income. In total, publishing expenses were down 4% year-on-year. Again, this reflects the disciplined cost management and the lower variable costs given lower revenues. The publishing EBITDA for the year was NZD 38.6 million, representing an EBITDA margin of 15%.
The trends just discussed are clearly evident on slide 25, which splits out the publishing digital and print businesses separately. As we highlighted at our Investor Day, we are pleased that we now have a digital publishing business that can fund NZME's journalism. The people costs within the digital publishing business reflect the full costs of all journalism that is contained on our digital platforms, even if the stories also appear in our print publications. The reductions in profitability across both businesses reflect the difficult trading conditions again in 2023 that we've highlighted a number of times already. On slide 26, again, you can see the 2026 strategic targets and the current metrics. We have significant growth aspirations for the digital business while we ensure we maintain the highly valued and profitable print business well into the future.
We will continue to grow our digital subscriber base and are focused on improving the content and the product offering. During the year, we will increase our targeting and retention capability through some platform enhancements. We'll continue to maximize the print relationships and use these to leverage our digital upsales. The advertising mix will change to skew more digitally. However, we will ensure we have a sales model that supports a loyal and valuable print base of advertisers. Given the above, digital margins and profitability are expected to improve while print will decline over time. Turning now to NZME's real estate division, OneRoof, on page 28. The chart on the left shows that OneRoof platform has a comprehensive level of residential for sale listings, proving the opportunity to deliver on our growth plans. OneRoof's audience has continued to grow.
This has allowed OneRoof to deliver engaged audiences and qualified listings inquiries to its real estate agent customers. The left chart on page 29 shows the growth and listings upgrades. OneRoof continues to consolidate its strong position in the Auckland market, with the four sales listings upgrade percentage hitting 44% for the last quarter of the year. A focus on growing outside of Auckland, where nearly two-thirds of listings are situated, has seen the listings upgrade percentage rise to 20% for the last quarter. We are really pleased with the continued growth we are seeing. Similarly, as shown on the right, we are seeing improvements in yield across the country. Page 30 highlights the overall OneRoof financial performance. Despite new listings coming to market being down by 13% in Auckland and 11% outside of Auckland, OneRoof was able to grow digital revenues by 5% to NZD 10.8 million.
This is a combination of the higher upgrade percentage and the yield improvements that we just discussed. Print revenue declines directly reflect the impacts from the reduced number of listings coming to market, especially given OneRoof's weighting to Auckland and the upper North Island where it has print publications. While we've invested in sales and data roles during the year, overall people costs are down. This reflects lower sales-related and incentive costs in the year given the reduction in revenue. Despite this reduction in total revenue, the EBITDA loss remained relatively stable year-on-year at NZD 1.3 million. Pleasingly, though, the second half of the year was break-even, setting the business up well for profitability in 2024. You'll see on page 31 the 2026 strategy targets for OneRoof.
The strategy remains simple: continue to grow the audience and the inquiries to agents, leverage the strong national sales team that's now in place, and improve total upgrade percentages. And finally, rapidly grow a diversified digital revenue product seed on OneRoof while we maintain the strong print products that we have. While the core cost base is in place, this revenue growth will deliver substantial margin and profitability improvements. Slide 32 is a summary of the corporate division. This includes our events business. You'll see the corporate division contributed an EBITDA loss of NZD 4.4 million for the year. So let me now talk about the operating environment outlook and the capital management outlook as provided on page 34. There are positive signs for 2024, with January and February advertising revenues pacing ahead of the same time last year.
Business and consumer confidence are on an upward trend, and we have a recovering real estate market. However, we are mindful that sentiment among market commentators remains one of economic uncertainty, and there's no real clear consensus on the short-term outlook. We are well positioned to deliver improved results as market conditions improve. We remain conscious of continued cost pressures across our business and will continue to focus on efficiency improvement opportunities. We are pleased that the focus on OneRoof is paying off, and the year has started well. OneRoof has achieved digital revenue growth of over 80% across January and February 2024 to date. We're pleased to have declared a final dividend for 2023 at the same level as last year, particularly against the backdrop of a difficult market. We will continue to review potential opportunities that may present themselves in the consolidating market.
We will be disciplined in reviewing any opportunities which may emerge. Finally, I'd like to note that the board is committed to maximizing distributions within existing debt facilities and in line with our dividend policy. Given peak debt is expected to reach 0.9 times EBITDA and that the seasonality of cash flow generation is weighted to the second half of the year, the board will review the capital management position later in the year. So that now concludes our presentation, and David and I are very happy to take your questions.
Thank you, Michael and David. We will now open the webcast for questions. Once again, if you wish to ask a question, please hover over the bottom of your screen and click Raise Hand. When it is your turn, you will be prompted to unmute your microphone on screen and will be allowed to talk.
To ensure everyone gets an opportunity, could we ask that you limit your questions to an initial question and one follow-up question? Please rejoin the queue for questions if you wish, and we will give you an opportunity to ask more if time permits. Our first question is from Arie Dekker. Thanks, Arie.
Good morning. Yeah. I'll just start with a few questions then. Just on January, February, obviously some good signs in advertising. What was the performance in reader revenues like in January/February, and sort of what level of EBITDA growth was the business generating year on year in January/February?
Yeah. So just the two questions there. So reader revenue, we are seeing continued growth year on year. I think what we saw late last year from a reader perspective is, like you'd expect, most people reviewing their subscriptions, which ones do they want and which ones don't they?
We've certainly seen coming back into the new year digital subscription growth continuing and people deciding that they do want to continue to subscribe. So we are seeing growth there overall. EBITDA is not something we'll talk about for January, February yet. But as you can imagine, with revenues increasing, that should improve overall profitability. Right. And then just in terms of OneRoof, the digital's obviously showing some good signs just waiting for a market turnaround. You've also referenced consolidation opportunities in the outlook. Are there consolidation opportunities for you that would help realize value for OneRoof more quickly? And I guess, would you consider offering a minority stake in OneRoof if it helped accelerate value recognition there? I think from a consolidation perspective, I think there's large and small media businesses in New Zealand looking to change things and maybe looking for divestment.
There's nothing substantially that we're focused on at the moment, but we're just cognizant that things may appear during the year in the marketplace. As we look specifically at OneRoof, I think the board would be very open to opportunities that help accelerate the business. But right now, we're delivering strong organic growth as we've started this year, and we look forward to doing that into the rest of the year and beyond.
Yeah. And then there's reference to the existing you make reference to your capital management and distributions within existing banking facilities. Can you just remind me what the current facility limit is, and is there any intention to upsize the facility?
So the current facility is NZD 50 million, Arie, and we're not considering anything different to that at the moment.
I think, Arie, the capital management policy is the debt will be in 0.5-1 times, which really says we don't need more than that.
Yeah. No, no. I understand that. Just since I'm going through it quite quickly, just quickly then on my two remaining ones. Publishing, digital reader revenues, and you referenced the repricing on renewals in corporate. Can we expect to see yield improvements as early as first half 2024 in corporate?
Yes. I would expect you would see that.
And then in advertising, which obviously had a very, very strong period but did come off in 2023, was that showing signs of growth in January, February within the overall advertising mix, digital advertising and publishing?
Yes, it was.
Great.
And then the last one, OneRoof, just a small decline in trend market share in Auckland versus Trade Me, I guess, over the last year or two that you've got in that graph. Is there anything to call out in terms of what's driving that?
No, I don't think there's anything specifically to call. Some of it might be a little bit more in private sales, which we don't cover. And it's not a loss from ourselves. It's more likely to be Trade Me just making sure they get everyone they don't have.
Great. Thank you.
Thanks, Arie.
Thanks, ari. We now have a question from Roger Colman. Thank you, Roger.
We can't hear you at the moment, Roger. I'm not sure if you're on mute.
Got it. Got it. All right. Hello.
Morning, Roger.
Yeah.
I've got a couple of quick ones, and Michael will get them over and done with.
Within the print, how did BusinessDesk and Viva go during the period, right? And what's the prospect look like?
So BusinessDesk and Vivago are both delivering strong growth, and we're pleased with the way they're going, and we'll continue to ensure that they deliver for the business.
Right. Is BusinessDesk's subscriptions over 15,000 now still?
Absolutely.
Right. And Viva, has that got significant subscriptions?
Yes, it has. And it's an area we continue to grow in also.
Right. Right. Now, looking at the real estate recovery of the 80% that the previous analyst discussed, mentioned, was Cyclone Gabrielle a big drop in areas it counted?
I mean, it was in those areas, but it wasn't a significant impact on last year's.
On the OneRoof stats, I'm just turning through it in the pack at the moment, we did actually show the difference to the prior year as well in number of listings coming to market. So 2023 was down further even on 2021, but it wasn't just a 2022 impact.
Yeah. When you had Cyclone Gabriellele last year in early 2023, one could estimate roughly that you dropped NZD 3 million-NZD 3.5 million worth of EBITDA. Is that been fully recovered in the period to date?
So we have now seen that that market is back to where it was prior, so in that particular area, yes. So we think we're recovered from that now as we go into this year.
So although that's January and February, what do forward pacings look like in March and April?
I mean, we're at the end of February nearly, so you should have a good idea whether some sort of recovery trend has continued.
Yes. We're pleased with what we're continuing to see. Obviously, the market's very short, so we are seeing more booked in the month than what we would in two or three or four years ago as businesses remain cautious.
Right. Right. Look, I'll come back again if there's more questions make room for.
Roger, I think you're okay to carry on if you like for a little bit. We're happy to go offline with you separately in a separate catch-up if that's helpful later.
Just Michael will stay online for the moment while we've got this. Now, just on the radio market, Australia was down 6% also.
Is there any sort of recovery in particular you'd like to mention in radio looking forwards, especially since you'd like it to have better forward bookings of visibility in radio than most other media?
That's right. So I think we are seeing radio benefiting from broadcast TV reductions, and so I think that trend will accelerate over the year ahead. So we're confident from a radio market perspective, and then obviously, we're growing share as well.
Right. Right. So working through the figures you've got in terms of leverage, it means you're projecting a similar NZD 40 million EBITDA pre-IFRS for this calendar year then.
The peak leverage is actually really after dividend payments which take place in March. So that's not a 0.9 or anything expected later in the year. So we'd like to see improvement.
Right. But I want to circle back on that. The arithmetic doesn't work.
If you've got a 0.9 or 1 projection at the peak, that means you're heading for an annual EBITDA. I mean, you're not projecting EBITDA leverage on a month-over-month basis.
It's a rolling 12-month historical calculation. It's not a forward-looking calculation.
Right. So it's rolling historical, okay? And just on OneRoof, even on your charts and on my figures, you're dropping market share in Auckland, and that's on your figures too. Is there any way of capturing those private sales or not and somehow keeping the premium upgrade separate and not blemished by giving people freebies?
Yeah. Private sales is an area we're not at all focused on. It's difficult from the perspective of dealing with those customers, whereas dealing with agents, we can get the volume, and that's where our priority is still.
Right. Right.
When I look at the similar web figures of total time on site, sorry, average user time on site, there's still a big gap on sites like New Zealand Real Estate, the realestate.co.nz site. Have you got much? I'm just trying to get a confirmation on this. Have you got much lower number of pages viewed and typical total time sessions than OneRoof, sorry, than Trade Me's property site?
I think one of the differences on the OneRoof site is there are a number of people coming to the site who aren't in the property market, but we're the person that we're the platform that engages them into the property market, which is either through content or coming for evaluation to start with. That's actually the differentiator on the site.
The person might come to read one story, be there for a small amount of time, but then we actually get to bring them back and then engage them in the property market. So what the agents are telling us is they are seeing different inquiries from us from others, but they are seeing very qualified inquiries from us as well as much as our competitors.
Right. Right. That brings me to the old thing on if you're profitable on OneRoof, what's the resources gap you're devoting to OneRoof relative to the competition that's REINZ and Trade Me? You think you're competitive now or not?
Yeah. We absolutely think we're competitive.
In the market, we think we would have more resources than our competitors, but we're able to leverage the rest of the business of NZME for the rest of the resources in the business, which is likely to be less than our competitors.
Right. So if you've got that position now, does that mean that the cost base on revenue has stabilized, given you equalised resources application against the competitors?
Absolutely.
So you want to break even, or you want to make more money in your real estate vertical?
Well, we broke even for the second half of last year, and we now have revenue growth, and we don't expect costs to move much. So we absolutely are focused on profitability.
Right. Right. Okay. That fixes that up. Last but not least, how's the competitor going who bought their business for NZD 1?
Look, they're a strong competitor.
They continue to compete with us in news, audience, and revenue every day. We're pleased to have overtaken them on a daily basis from an audience perspective, and we're continuing to focus on how we can improve our overall audience because at the end of the day, that's what we use to then be able to monetize the business. So we're making good gains.
Do you get to see some figures? Are they profitable or unprofitable?
I do not get to see any figures.
None. And have they got significant paywall that you see in terms of market terms, in terms of digital subscribers?
No, we don't get to see any of that data, Roger, but there might be many people on this call who have it. I'd welcome them.
Right. Right. Okay. Well, as they can spill the beans, it'd be fantastic. All right then.
Well, that's about it for me. Many thanks. Difficult environment, but let's hope that things get better through the calendar year, okay?
Thank you. Thank you, Roger.
Thank you.
We just have one question from Dennis Chua. Can you provide a sense of the seasonality of net leverage in prior years between the peak after typical March payouts of dividends and at the end of December when FCF has been really strong? Second half, FCF is always significantly stronger than first half, but obviously, you don't disclose the month-to-month cash flow, so it's hard for us to know.
Hey, Dennis. So I think you've pretty much picked it, to be honest.
So the peak really sits through March and May, and it's a result of the dividend payments that are made in March and then the various tax payments that are made in the first half, which are spread evenly across the year where the profitability is much stronger in the second half, particularly in the fourth quarter. So the cash flow generation comes well into the second half, which is why you see the sort of peak debt through the middle of the year.
We also have a question from Gerard Eakin. Go ahead, Gerard.
Good morning, Paul. Michael, on OneRoof, I've always been a bit disappointed with your competitive position, as in you've got this fantastic print advantage, and your competitors still seem to be fighting you off and holding a strong position in the market.
Could you just comment on what's got to happen in the competitive landscape for you to achieve your profitability goals in 2026, please?
Yeah. Hi, Gerard. Thanks for joining. I don't think anything has to happen in the competitive landscape for us to deliver on those goals. I literally think we just have to deliver on our strategy of making sure that we continue to improve the upward percentages and the yields. And that's been focused on having the resources in place, which we have nationally, having the audience coming to the site, and then continuing to improve the product proposition. So I think from a start point, I think we were platform number four in the market. I think we could safely say we've moved well up that ranking, and we're a long way behind number one.
Number one, people might have said was a monopoly in the past, and now we're closing that gap.
Right. If you look at the Australian market, number two just seems to be struggling, and number one seems to be moving further away. Could you just comment on what you think is happening in your market, a view versus the leader?
Yeah. So I think the leader's focus now is completely on yield management, which is all it can be really now. That means the market is looking for alternatives. Given that we are providing great quality leads and inquiry for them, they're very quickly coming to say they'd like to do more with OneRoof. So that is the key thing for us. I think the other thing is we actually now get to leverage all of the assets of the business.
So whether it be the editorial content, whether it be the radio stations or the digital advertiser we have, the business understands that OneRoof is a real differentiator for us in the market, and therefore, it appears on all of our platforms now.
Right. And Michael, if you put yourself back in time a few years, and then projecting where you would have liked to have been now with OneRoof, are you pleased with where you are relative to where you thought you would be, or is it lagging a bit? Or what are your thoughts on that?
I think the market has been what's hindered us the last two years, and that's substantially been the number of listings coming to market and the momentum in the market and people's uncertainty, actually, about paying for the upgrades because they weren't sure if they were going to sell or not.
The market's definitely had some change. So obviously, there's more coming to market. We now need to see, obviously, the sell rate go through. And I know there's even been some media here the last few days around January was a tougher month, but February's looking better from a sell-through perspective. So I would have loved us to have been further ahead over the last two years. But you can absolutely feel the momentum in the market and with agents and their relationship with OneRoof and how that's now delivering. And so do you think if rates are stable, does the market recover, or do you think it really needs a lower interest rate environment for the market to recover properly? There's still a number of people, obviously, come off the lower rates onto the current higher rates. So that still is a bit of pain to come.
And I guess that's why we see what we see in consumer confidence as well. But I think we're definitely seeing more people back in the market now and more inquiry right now. So people have certainly got through much of it. Having said that, rate reductions would absolutely stimulate the market.
Right. Thank you. So that's the biggest source of hidden value in the company. And just switching to the biggest value in the company, which is the publishing division and forgive me because I was a bit late joining. I didn't understand your cost allocation on people and journalism. And I guess I'm still really surprised to see just how much more profitable print is than the digital business. So could you just talk through some of the issues there?
Yeah. So just to explain that, people cost.
So effectively, every journalist is having their cost put 100% against the digital business. So really, the way we're looking at the business is we are a digital-first business, and that digital revenues is what is going to have to pay for journalism at some point in the future, now and well into the future. And so what we're really pleased with is that the digital business is now profitable even with paying for all the costs of the journalists. We're not trying to allocate some to print and some to digital when the stories are across both.
Okay. So it's like 2025, Michael, the people cost in print. There's no journalism in that people cost.
Only for some community newspapers, for example, who don't appear in our digital sites anyway, where it is purely a print product.
The main parts of the people cost there are our print and distribution costs.
Right. Okay. Then so the higher profitability in print, I guess, is a long-term issue for you as subs decline. Can you just talk through what you think happens over time to print because of that longer-term trend?
Yeah. So there's one thing we look out to, and that's in 2029 is a key decision for us around our print plant. Now, we expect print only because that's when its lease is up, and we have a substantial print plant here in Auckland, New Zealand. And I think that's a key decision point for us as to are we staying on at that print plant, or are we going to something smaller or some other way of printing? But we absolutely expect print to go well past 2029.
So it's a business that we now have completely separated out from a revenue and cost perspective so that we can understand the profitability pool of it while we still sell it as an integrated approach across the business because we think that's the best way to continue to get revenues into it. But the other thing to remember, obviously, is because we have put all those journalists into digital, we're really showing the worst of digital and the best print. And we'll obviously just continue to monitor that over time. But fundamentally, two key things is we've got to grow our digital subscriptions, and we think we continue to have lots of opportunity there. And last year, the digital revenues being down, and I used the words volatile when we were talking earlier.
It is very volatile on the basis that it's actually the easiest product to switch on and off on any one day. So when businesses are feeling tough, they have been switching off digital more than they've been switching off anything else because they could stop it tomorrow. And so again, we just need to get back to, as what we're seeing, digital revenue growth year-on-year. And we're getting audience growth on our site. And so now we'll be back to getting the revenue growth as well from the customers.
Thank you very much. And just last one on audio. Audio seems to me, for a number of years, has defied your margin ambitions. What's going to happen for it to get towards where you want it to get to?
Yeah.
The key thing now is obviously maintaining the radio advertising revenues, and that'll be through market growth and share growth, but growing overall those digital advertising revenues, which are becoming a more substantial part of the business, obviously. And as you would have seen in the pack, we have over 70% market share versus our main competitor in that digital audio. So that's an area that we can continue to excel in.
And that's podcasting primarily?
And audio streaming.
Right. Terrific. Thank you very much.
Thanks, Gerard.
And we just have another question from Roger Colman. Thanks, Roger.
Can you hear me now?
We can, Roger. Thank you.
Yeah. I've got a couple of follow-up questions then.
In terms of the pretty flat outlook and the peak debt position, your cost outlooks this year and also the typical NZD 10 million CapEx, are you going to go harder on one of those two for CY 2024?
Roger, we certainly will continue to look at where we can make our cost base more efficient. That's a continuous focus we have. That will certainly be a key area of the coming year. In terms of capital spend, we continue to develop the products that we need to make sure that we make a successful transformation of those digital platforms. And so we'll continue that investment along similar lines to what you've seen over the last couple of years. Right. Still about 10 million. Yeah. As you say, it was about 11 million this last year.
If we just circle back to OneRoof, the gap on the chart looks like about 100-120,000 UVs a month. Have you ever been able to look into what your rental percentage of visitation is, or is there any way looking at the core UV relationship between you and Trade Me competitively in the core looking for homes rather than rentals?
It isn't something that I've got some specifics on at the moment, Roger, but it is something that we work on every day. And one thing I can say is that the December sorry, the January gap closed even more, which we're pleased about. So yeah, there is a difference. Theirs includes rentals. Ours includes some news. So there's a little difference there, but the key thing is getting people to our site and then engaging them.
Right.
Then, looking at the print one with the previous questionnaire asked about the future of it, it must be 110% of profitability sits on Saturdays and Sundays, and you must lose money hand over fist Monday, Tuesday, Wednesdays sort of thing. Is there any hybrid model which enables you to close down the loss-making days and just concentrate on the concept of the weekend magazines for Saturday, Sunday publications? And has that worked anywhere in the world? Has that sort of thing worked anywhere in the wor ld? So, I think the good news is it isn't like that, that it's 110% of the profit. So we are, and we do look at every masthead and every day. Now, yes, some are definitely more profitable than others, but we're really lucky to have a very strong subscriber base who stays with us and a smaller retail base.
We're quite the opposite to the rest of the world, as you know, with strong subscribers and smaller retail. That gives us much more surety over those revenues that come in every day of the week.
Then just on the last summary, one of your summary doc statements, you're looking for some sort of growth outside the three pillars you've got now. Have you got appetite for that? Is it too far removed? Is it a risk proposition? I mean, has the board decided that you can make acquisitions or something? And is there anything available in New Zealand?
So I don't want to signal that we're looking for growth outside of the three pillars. We're very focused on the three pillars, and that is our focus. However, if something came along, of course, the board would look at it, and it would be very disciplined.
And if appropriate, it would talk to shareholders about it. But we're not out trying to get a fourth and fifth pillar.
Right. Okay. That's good. Okay. Then thank you very much, gentlemen.
Thank you. Hey, well, thanks, everyone, for your interest today. Really pleased to be able to talk to you and give you further insight into the results. And we look forward to catching up with many of you over the coming days and weeks. Thanks again for your interest. Thank you. Bye-bye.