Kia ora koutou, and welcome to New Zealand Media and Entertainment's 2022 half-year results webcast. My name is Kelly Gunn, GM of 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. After the presentation, 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. At an appropriate time, you will then be prompted to unmute your microphone on Zoom to ask your question. Please note that only participants on the webcast will have the ability to ask a question. If you have any technical questions, please use the chat function at the bottom of your screen. I will now hand you over to our CEO, Michael Boggs.
Kia ora koutou. Good morning, and thank you for joining us for NZME's 2022 half year results briefing. If you're on the webcast, you will be able to follow our results presentation simultaneously on the screen. Firstly, I'll be taking you through our half year results summary, reflecting on where we're at with our three-year strategy and providing a market overview before handing over to David, who will take you through the financial results. Following that, I will go through each of our strategic priorities and the divisional performance in more detail. I'll then look to share NZME's outlook for the second half of the 2022 financial year. Dave and I will then be very happy to take your questions. On page three, you'll see our results summary for the first half of 2022.
I'm pleased to share that the year has started strongly with advertising revenues for the first half above the pre-COVID levels of 2019. 2022's revenue and profitability is above last year's. You'll see that operating revenue grew 5% on the previous corresponding period and has risen to NZD 176.7 million. Operating EBITDA was NZD 28.1 million. That's up 3% on the first half of last year. Statutory net profit after tax was NZD 8.5 million . That's 37% up on the first half of 2021. You'll note that significant progress has been made across each of the three strategic pillars of Audio, Publishing, and OneRoof. There are quite a number of highlights. These include total revenue increases across all strategic pillars, Audio, Publishing, and OneRoof, with total digital revenue up a pleasing 24%.
During 2022, digital advertising revenue equaled our print advertising revenue for the month. This digital milestone again demonstrates the continued progress on our digital transformation. You'll see that radio market share reached 41.1%. That's our highest share since 2016, and audio revenue increased by 5%. Digital subscriber growth momentum continued, with publishing subscriptions increasing to 206,000, including 101,000 digital-only subscriptions. We have now reached the inflection point of having more paid digital subscriptions than print subscriptions during the recent period. In addition, OneRoof had another outstanding performance this half, delivering a 53% increase in digital revenue year-on-year. We are pleased with the positive first half result, despite New Zealand being at the peak of the Omicron outbreak during this time.
Growth in revenue and profitability, despite these challenging times, demonstrates the strength and agility of our business and our teams right across the country. As you'll know, during the half, we undertook the on-market buyback and paid substantial dividends. This increased our net debt at the end of June to NZD 2.9 million. Given the strength of the business, the NZME board has declared a fully imputed interim dividend of NZD 0.03 per share. Turning now to page four. As just mentioned, the operating environment has been challenging. This, combined with supply chain challenges, inflationary pressures, and labor shortages for businesses, has resulted in overall business confidence falling to levels as low as have been seen in recent years. This ANZ Business Confidence Index, shown in the graph on the left, highlights the weakening in the first half of this year.
It is at levels similar to that seen at the start of the COVID outbreak in early 2020 and not seen prior to that since the 2008 GFC. Despite grappling with the impacts of this Omicron outbreak and coinciding low business confidence levels, we are pleased this half to meet our objective of returning advertising revenues to the pre-COVID levels. You can see this in the chart on the right-hand side. We continue to focus on building on this momentum in the second half of the year. I'll now take some time to overview our strategic priorities and our performance in the context of the overall market performance. At the end of 2020, we set targets and strategic priorities for 2023, and we are now halfway through that strategy, as you'll see on page six.
To recap those strategic priorities, they are to be New Zealand's leading audio company, for the New Zealand Herald to become New Zealand's Herald, and finally, for OneRoof to become your complete property destination. Under each of these strategic pillars, we have a number of key focus areas. I'll talk to these following David, providing some more detailed information on our financial results. You'll see on slide seven that NZME reaches more than 3.4 million New Zealanders through our leading platforms across audio, publishing, and OneRoof. In July, we reached our largest ever audience in the GfK Commercial Radio survey. We reached more than two million listeners across our audio brands every week. Once again, we celebrated Newstalk ZB being the country's number one radio station and breakfast show. iHeartRadio is also New Zealand's number one podcast network, with more than 780,000 monthly listeners.
We reach more than 2.8 million Kiwis through our publishing business with New Zealand's number one daily newspaper, The New Zealand Herald, achieving a weekly brand audience of 2.2 million within New Zealand. As I noted previously, we recently celebrated a significant milestone with 206,000 subscriptions across our print and digital news platforms. OneRoof real estate products reach more than 800,000 people and is the most-read real estate newspaper section, as well as having 90% of the country's residential for sale listings on OneRoof.co.nz. Page eight highlights the strong position that NZME has in each market it participates in, and the overall split of revenue across each platform.
We are pleased to have achieved a number of revenue market share gains in the first half of 2022, with radio revenue market share increasing further to 41.1%. As noted, we continue to make significant progress in diversifying our revenue streams, supported by strong digital revenue growth. The graphs on page nine show the changes in market revenue across radio, print, and digital display, together with how NZME has grown its market share in each channel over the last four years. While the total radio market revenue has not yet returned to the pre-COVID levels of 2019, NZME's increased market share has resulted in a full recovery to these levels. The print share decline in 2022 reflects lower performance in the first quarter of 2022 while Auckland was impacted by Omicron. The second quarter has rebounded and has returned to market share growth.
Unfortunately, digital market or share revenues are not yet available for 2022. However, we have delivered strong year-on-year growth across our business with 24% digital growth, as already noted. Page 10 details this 24% digital revenue growth and demonstrates the positive impact our digital transformation and diversification of our platforms continues to have on NZME's overall performance. You'll see we have strong growth in digital audio revenue through our iHeartRadio platform. It's up 56% this half compared to the previous corresponding period. Digital publishing revenue has also increased by 18% year-on-year, and OneRoof celebrated a 53% increase in digital revenue compared to the same period last year. We're really pleased with these digital results. Let me now hand over to David Mackrell, NZME's Chief Financial Officer, and he'll take you through the financial results.
Thanks, Michael, and thank you to all that have joined the call today. You'll see on page 12 shows the operating results for the year with operating EBITDA of NZD 28.1 million, which is 3% higher than the first half of last year. Operating revenue was up 5%, with both reader revenue and advertising revenue 4% higher due to the continued growth in digital subscription revenue and strong growth in radio and digital advertising revenue. Other revenue was higher, primarily due to government grant income. This income funds the costs of specific projects and is one of the drivers of increased operating expenses. Operating expenses were up overall by 6%, which I'll cover in the next slide.
The result was an operating net profit after tax of NZD 9 million, which was 30% higher than last year and delivered on an operating earnings per share of NZD 0.046 per share. Page 13 shows the key changes in the cost base for the half, which have resulted in operating expenses 6% higher. The key driver of the increased cost has been people and contributors, which were 11% higher than the first half of 2021. Half of this increase relates to the impact of the acquisition of BusinessDesk, additional resources to support the government grant projects, and a one-off NZD 1,000 discretionary bonus paid to each eligible employee. The remaining increase relates to additional resources deployed to drive growth and rate increases.
While print and distribution costs were similar to last year, this was the result of higher distribution costs being offset by lower volumes. Content costs were higher in line with the increased resale of digital services and increased license costs. Other expenses were higher as a result of the impact of the acquisition of BusinessDesk and Radio Wānaka together with increased radio broadcast costs from expanding our frequency reach. NZME continues to focus on ensuring it has an efficient cost base. Summarized balance sheet on page 14 highlights the impact of the capital management undertaken during the six months, with net assets reduced to NZD 141.2 million. Net working capital, excluding cash, continues to be a net liability due primarily to deferred revenue.
It is lower than December 2021 due to an increase in receivables and the reduction in tax payable, with a significant change in the timing of tax payments in the first half of this year. The dividend payable reflects the special dividend of NZD 0.05 per share declared on 20 June and paid on 12 July this year as part of the capital management plan. Other payables reflects the potential earn-out liability associated with the acquisition of BusinessDesk. Net debt was NZD 2.9 million at 30 June and is an increase of NZD 16.4 million compared to the net cash position at the end of December 2021. Moving now to the cash flow summary on page 15. Cash flow from operations was NZD 11.9 million for the six months, which was NZD 8.2 million lower than the first half of last year.
This was due to the increase in working capital and a higher amount of tax paid during this half. Capital expenditure was NZD 4.1 million for the half, with the pace of development returning to more normal levels and consistent with our expected NZD 8 to 10 million per annum. In addition, investing in the acquisition of BusinessDesk and Radio Wānaka consumed NZD 3.6 million. During the half, the company purchased NZD 5.3 million worth of shares as per the on-market share buyback program, which together with the final 2021 dividend of NZD 9.9 million, resulted in NZD 14.2 million of payments to shareholders. Let's turn to capital management on page 16. The graph shows the reduction in net debt since 2018 to NZD 2.9 million.
After the special dividend payment of NZD 9.9 million in July this year, net debt was NZD 12.6 million as at the end of July. Half of the planned NZD 30 million capital return has been completed through a combination of the on-market share buyback and the special dividend paid in July. As mentioned, the board has declared a fully imputed interim dividend of NZD 0.03 per share to be paid on 27 September. Our leverage ratio remains well below our target range, and accordingly, the buyback program will recommence on 24 August in accordance with our securities trading policy. I'll now hand back to Michael to talk about progress in each of our strategic priority areas and discuss the outlook for the remainder of the financial year.
Thanks for that, David. I'll now take you through the performance of each of our three divisions. That's Audio, Publishing, and OneRoof, together with an update on the strategic initiatives for each division. Let's first turn to the Audio business unit. Let's start with our audience and market share on page 18. NZME achieved its highest ever cumulative weekly audience in the July 2022 commercial radio survey. That was with more than two million listeners tuning in across our radio platforms each week. This is on the left-hand graph. The center graph shows NZME's audience market share with the lighter section of each bar, the music audience, and the darker section, the share of the talk audience. With the receding impacts and interest in COVID, we are seeing slightly reduced talk listening. The chart on the right shows the increase in total listening hours on NZME's digital audio platform.
That's iHeartRadio. On average, over six million listening hours per month. We expect this growth to continue its strong momentum. Page 19 shows the financial performance of the Audio division, with total revenue up 5% year-on-year. Radio advertising grew 3% in the first half of the year to NZD 51.1 million. This was complemented by iHeartRadio's continued growth, with digital audio advertising growing 56% compared to the same period in 2021. The increase in people and contributor costs was driven by a one-off staff bonus, increases in labor costs, and investments in the digital audio team. Agency commission and marketing costs were 13% lower as a result of reduced marketing during the half. EBITDA margin grew by 1%, with 23% of the increased audio revenue year-on-year reflected in growth in EBITDA.
On page 20, you'll see the progress towards our 2023 targets for Audio. As noted, we were pleased to celebrate our largest ever cumulative audience in July, reaching more than two million people across our radio platforms, even with the anticipated decline in talk revenue share that we have seen. This audience growth is further complemented by our digital audio platform, iHeartRadio, which reaches one million devices and boasted 6.4 million listening hours in the month of June. NZME's radio revenue share grew to 41.1% for the half. Our leading digital audio revenues are excluded from these revenue market share metrics. We've continued to grow the proportion of revenue from our digital audio with 4.6% of total audio revenue now coming from digital platforms. That's mainly iHeartRadio. We're pleased to be making good progress towards our 2023 target of 5%.
The second half has historically produced increased EBITDA margins given the revenue seasonality over the year. The first half of 2022 delivered an 11% margin, up from 10% for the first half of 2021. Let's now move to talk about our publishing business. Page 22 shows continued engagement of both print and digital audiences with our brands. The left and middle charts show NZ Herald's print and brand growth over recent years. Much of the readership and brand growth delivered during COVID has been maintained and can now be leveraged for further revenue growth. The phenomenal digital peaks seen during New Zealand snap lockdowns over 2020 and 2021 are clearly evident in the right-hand chart. As signaled, we are seeing more normalized news cycles as we move away from COVID-focused content.
The charts on page 23 show details of our subscription base, which continues to grow and now totals more than 206,000 across both NZME's print and digital platforms. While print subscriber volumes continue to decline by 6%, as shown in the left-hand chart, a 5% yield improvement nearly offset that volume decline. The center chart shows the continued growth in our subscriber base and clearly highlights the significant growth of engagement in digital subscriptions. This again supports our ongoing focus on digital transformation across our publishing business. We continue to see significant growth opportunity in digital subscriptions. The combination of a bundle BusinessDesk and The New Zealand Herald subscription is proving popular for corporate growth. Longer-term introductory offers are driving improved retention rates at an initially lower yield. On page 24, we'll move to review publishing's financial performance.
Continued strong revenue growth from digital subscriptions more than offset the decline in print reader revenue. Total reader revenue increased by 4% on the first half of the prior year. Total advertising revenue grew 1%, with digital making up nearly half of publishing's advertising revenue in the first half. This again reflects the success of our digital transformation and focus. As David noted, other revenue increased mainly due to the impact of government grants for specific projects such as the Te Rito Journalism Project and the Open Justice program. These grants directly fund some of the increased people costs that are reflected in the expenses. The NZD 4.4 million increase in people costs reflects the one-off employee bonus, costs associated with government grant projects, and the acquisition of BusinessDesk. The publishing EBITDA for the half was 2% higher at NZD 21.5 million.
Page 25 shows the progress that we've made towards our 2023 strategy of ensuring the Herald is becoming New Zealand's Herald. Total subscribers increased by 8% from the end of the 2021 financial year to 206,000. We are well on track to achieving our 2023 target of more than 210,000. With the significant growth in digital advertising revenue, it now represents 49% of total publishing advertising revenue. Our teams have worked hard on developing simplified corporate pricing and bundles for Herald Premium and BusinessDesk, and we've made improvements to customer experiences across Herald Premium. We have further exciting developments underway to ensure that NZME produces content and customer experiences that will enable us to continue to rapidly grow subscriptions.
The board has also supported a strong and renewed focus on our newsroom quality and trust principles and initiatives for this year, and these principles are captured in our new editorial code of ethics. The second half EBITDA margins have historically been higher than the first half, given revenue seasonality. In addition, we will receive the benefits of the Google and Meta agreements that we've previously announced. We'll now turn to NZME's real estate division, OneRoof. The chart on the left of page 27 shows that OneRoof platform has a strong position in the market with 90% of residential for-sale listings nationwide and 98% in Auckland. While market interest in property has waned somewhat from the peaks of 2021, we are pleased to see that OneRoof has increased its overall audience during this tougher period.
This is resulting in a reduction in the audience gap to Trade Me. Listings upgrades or depth products growth is shown in the chart on the right of the page. The continued focus on Auckland has lifted the upgrade percentage to 29% at the end of the half. Markets outside of Auckland have seen the upgrade percentage increase to over 10% at the end of the half. We're continuing to make really good progress working directly with agents, highlighting the unique benefits of OneRoof. On page 28, you'll see that OneRoof digital revenue has grown to NZD 5.4 million. That's up 53% compared to the first half of last year. Again, this shows the strength of the offering despite a cooling of the housing market. OneRoof total revenue grew 16% over the same period last year.
Both people and marketing costs increased with investment in additional sales, resource, and marketing to promote the platform nationwide and deliver this growth. Due to this continued investment to drive current and future growth, OneRoof EBITDA was slightly lower than the first half of last year. Pleasingly, you'll see that the real estate industry revenue across all of NZME's brands was NZD 23.5 million for the half. That was 15% higher than the first half of 2021. OneRoof has continued to progress its position to become your complete property destination, as highlighted on page 29. OneRoof is focused on identifying key accounts and has deployed an effective strategy to secure listings, supported by a strong brand campaign to deliver increased brand awareness across the country. This has resulted in the audited reduction in the audience gap to Trade Me during the period.
We're continuing to see this trend. An analysis of the OneRoof customer experience has been completed, with actions underway to further increase audience engagement in the second half of the year. The introduction of new products and regional resourcing is delivering revenue growth nationally. Once again, OneRoof is delivering on NZME's digital transformation as part of our 2023 strategy. Slide 30 shows our corporate division performance, which also includes our events business. With no events held in the first half of 2022 due to the impacts of Omicron, revenue and costs were lower during the period. Finally, let me now share an update on our outlook provided on page 32. We are very pleased to have seen advertising revenue recover during the first half of the year to pre-pandemic levels.
There remains significant indicators of unease in the market, and while advertisers are exercising caution, bookings for the third quarter of 2022 are currently tracking 5% above the same period in 2021. There continues to be cost pressures across the business. However, significant increases in paper and freight costs have been offset by cost-saving initiatives. Based on the above trends, NZME reconfirms its market guidance of 2022 EBITDA in the range of NZD 67 million to NZD 72 million for the year. We remain in a very strong capital position and will recommence the on-market buyback tomorrow, 24th of August 2022. Finally, it is worth highlighting that the board remains committed to ensuring and returning excess capital to shareholders and will review capital and dividend policy settings over this half. Thanks, everyone. That concludes the formal part of today's presentation.
David and I are now very happy to take any questions you may have.
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 on screen to unmute your microphone and ask your question. To ensure everyone gets an opportunity, can we please ask that you limit your question to just one initial question and one follow-up question. If you wish to ask any further questions, you're welcome to rejoin the queue, and we will give you an opportunity to ask more questions as time permits. Our first question is from Arie Dekker. Thank you, Ari. Please go ahead with your question.
Well, good morning and thanks for the update. Just starting with OneRoof. I guess that's where you've got some of the larger gaps to your 2023 targets at this point. I mean, in light of that, should we expect to see you continue to sacrifice shorter term profitability and continue investment there, or do you sort of think that the operating cost base is reaching a level you're comfortable with?
Yeah. Hi there, Arie. Yeah, no, we're absolutely focused on continuing to reach those metrics in 2023. The cost base and investment that's gone in last year and this year, we think we're now at an appropriate level. The fundamentals now are around continuing to grow the audience and grow those revenue penetrations.
Oh, great. Yeah, your expectation would be that we start to see some operating leverage and EBITDA come through in the second half and into next year.
Yes, indeed. Yeah. I would expect it more into next year as we continue the setup in this year. But we're not shying away at all from those outcomes for next year.
Great. Then just on the Google and Meta agreements, you know, I imagine there's some limits on what you can say, but could you just perhaps sort of talk a little bit, you know, around the duration of those agreements? I think you've talked about that a little bit in the past. Then also just the, in terms of the revenue that you expect to get over the term of those deals like, should we expect them to be reasonably fixed or is there a revenue at risk element there and you'd sort of expect them to grow from their starting base this year?
Yeah, thanks, Arie. As you'll understand, we are tied into some confidentiality of that. But what I can say is, we've publicly obviously said that our Google News agreement is a five-year term and our Meta agreement is a one-year term, and we'll obviously look to continue to engage with them for an extension if possible. Both of those agreements, well, are calendar-based. You know, the revenues that we see in this year, we wouldn't expect to see a significant increase the following year, into next year, for example. You know, we won't see a doubling, for example, with most of those revenues coming in the second half of this year and next year's result.
The revenues are partly driven by projects we undertake and partly driven by news we generate, but are substantially of a fixed nature.
Yeah, sure. Well, that's helpful. Thank you. Just to clarify the first point there. Are you saying that the revenue that you'll receive in those deals for second half fiscal year 2022, that will be similar as the full year revenue in your calendar and fiscal years 2023?
Substantially similar, yes.
Great. No, that's helpful too. I guess I'll take the cue or the direction on a number of questions and lower my hand now and come back later if time permits.
Thanks, Arie. Our next question is from Roger Colman. Thank you, Roger.
Good morning, gentlemen. Can you hear me?
Morning, Roger.
Yes. Can I just go to OneRoof, the 50-odd percent revenue increase. When I plot the volume of listings average for this first half against first half last year, your average listings are also up in the mid-50s. I think my figures are 56%. Has yield just not increased at all?
No, we aren't driving yield growth in OneRoof at this stage. We're focused on depth product penetration. Yield outside of Auckland, slightly lower than Auckland, obviously we do have lower yield at the moment outside of Auckland, and that's where the significant growth has got to continue. Yeah, we're not focused on yield. We're absolutely focused on overall inventory penetration.
Right. That leads me to the question of, are you usually declare your average premium of about NZD 300 odd. Is that still the case?
Yes, that's about right.
Right. Can I do a follow-up question now?
Yeah.
In the corporate expenses, is that the CEO, CFO salaries and all that? Because you guys seem to be poorer every year.
Well, it's all of those corporate costs includes those things. That's correct, Roger.
Right. Okay. A quick one on what's happened to the Driven, and is it logical to have three competitors in the New Zealand market?
Yeah, I think, maybe we talked about this at the last results announcement. We don't see Driven being a competitor directly against Trade Me from the perspective of a listing site. We do think there's a real opportunity to continue to monetize it from an advice perspective and a lead generator, as opposed to it trying to tackle Trade Me head on as a, you know, a private or dealer listing site.
Yeah. I'll come back later on and let Arie go on. Okay, thank you.
Thanks, Roger. I think Arie had a follow-up question.
Oh, great. Thanks. Yeah. Only one. Just on operating costs more broadly. Just in terms of, you know, you've outlined the reasons for the growth in the OpEx base pretty clearly. Just in terms of that, paper and freight costs, can you just sort of give a little bit of context on how much they sort of are impacting the OpEx in FY 2022? I know you had some contracts in place. Also just what your expectation is in terms of any visibility on those normalizing out. Yeah, that would be helpful. Just in terms of the current year impact, the current year impact on paper is relatively minimal. Distribution costs have increased with fuel, as one would expect.
As we noted there, we have offset those with other, you know, other savings. As we look into next year, you know, the market we think will normalize, and we think the freight costs will come down, as freight returns to a more stable environment.
Sure. Just on next year, are you sort of saying that, so on paper, you've sort of taken the benefit this year of those contracts, so the impact's relatively minimal. You know, and then presumably also some volume decline included in that. That next year, you know, on the basis that things normalize a bit, that the costs should be, you know, reasonably similar on paper in FY 2023 as they are this year.
Yes, certainly the back half of this year will be similar, but the, you know, the cost has increased and those contracts run out this year.
Great. Thanks. Just one other one. Just on the buyback. Is the intention to, you know, for this capital management, the NZD 30 million to get done substantively in this calendar year and hence you'll see how you go in terms of progressing the buyback further in second half, but, you know, wouldn't rule out another supplementary dividend to complete it this year?
I think as we indicated, you know, the board's shown a commitment to return excess capital, and, you know, elected to pay a special dividend to, you know, to maintain that sort of progress towards the NZD 30 million. Obviously, that's something they'll review in the context of all of the things going on, at the appropriate time. You know, the intention is the program will recommence tomorrow. We'll see the progress that we make towards the back end of the year.
Arie, just to add to that, I guess, I think it's, you know, about virtually the last dot on the outlook page saying that, you know, the board certainly recognizes that it's gonna continue to generate excess capital and does want to, in this half, actually review those capital and dividend policy settings. That could, you know, could include, for example, you know, reviews of further buybacks or changes to dividend policies overall for returning capital.
Sure. Then I guess, you know, perhaps playing into that review as well would just be what your outlook is on opportunities to sort of selectively invest into the core business, more adjacent to it. Is there, you know, sort of anything else sort of on the radar, that would be kind of new, this is what you've sort of been focused on? Then just an M&A, are there any other things, that you're sort of looking at?
No. There's nothing we're looking at that's to, you know, use significant capital.
Yeah.
This was, you know, outlook statement was more around returning capital as opposed to using capital.
Great. Thanks. We'll talk to you a bit later.
Thanks, Arie.
Okay. Well, thank you, everyone. That concludes our Q&A for today. Thanks for participating in today's webcast. Really appreciate your ongoing interest in the business. David and I look forward to catching up with you, many of you, over the next week or so. Obviously, a recording of this presentation will be available on our website by the end of the day. Have a great day, everyone.