NZME Limited (NZM) Earnings Call Transcript & Summary

Welcome to the New Zealand Media and Entertainment Investor Day.

Welcome to NZB. I'm absolutely delighted to be coming to you from the Newstalk ZB studio here in Auckland. I'm going to be joined today by our Chairman, Barbara Chapman, and with a number of the exec team. Today is about giving you deep insight into what is happening to our audiences, our brands, what are our customers demanding? And importantly, how we plan on creating shareholder value. Let me take you through the agenda. Next, you'll hear from our Chairman, Barbara Chapman. We'll then focus on our 3 strategic priorities. I can give you some insight as to where we are right now but importantly, you'll then hear about our radio strategy with Wendy Palmer. We'll then move on to talk about our publishing business. You'll hear from Shayne Currie regarding our audiences. You'll hear from Matt Wilson regarding our subscribers, and finally, with Publishing, you'll hear from Laura Maxwell, talking about our print and our digital revenue streams. The third priority regarding OneRoof we'll cover with Laura Maxwell as well. Our CFO, David Mackrell, will then give you an overview of our financial performance and where we plan on going, what we plan to do to deliver shareholder value. You'll have an opportunity at the very end to ask each of us questions, and we look forward to giving you further insights during the day. I'll now pass over to our Chairman, Barbara Chapman.

Greetings. Hello to you all, and welcome to New Zealand Media and Entertainment Investor Day for 2020. At our annual Shareholders meeting in June, we shared with you that we recognize the opportunity we have to grow our investor engagement and communication, both in terms of the detail that we share and the frequency with which we communicate with you. Today's investor presentation forms one part of that commitment, and I'd like to reiterate that as a Board, we value these ongoing opportunities to grow shareholder engagement to better understand your perspective on shareholder value creation. Today, we will share with you deeper insights into the inner workings of NZME. In particular, Michael and his team will take you through the detailed analysis that supports the strategic focus on our 3 key priorities. We will also share with you new initiatives that will add power to our strategic priorities. And in a moment, I will discuss with you a set of guiding principles that the Board has agreed on to ensure that we operate with ambition, accuracy and at pace and deliver what matters most to our customers. And our shareholders. Firstly, I'd like to take a few moments to discuss 2020. To be generous at best, 2020 has been a year of incredible contrasts. On the one hand, our business has been tested by the coronavirus pandemic and the initial outbreak in New Zealand of COVID-19. On the other, NZME, its people, its leadership and its loyal customers have responded incredibly. On one hand, many of our commercial partners suffered significantly during New Zealand's lockdown phases, in turn, significantly impacting NZME revenue. On the other hand, NZME's platforms are experiencing never before seen levels of engagement with key audiences, offering advertisers an unprecedented opportunity to connect and engage with their customers. As I mentioned previously, NZME's leadership responded swiftly and with purpose, to the impact of COVID-19. From the outset and consistently throughout, we took a people first perspective, ensuring NZME's staff were kept safe and well informed. Simultaneously, our business continuity plan was deployed, ensuring we continued to operate as an essential service during the lockdown periods. This kept our audiences informed and engaged with news and information they could trust and have confidence in, as well as ensuring our commercial partners and advertisers continued to reach their customers through NZME's significant audience base. NZME's leadership also responded with a set of initiatives aimed at making sure the business was protected from the worst of the revenue impacts of COVID-19, reducing costs across the business and continuing our program of debt reduction were both aimed at providing certainty for shareholders and our people. These and other initiatives meant that NZME was in the best possible position to respond swiftly and with momentum to the COVID-19 recovery that we are now experiencing. Before I consign 2020 to the historians, I'd like to make this comment. The Novelist, James Lane Allen pinned the phrase, " adversity doesn't build character, it reveals it". The adversity brought by COVID-19 revealed in NZME a resilient, robust resolute and empathetic character. It revealed a leadership team confident to make hard but necessary decisions and a team with the capability to act swiftly. We also learned some lessons along the way about which priorities were really important to us and about leaner execution. 2020 revealed a character in NZME that as shareholders and as a Board, I believe we can all be very proud of. I'd like to now talk briefly about the NZME Board: Carol Campbell, David Gibson and Sussan Turner. As a team, we bring to the table extensive business strategy and leadership experience, listed company governance experience, and deep media industry knowledge. We also bring extensive corporate finance capability, financial and audit experience and customer insight, marketing and brand expertise. The Board recognizes that the experiences our customers are demanding from us today includes a focus on digital engagement. And as a company, we are rapidly pivoting towards this. While some of us have led companies through digital transformations, the Board recognizes the opportunity to expand our depth of experience and insight in digital innovation, data and analytics. With those skills in mind, we are making good progress towards appointing a new board member, and I look forward to being able to update the market on that shortly. I mentioned earlier that the Board has agreed on a set of guiding principles that we expect to be applied across NZME's strategic priorities to ensure that all key initiatives are focused on activities that will drive shareholder long-term value creation. These guiding principles will ensure the priorities and initiatives being worked on by the NZME team, sit within a robust set of parameters designed to ensure they deliver to the expectations of our customers, and through them, to our shareholders. Michael and his team will share those strategic priorities shortly. But for now, I'd like to touch on the principles the Board has agreed, will provide some guide rails for NZME ensuring we operate with ambition, accuracy and at pace. Starting with customer first. Our success or failure depends on a relentless focus on always putting our customers and our customer experiences at the center of what we do. The products we offer our commercial partners and the content we create for our audiences must be designed to make a tangible difference to them, their businesses and their daily lives. Simply put, what we do for our customers must add true value to them and make us an indispensable part of their day. Moving to Win with Quality. Trust in what we say and do is critical to our success in winning the flight to quality is a key focus for all NZME content. The proof is and will continue to be that New Zealanders are happy to pay for access to premium quality journalism, insights and analysis. We must all hold the expectation that this premium quality lens be applied to all of our strategic priorities and those initiatives engaged to support them. Now on to digital acceleration. Digital disruption in the media sector is a global reality, and our customers' expectations for more, better, faster, are not diminishing. To meet those expectations, our strategic priorities must be supported by initiatives that add momentum to delivering world-class digital experiences for our customers. In terms of audience expansion, we believe a great opportunity exists for continued and sustained audience growth and engagement. Compelling quality content delivered where and how an audience wants it will lead to this growth. And we must continually seek out those new opportunities, which take advantage of the disruption around us or expand our national presence to enable us to engage with broader audiences. And finally, to Top Performance. The Board recognizes that top quartile business performance in each strategic priority is a key measure of success. We must be measuring our performance, not only against our industry and sector competitors, but against the performance of the publicly listed company environment. This principle ensures the investment performance of NZME's initiatives must clearly illustrate their ability to drive long-term shareholder value creation. Through the lens of the 5 guiding principles, the Board will challenge management to ensure NZME remains focused on the priorities that will make the most difference to our customers and our shareholders. Before I hand back to Michael, I would like to share some of my reflections on the New Zealand business environment, what our commercial world looks like from inside our New Zealand bubble and the impact of the recent New Zealand general election. I have the privilege of being in leadership roles across a number of businesses and industry and government initiatives. And through these boards and forums, it's obvious to me that the domestic implications and global ramifications of the coronavirus pandemic have punctuated virtually every asset of our commercial environment. When COVID-19 hit New Zealand's shores, we hoped for the best and prepared for the worst, as the New Zealand government embarked on a hard and fast strategy of not just containing but eradicating the virus. Within New Zealand, economic disruption has been unevenly felt and this will continue while our borders remain closed. But from what I see, business has been swift to adapt and in many sectors, the initial negative sentiments have not materialized. Business is doing what it does best, getting on with it. Although for a while at least, uncertainty remains the most dominant outlook. You will know that New Zealand has recently reelected Jacinda Ardern as their prime Minister and with a significant mandate such that her labor government is in a position to govern alone with no coalition partner required. This is now a second term government with significant experience. It's a government that is very clear on the need to balance health outcomes with economic recovery, as we look to position New Zealand businesses strongly as the global recovery from the pandemic begins. So we remain positive. I look forward to joining you again later with Michael and his team to answer any questions you may have. Thank you again for joining with us today. I'll now hand you back to Michael.

Thank you, Barbara. I'm excited today to be to update you on the last 2 years of NZME. We're an audience and customer-centric business with multi channels. We're across print, radio and digital, but importantly, it's the journalism and broadcasting across news, sport and entertainment that makes a difference. You'll see on the slide the premium brands we have across the business. The leading brands, this is down to the great work that they do every day. I'm really proud of some of our achievements over the last 2 years. And let me take you through the 3 strategic priorities and some of what we've delivered. For me, under leading the future of news and journalism, our partnership with the Washington Post has been phenomenal. They've given us a world-leading technology road map, and that allowed us to launch New Zealand Herald Premium just last year. I was delighted that we were chosen to be their partner to develop the technology and launch it. We also had the ability to launch it to their customer base globally. We've delivered on a promise of bringing premium content to market, and I'm really pleased with how we're going. I'm also really excited that we've managed to return radio revenue to growth. We saw that in the end of the last financial year and the beginning of this year. We've successfully transitioned so much of our talent, our music and our brands, and you'll hear more on that from Wendy, shortly. On our third priority OneRoof has come from being an idea to being a leading contender in the real estate market. I'm really pleased with the progress there. For shareholders, we've stabilized our profitability, we've reduced our debt, and we've positioned NZME for growth. You have a dedicated and passionate executive team leading your company. You'll hear from many of them today. In early 2021, Paul Maher will join us from TVNZ. There he led this strategy and commercial operations. I'm really looking forward to having him join with us to lead OneRoof in early next year. I'm reminded daily about the quality of our people and their commitment to our business. They regularly tell me how they enjoy working at NZME and importantly, how we manage to develop them. Just in the last few days, I received this piece of feedback. I've only just joined the company in the past few months, and I've got to say I've been blown away by the culture here. We're a team of 1,200 people working in your company to ensure that we champion the craft of journalism and broadcasting well into the future. We have a culture that supports our people for their own personal development, but importantly, for NZME's success. The combination of our brands and our platforms allows us to reach 3.2 million New Zealanders. We have an objective to grow our national reach that's aligned to our guiding principle of audience expansion that you heard from Barbara earlier. As you'll see, we have a real opportunity to grow our reach nationally, but more specifically in the South Island. NZME is the largest local player. We have the #1 news site in the country. This, again, is a testament to the quality of journalism and broadcasting that we deliver. With growing audiences, improved technology and tools and fabulous content, we are continuing to deliver for our customers. We are growing our market share across all of our platforms. We're seeing growth in radio, growth in print and growth in digital. You'll hear more about our aspirations later today. NZME has real momentum in the market. As we have spoken about before, real estate is NZME's largest industry vertical. All 5 top verticals have been impacted by COVID-19. Real estate suffered from lockdowns, open home restrictions and reduced new listings. However, we are seeing a strong real estate recovery, and this is resulting in lower print campaign revenues with properties currently selling extremely quickly. More on this a little later. International travel has been a large advertising category. Cruising, in particular, we're seeing growth in local market travel. However, this is not enough to offset the international spend. Automotive remains in the top 5, but there are 2 different trends in the market. Firstly, premium brands have reduced spend as they are currently low or even out of inventory. Non-premium brands have seen lower demand with lower overall new car sales volumes. Last week, we provided you with some updated guidance till the end of the year. We continue to see a recovery from COVID-19. Advertising revenues are expected to be down 7% year-on-year in Q4 2020. This is ahead of our original expectations. This has allowed us to reduce our overall net debt. And at the end of September, we were at $50.9 million. Based on our current expectation, we expect to deliver an FY '20 operating EBITDA, including IFRS 16 of $63 million to $66 million and to have net debt of less than $45 million at the end of December 2020. In 2019, we set a longer-term strategy. They remain absolutely relevant today. We are returning the business to growth. We are driving a transition to digital engagement. This is aligned with our digital acceleration guiding principle. And we will be the digital market leader into the future. You'll hear more on these topics throughout today's presentation. Our strategic priorities are clear. The 3 strategic priorities to 2023 will deliver strong shareholder value creation. We will be New Zealand's leading audio company. We will transition the New Zealand Herald to be New Zealand's Herald, and OneRoof will be your complete property destination. Going forward, as part of informing the market and our shareholders, we will provide increased transparency with new divisional reporting. We will move from a consolidated income statement reporting a single division to one which provides more transparency across multiple divisions. David Mackrell will speak more on this a little later. We will also today outline key metrics and scorecards that we will report against over the next 3 years. I'm really excited by the focus and momentum that we have built at New Zealand media and entertainment. We are a leading integrated media company, and we want everyone here. As I mentioned earlier, we'll focus today's presentation on our 3 strategic priorities: The first of those will be radio and audio, and that's being led by our Chief Radio and Commercial Officer, Wendy Palmer. Let's have some thoughts from Wendy first.

My name is Wendy Palmer. I am the Chief Radio and Commercial Officer here at NZME. My role is primarily focused on commercializing our assets and in particular, the growth of our radio side of the business. What excites me most is the opportunities that we have as a business. We have fantastic assets. We're continuing to drive great growth in both market share and audience share and the opportunity to monetize that is really exciting. The greatest achievement our teams have delivered this year is without doubt, the growth of our revenue. In these really challenging times, it's been incredibly gratifying to see strategies that we've put in place, playing through and working and that we're outpacing our competitors in the market. Thank you, Michael. Radio remains a solid advertising channel globally and locally. Globally, radio's share of advertising has remained relatively stable at around 6% of total advertising spend for the last 5 years. This compares with radio here in New Zealand, which currently sits at 10%. New Zealand's radio has always outperformed as a share of total advertising spend due to its higher percentage of local revenue and lower dependence on agency dollars. New Zealand's radio market revenues are stable. New Zealand's radio advertising market is stable at around $260 million, and this has been the case even through the period of lower business confidence across 2017 to '19 where radio was able to hold its own. 2020 has obviously been impacted by COVID, but we are definitely seeing our current revenue run rates improving, which is very pleasing. The commercial New Zealand radio market is a duopoly, and barriers to entry for any major third-party are very high. Broadcast continues to dominate radio consumption. In the U.S., Broadcast radio is about 2/3 of total radio consumption. That excludes online streaming of broadcast radio content. In New Zealand, broadcast radio has grown to around 3.4 million New Zealanders, which is 84% of the population aged 10 plus. In-car listening trends in the states are affected in New Zealand, where most radio listening is in the car. With broadcast radio listening heavily weighted to in-car listening, it's important to note that New Zealand has one of the highest car ownership rates in the world. Digital audio is a revenue growth opportunity. Both digital audio and podcast listening have experienced rapid growth. Global digital audio advertising revenue is estimated at USD 4.6 billion, which equates to 10% of audio advertising revenues. Podcasting makes up USD 1.5 billion of that number, 35% of the total digital audio advertising revenue. New Zealand digital radio consumption is following global trends. iHeart Radio represents the majority of New Zealand's digital radio revenue. iHeart also attracts the largest radio streaming audience in the country. Our overarching goal for NZME is to be New Zealand's leading audio company. There are 3 pillars to the audio strategy, create New Zealand's best local audio content, grow broadcast and digital reach, and grow market revenue share and digital revenue. We will measure our performance against this scorecard. Our total share of audience currently at 36% has a goal of growing by greater than one share point per annum. Our share of revenue currently sitting at 42%. We also have the goal of growing that by greater than one share point per annum and increasing our digital audio revenue from 2% to 5% by 2023. Let me take you through our first pillar of the audio strategy, create New Zealand's best local audio content. There is an opportunity to grow our core demographics. This chart shows you our brands in purple and our competitor brands in green. You'll see the clear opportunity we have in terms of audience growth. We're going to be the station of choice in each format. In quarter 4 of last year, we commenced a review of our music brands with the goal of capitalizing on the audience gaps you saw on the previous slide. Our overarching goal is to be the station of choice in each format. Across the first 2 quarters of 2020, we have made significant changes to our programming and music formats as well as creating 2 new networks. This work has resulted in our portfolio covering all core demos with brands and audiences now standing shoulder to shoulder. We will continue to identify, attract and retain the best talent. As well as delivering a complete portfolio format reset by July 2020, we delivered major changes to our talent lineup. This involves both realigning our existing people with our new formats and positioning, those are the ones circled in black, and making some key recruitments, those in purple. As you can see, the only brands with no change, were the highly performing ZM and ZB. In the case of ZB, we had made a number of changes in 2019 with new morning, afternoon and drive shows. The early feedback has been outstanding. Social engagement is higher and momentum is building in radio audience measurement. For those of you who know the New Zealand media landscape, you will know that this is an incredibly strong lineup. The content changes implemented to date will drive audience growth in the key 25 to 54 demographic. This grid shows how we can close the gap in this key demo, which will drive incremental revenue from our agency partners in particular. We will continue to cement ourselves as the leading local podcaster. Our catch-up podcasts, which feature the best of our broadcasters and shows, dominate iHeart podcast listening. And as you can see, our total podcast audience is growing rapidly with a record 1.6 million listeners in September of this year. Our second pillar is to grow broadcast and digital reach. We will extend national reach through iHeartRadio, strategic frequency acquisitions and investing in local content. New Zealand is the most deregulated radio market in the world, which makes us the most competitive. We have, and will continue to make changes to ensure that high-performing brands are on full powered FM frequencies and optimization is ongoing. IHeartRadio complements our terrestrial network and provides nationwide coverage, extending our audio reach across the country. This in turn will help to shore up the frequency get and balance. We will accelerate iHeartRadio utilization, including cross-promotion across all of NZME's platforms. iHeartRadio continues to go from strength to strength, being the leading audio live streaming platform in New Zealand. iHeartRadio's weekly reach has experienced significant audience growth over recent years, and now represents 10% of NZME's terrestrial reach. Maintaining this momentum using NZME's platforms to promote iHeartRadio is key. Overt promotion and integration across all NZME radio brands on air and on iHeartRadio, has made iHeartRadio a household name, and we will continue to accelerate this growth. We will maximize the distribution of content across multiple platforms. Audio content now extends to video, social, mobile and live content. Our next initiative to grow broadcast and digital reach is to maximize the distribution of this content across multiple platforms. We will ensure our content is easily discoverable wherever the audiences are to grow strong online followings for our brands, shows and talent. Our third pillar is to grow market revenue share and digital revenue. Regional New Zealand represents a real opportunity for NZME. NZME's current revenue share has been growing since 2018 and is gaining momentum with September 2020 on a pleasing 42% share. Our revenue share outpaces our audience share in all measured markets other than Regional New Zealand. We will continue to enhance our sales capability with the best sales talent. We are making sure we are recruiting and retaining the very best sales talent, focusing on culture, best practice and reorganizing our commercial sales infrastructure to ensure a seamless customer experience. Our non-metro regions will be a key area of focus as an opportunity for revenue for NZME. Our third initiative to drive revenue is to further leverage our multi-platform position. Since 2018, we have grown our multi-platform revenue to 39% of the total, and we're continuing to drive opportunities in this area. I've included a great case study of work that we did with DairyNZ. The benefit our customers get from maximizing reach and value across our integrated platforms is demonstrated by work we have done with DairyNZ. The brief identified a broad and ambitious target audience, essentially all Kiwis, and the success of this campaign relied on generating momentum by scale. Our channel selection was therefore wide, targeting a variety of demographics to reach a broad spectrum of New Zealanders and by using the full suite of NZME platforms, we provided a formidable campaign that met client objectives around shaping a conversation and changing customer behavior. Less than a year after the Vision is Clear campaign started, research showed we had already reached their 3-year goal. The final initiative is to lead the industry in digital audio monetization. As advertisers are looking for more engaging ways of interacting with audiences, digital audio provides an ever-growing number of unique opportunities. NZME leads the New Zealand market in digital audio ad technology. Keeping at the forefront in this area is critical to maintaining our market-leading position. Radio is a simple industry. It is here to maximize audience and advertiser return. As I said at the beginning, this is the scorecard we will use to measure ourselves against our goal of being New Zealand's leading audio company. [Presentation]

Thank you, Wendy. Just a reminder that all the executive team will be available at the end of the session for a Q&A. We're now going to move into our publishing strategy, which is split into 3 separate sections: the first is going to be covered by our managing editor, Shayne Currie. First, a few thoughts from Shayne.

I'm Shayne Currie. I'm the managing Editor of NZME, so I'm responsible for 300 journalists and the editorial staff around the country. We're at record audiences. And that's as a result of all the major news that's happened, but it's also a result of the incredible work that's being done around the business and around the country, not just in our newsrooms. We're being there to inform and comfort our audiences, also entertain and making sure that we're offering a fair and balanced view of what's been happening, not just here in New Zealand, but around the globe and the importance of a trusted news media is more vital than ever. Thanks, Michael. Thank you, everybody. It's a privilege and an honor to be here today to share with you the next 3 years in our journey here at NZME, not just the New Zealand Herald, but across their news platforms generally. And for the last 157 years, the New Zealand Herald has led the charge in the New Zealand news environment, fighting for and on behalf of our readers and audience and also holding the powerful to account. And we see ourselves here for at least 150 more years. But today is all about the next 3. And in that respect, there's 3 key pillars to our publishing strategy. I'll be talking about our audience generally, before Matt and Laura take on the subscribers and advertising pillars. So this is us today. The New Zealand Herald and the NewstalkZB are our leading news platforms, and across 'Eua, we're talking to more than 2 million New Zealanders. And of course, NZME generally, with 3.2 million audience overall. Across New Zealand, we've got news journalists and broadcasting staff everywhere led by, as I say, the New Zealand Herald and NewstalkZB, our 5 regional daily newspapers. We're a 24/7 operation. And just in the last 12 months, we've been really proud to team up with a lot of other strong New Zealand media operators to help us cover new audiences and build our strength across cultural, social and geographic gaps. So this is our audience today. We're New Zealand's largest news website, and we're really proud that we overtook Stuff in the last 2 months to be the biggest and most popular news website in this country. But we know there's also opportunities. While we're #1 in Auckland and around much of the North Island, there's a huge potential for us in Wellington and Canterbury. And just recently, we've invested in new journalists and digital production staff to ensure that we become the #1 news website right across the nation. The role of journalism has never been more important, and that's been illustrated this year, of course, with the one in 100-year pandemic. With COVID-19 also came the media's role to ensure that it gave its audiences advice, information and led the discussion and debate over our response. And at the forefront of that, nzherald.co.nz led the charge here in New Zealand. What you're seeing here is the corporate reputation index survey by Colmar Brunton, and that had nzherald.co.nz coming out on top in terms of any businesses that offer useful advice, information and encouragement, and we're really proud that we're there. We are now more in tune with our audience than ever before. We know what they're reading, when they're reading, and importantly, how they're reading us. And as the chart shows here the incredible rise of mobile over the last several years and beyond has been incredible. That gives us a really good ground base to which to build our strategy for the next 3 years, more of which I'll talk about very shortly. So under the #1 news brand for all New Zealanders, there's 4 key important points that I'll make before I hand over to Matt. And that is growing our audience overall, how we tell our stories, particularly on the small screen, the rise of our premium digital subscription service and what's to come, and of course, the tools and technology that allow our journalists to tell those stories in the best way possible. And with that, we're replacing the New Zealand Herald front and center. We want to leverage New Zealand Herald as New Zealand's Herald, building on the incredible last 157 years and building that deep connection that the Herald has here in Auckland and around the North Island with the rest of New Zealand with our communities and our regions. We have 5 incredible regional daily newspapers. And very soon, we'll be scoping the New Zealand Herald brand moving even more strongly in terms of supporting those newsrooms, the journalists and ensuring that those local communities and regions are served with the very best journalism possible. And of course, the power of NZME, which you'll hear throughout our presentations today is the ability to cross-promote and ensure that all of our products are feeding off one another, that we're moving audiences between not just the Herald and our news sites, but beyond to the likes of OneRoof and to other platforms. And with the move from New Zealand Herald to New Zealand's Herald, you'll see very soon that growth in our Wellington and Christchurch and South Island audiences, generally, we've invested in more journalists and more digital staff, as I mentioned, in those regions. We're #1 in New Zealand. We're #1 in Auckland. And we're #1 in many North Island centers. And it's very soon, we aim to be #1 in Wellington and in Christchurch and around the lower South Island. And with that also, we're proud to show off today our new localized homepages to really lift engagement and audiences. Here's an example of our Christchurch homepage as it currently stands. So the top 22 stories, all with a heavy South Island or Christchurch focus that allows our audiences to tune directly into this landing page rather than necessarily going to the home page of the NZ Herald website generally. So this page features a lot more local stories from those regions, but it also carries a lot of the NZ Herald Premium content so that we're building not just our mass audience in the South Island, but also our overall subscription audience, which is a key part of the strategy you're hearing today. And then with our mobile storytelling, as I mentioned earlier, more than 80% of our audiences are now reading us on mobile phones. We know that we have to arm our journalists with the best skills and the best tools to be able to tell those stories on the small screen. That includes video storytelling, data interactives, and of course, the way that we write those stories, knowing that many of our audience members might only be reading us while they're on the move. And then saving the longer form pieces, the investigative journalism for the appropriate times of day. And of course, this year, we've launched a new app, and that is a much more personalized experience, readers, such as business Chief Executive can choose business premium, whereas a sports person or a fan may want to read more about the All Blacks. They now have the power at their fingertips with our new app to decide what news they see on that opening screen. And then another key part of our strategy, of course, is our premium storytelling. And the launch of digital subscriptions in April 2019 has been such a huge boost for our business and for our newsrooms, in particular. We know in our first almost 2 years of operation, how strong business and political and investigative journalism has led the charge on digital subscriptions. Just recently, we've invested in several more business journalists for Duncan Bridgeman and the team to ensure that our business journalism is at the top of its game in New Zealand. Today, we're excited to announce that we're scoping new content verticals, in particular, food and drink, sport, puzzles and quizzes. We know from overseas experience that specialist content verticals really help drive subscription numbers over and above the investigative journalism, the analysis that has worked already so well for us in the last almost 2 years. And as well as our new partnership that we've announced today with MÄori Television, you'll see more people teaming up with us in the next wee while to ensure that we've got New Zealand covered, both culturally and socially and also across the entire country geographically. And with those changes, we've also teamed up with The Washington Post an incredible ARC system that gives our journalists the best story telling tools around the world. And just as an example of what we've seen already as a result of that partnership with ARC. Obviously, this year, we've launched our new app and with that premium subscriptions. We've got a new content recommendation engine that allows our audience to move on to stories that are relatable to them personally. And we have a new, what we call a URL restructure, which means that people can find us much more easily and quickly on the likes of Google. Into 2021 and beyond, there's even more exciting projects ahead, a new video destination on nzherald.co.nz. The new subscription and content vertical products that I mentioned earlier, including food and drink. The new local sites, which really personalize the news for local communities and regions. You've seen an example today of the Christchurch homepage. Very shortly, you'll see that being launched in Wellington. And editorial automation, and that's one of the most exciting advances of all, that artificial intelligence that frees up our own journalists to focus on their own storytelling and specialized content. These are all exciting things to take us into the next 3 years and beyond. And I wanted to finish my input in today's presentation by illustrating to you the power of NZME. And more specifically, what we did on election night, just a few short weeks ago. Using the likes of Heather du Plessis-Allan, Mike Hosking and our incredible journalistic talent, NZME provided a service and content that no other media company in New Zealand can match across digital, video, print, social and, of course, our brilliant radio stations. We brought the election night live into the homes and into the mobile phones of our audiences. And the audience results were incredible, almost 9 million page views in a 24-hour period from Saturday across to Sunday. It really did show off the power of this company and the huge potential that we have for future events, such as the election and other big breaking news. So here's an example of what happened on election night. [Presentation]

You've just seen a clip of some of our coverage that happened on New Zealand's election just a few weeks ago, I was lucky enough to be here. The atmosphere was phenomenal, and I was so pleased with what the team put together. Now though, we're going to move on to the second pillar of our publishing strategy. With me is Matt Wilson, our Chief Operations Officer, and he's going to tell you a little bit about his thoughts right now.

I'm Matt Wilson, I'm the Chief Operations Officer at NZME, and I'm responsible for all of the operations, obviously, which includes printing, distribution functions, call centers and responsibility for our subscriber bases, both print and digital. The real thing over 25 years that keeps me going, I guess, is the influence that our brands have on everyday Kiwi lives. The greatest achievement or the things I'm most proud of, I guess, is the company's response to COVID. After that, really, it's been the growth of our subscriber bases and the readership in our audiences and how they've taken to our print products this year. And digital has been hugely rewarding. I'm very proud of the work that the teams have done. The second pillar of our publishing strategy is to become subscriber first. Subscriber first means putting the subscriber at the center of our business. By being subscriber first, we can grow our digital subscriber base to exceed that of our print in 2023. We can finish that year with over 210,000 subscribers and achieve more than 15% of New Zealand households subscribing to the New Zealand Herald by 2025. To achieve this growth, we need to focus on both maintaining our print subscribers and accelerating our digital subscriber business. Looking first at print, I'll provide you some background information, and then the strategies on how we will maintain our print subscribers. Print reader revenue is a combination of retail sales revenue and subscription revenue. As you can see from the graph on the left, retail revenues have consistently declined over the last 5 years. The impacts of COVID-19 this year have accelerated the decline with sales to hotels and airlines being significantly reduced. Subscriber revenue is now 75% of our total print reader or circulation revenue. And looking at the graph on the right, you will see that for print, reader revenue exceeded that of advertising in 2018. Looking closer now at subscription revenue, you will see from the graph that print subscriber revenue has been stable over the last 5 years. Yield improvements have largely offset volume decline. Subscriber volumes have also stabilized this year, which is positive. And currently, the Herald has more print subscribers than at the start of the year. Providing some background into the makeup of our print subscriber base, from the pie chart on the left, you will see that over 81% of our subscribers received the paper on 6 or 7 days of the week. These subscribers have a strong daily habit and high engagement and retain relatively stronger than those on less frequency. 5-day a week subscribers are largely businesses and 1- to 3-day subscriptions are predominantly weekend combination subscriptions. The pie chart on the right gives a breakdown of our subscriber base by title. You will see that the New Zealand Herald makes up over 2/3 of our total subscriber base. There are low levels of duplication across our subscription base, which will assist the Herald with its brand extension plans that Shayne outlined earlier. That concludes the background information on print subscribers. Looking forward now, we have 3 strategies on how we are going to maintain our print subscribers. We're going to continue acquiring customers, improve customer retention and manage customer yield. Focusing first on acquisition. Newspaper subscriptions are typically sold rather than bought. That is an important distinction. To continue acquiring, we need to constantly refine and improve our multichannel sales program, which balances above the line price and premium offers with below the line direct acquisition from prospects that take up a 4-week subscription trial. Further to this and following a successful trial this year, we'll be offering all individuals who take up a 4-week print subscription, a free premium digital access as well for the period of the 4-week trial. The trial showed increased telemarketing sales conversion for print only and digital-only sales from those customers who prefer that medium only. So making sure we maximize revenue opportunities from all of our marketing activities across print and digital. The second way we will maintain our print subscribers is by improving customer retention. As print subscriptions are typically sold rather than bought, they normally experience higher initial churn. The table on the left provides annual retention rates by subscriber tenure. To improve retention, we will continue to reduce subscription moments of truth by improving self-service options and customer service standards, including the all-important distribution. And by advancing our subscriber onboarding program to reduce early churn. We will also continue to develop a skilled and focused retention team within the call center. This year, we have increased our save rates from that team to over 45%, and we believe we can continue to improve this. Lastly, we now have over 53% of our eligible print subscribers activating their free premium access. These subscribers churned at 8% lower than those that have not. We will continue to focus on increasing the numbers that have activated their free premium access. The third area of focus to maintaining our print subscribers is continuing to manage customer yield. As you can see from the graph, we have been able to lift yield to the average subscriber to help offset volume loss and maintain revenue. We have achieved this and can continue to going forward by a sophisticated yield management program, which is managed in conjunction with pricing specialists, Mather Economics, in the United States. The program utilizes demographic tenure and service standard customer data to determine the optimum price for the individual subscriber. Further improvements to the program can be made by adding premium digital engagement into this pricing algorithm. By continuing to acquire improving retention and focusing on continual yield management, we can maintain our print subscribers. The second major focus area and an exciting area of growth for NZME is to accelerate our digital subscriber base. Firstly, I'll provide some background information on our digital subscribers and then the strategies that will take us forward. Looking first at the global market. The New York Times well-known for their subscriber success story now have in excess of 6.5 million subscribers. The graph on the right is of the New York Times reader revenue since 2011 and shows an increase of 53% through a combination of maintaining their print subscribers and digital growth. 6.5 million is a significant number. Looking at market penetration, it equates to circa 2% of the U.S. population or 5% of all households in the United States subscribing to the New York Times. None of these metrics are perfect as the New York Times as a global brand. Closer to home in Australia, News Corporation have seen their digital subscriber numbers increased 25% this year. Combined, they reached 7% of Australian households or 2.6% of the Australian population. Versus unique monthly audience, which is another measure, they have both all achieved around 4% penetration. Looking further into global markets. Subscription penetration versus digital audience, and FTI Consulting study in 2019 benchmark subscriber penetration rates. The key findings, as you can see on the graph, says that sites with smaller audiences typically have higher subscription penetration versus sites with larger audiences. Our monthly audience fluctuates between 1.7 million and 1.8 million. FTI Consulting established a target benchmark of between 1.5% and 2.5%. The data -- this data is pre-COVID, so we can expect both audience numbers and subscriber numbers to be greater than when surveyed. The orange star towards the top of the graph represents our current subscriber penetration for the total New Zealand Herald subscriber penetrations. And this strong result was recognized in September this year by the INMA Readers First Initiative. To provide further background on the relative performance versus the global market, we can take you through further detail on the audience funnel. Piano, which is one of the largest providers of paywall software globally, benchmarked audience funnel performance across 223 of their clients earlier this year. Piano identified 6 components to the audience funnel from the casual readers on the left of the image, which is called fly-bys, to successfully renewed subscribers with high engagement on the right. Key takeouts from these benchmarks, the New Zealand Herald is in the top quartile performance for 3 out of the 6 benchmarks. They are the percentage of active users, percentage of registered users and percentage subscribed. Further opportunities for us exist in the percentage of fly-bys or casual readers, the percentage of readers who are exposed to offer and the percentage that renew after 1 month. So performing well, but room for improvement. Looking further into our growth and digital-only subscribers since our launch 18 months ago. We currently have 93,000 total subscribers, of which 49,000 are digital-only. The graph relates to the digital-only subscribers, and it outlines progress to date and the events that have accelerated the growth, news events, great content, increased capabilities such as launching corporate subscriptions and in-app subscriptions this year and new offers have all made a difference. The final background slide is on yield. As you can see from the graph on the left, we have successfully maintained yield while our volume has grown. The pie chart on the right gives you a snapshot of our 49,000 digital subscriptions and the makeup of our digital subscriptions with annual subscribers continuing to remain around 1/3 of all individual subscribers. That concludes the background on digital subscriptions. Looking forward now. The 3 strategies to deliver digital subscriber acceleration: continuing acquiring customers, improve customer retention and managing customer yield. Firstly, we will focus on continuing to acquire customers. A survey this year from the Reuters Institute across the United States and the United Kingdom identified the 4 main reasons why people pay for online news services. They are distinctive journalism, convenience, purpose and value. We will continue to convert from improved quality and increased quantity of premium content, as outlined by Shayne earlier. We will also increase conversion by utilizing customer insights and developing enhanced personalization. And while New Zealand's paid online news market is less mature than many others, we will be able to capitalize on increasing demand and propensity to pay as seen in other markets. We will also continue to acquire customers by enhancing the performance of our audience funnel. This slide shows the diagram of a typical audience funnel with total audience at the top and subscribers at the bottom with increasing engagement as you come down the funnel to subscribe and stay subscribed. The key tactics that contribute to increased reader engagement are: developing new audience, as outlined by Shayne and marketing the content to bring in new readers; to introduce personalization of content within the home page, within the app feed and within newsletters; driving increased reader registration and newsletter uptake; integrating the propensity to pay subscriber data into the paywall also so we can target or personalize offers to individual; and improve the registration and subscriber flow to a best-in-class mobile experience, utilizing social sign-on and Google One Tap integration to reduce friction. All of these tactics and continuous testing and refinement ethos will ensure we continue to acquire. The second way we will accelerate our digital subscriber business is by improving retention. The table shows the relative different retention rates for monthly and annual subscribers at different tenure levels. Our digital subscriber base is very new, so total churn and retention rates are heavily skewed by the volume of relatively new subscribers that typically churn at higher rates. We are very happy with the retention levels for subscribers that have been with us for more than 6 months. Retention for annual subscriptions is nearly 15 percentage points better than that for monthly subscribers. The focus areas to improve retention are building the reader habit and engagement in the first 100 days. We can do that by developing subscriber on-boarding on-site and triggering messaging and content to subscribers to improve their engagement. Longer introduction periods and a greater focus on selling more annual subscriptions will improve retention. Developing a propensity to churn model that automatically triggers activity to improve engagement will also help. Reducing involuntary churn has also been identified as an area for improvement, focusing on failed credit card take renewal process will help reduce overall churn. And improving the core value proposition, more premium content, improving the subscriber experiencing, introducing commenting in story and subscriber-only events will also help improve retention. The third and final way we will accelerate our digital business as through ongoing yield management. Our initial focus has been on building volume. We have done so to date and maintain yield. The most immediate growth opportunity are our corporate subscriptions, where yield is managed annually based on each corporate's usage data. And as usage increases within the corporate, so too will the revenue. Print and digital bundles are also an opportunity to add into the Mather yield management program. And lastly, we would be able to introduce yield management programs similar to that to our print subscriptions on digital subscribers using actual engagement data to optimize volume and yield. At present, we have no plans to do this in 2021, while we continue to build volume. So by focusing on all subscribers, we can maintain our print subscribers and build our digital subscriber base. We believe digital subscriptions will overtake print in 2023. And by 2025, more than 15% of New Zealand households will be subscribing to the New Zealand Herald. Digital subscriptions will be the significant majority of our total subscriber numbers by the end of 2025. We will be delivering on our promise to become a subscriber-first publisher.

Thanks, Matt, for sharing us why it's so important to look after the subscribers and grow those into the future. We're now going to be joined by Laura Maxwell, our Chief Digital Officer. She's going to cover the third pillar of our publishing strategy. But first, let's hear some thoughts from Laura.

[Foreign Language] I'm Laura Maxwell. I've been at NZME for 7 years, and the past 3 years in the role of Chief Digital Officer. What really excites me about the role of Chief Digital Officer here at NZME is that no 2 days are the same, that we operate in a New Zealand environment, that we're very much influenced by a global ecosystem. The common theme in all our thinking and the success of what we're achieving is because we put the customer at the center of what we do. So we're thinking about what does the customer need, what problem are we solving and that really drives our thinking and our strategy. I'm going to talk to you today about our brand-safe and scalable destination for monetization as part of our publishing strategy. As you can see here, we are excited about the scorecard that we're putting in front of you today, which shows that digital will be the predominant revenue advertising source for publishing in 2025. Now let me take you through where the business is today and how we'll deliver that strategy. The New Zealand advertising market has shifted significantly in the past 5 years, as you can see from the graph on this slide. It's moved away from newspapers and towards digital channels. And the digital number here shows the digital revenue for all New Zealand digital advertising revenue, including that, that goes to the global platforms across social, search, classifieds and display. You can see from the graph that the move was swift and disrupted core advertising revenue streams for NZME. Why this move was so significant was that the global platforms initially delivered superior audience targeting and buying methods compared to local publishers. However, in the past couple of years, the pendulum has moved back towards trusted local content creators for both audiences and the aligned advertising revenue targeting these audiences. Looking here within the total newspaper and digital advertising revenue market, you can see we've adapted to the external environment better than our competitors, and this is evidenced by our growth in market share across both print and digital advertising revenue sections. We moved first to implement a range of technology and tools. We've invested to improve our attractiveness to advertisers and move closer to parity with the global platforms with respect to buying automation and audience-targeting ability. The advertisers have responded by moving their campaign spend to NZME. And in particular, our investments in the data management platform, our programmatic trading desk and native content solutions have resonated with the needs of the advertiser. In parallel, our audiences have moved to our trusted quality content and back to our print media, enjoying the mix of reading breaking news online and the big reads that they can consume in an offline and unplugged setting. This creates the perfect canvas for advertisers to place their native content with them. To give you a view of how we've invested in our data and understanding our audiences, this slide shows you what we offer advertisers right now through our investment in our data management platform, our data lake and ad-serving technology stack. At the simplistic end of the audience segmentation continuum is demographic, geographic and content-specific targeting, where segmentation can be inferred and served to anonymous users. This is something we offer at real scale at NZME for New Zealand advertisers right now. At a more sophisticated level, however, when we have understanding of the advertisers' sales funnel and ideal customer, we can then find the behavioral signals across all of our NZME sites, where audiences show propensity to purchase, and we can then target the advertising messages to these people specifically. Not surprisingly, this type of campaign delivers better results, and so advertisers are prepared to pay a premium for this type of targeting. A final point to note on this slide is the quote, where content and environment are critical success factors. This plays directly to our strength of being a local trusted content creator, and so knowing the mindset of the customer when being exposed to advertising is more important than cheap clicks in getting our results. So NZME currently provides a brand-safe and scalable environment for its advertisers. However, to continue to evolve this into the future, we have 3 strategies: leveraging audience insights; best technology and tools; and brand-safe monetization. And I'm going to take you through each of those strategies in more detail. The first of the strategies is leveraging audience insights. The power of the NZME network is evidenced on the graphic on the slide, which shows the range of data that we currently collect from our audiences throughout the country in online and offline environments. You can see that there is a myriad of data points that we use to find these audiences and serve the best advertising messages to them at the right time. Single or dual media channel competitors simply don't have data sets as rich as we do at NZME across our multiple channels, which is an important differentiator in the value that we can provide to an advertiser. In addition, we have a strong direct-to-advertiser sales channel, so building local solutions for small to medium enterprises across digital and print environments is an important part of our data and monetization strategy. A key component to the leveraging our audiences strategy is to move from anonymous to known and authenticated audiences and customers. Matt referred earlier to the launch of commenting and other subscriber tools that will require people to be registered and signed in. Uptake of these products will lead to more people being signed in, and therefore, a greater ability to create larger authenticated audiences and improve the relevancy of ad serving. Again, advertisers will pay a premium for this type of targeting. So building the audience data set through declared data like which newsletters you've subscribed to, what houses you're looking at on OneRoof, and what radio stations you're listening to on iHeartRadio. And then meshing this with inferred data, like what articles you're reading and where you have set your weather on the website, allow us to create a really rich data set for advertisers that we can serve their advertising messages to. None of this would be possible, though, without the right technology and tools. As I mentioned earlier, we do have an air-to-the-ground with respect to trends, and it's imperative that we continue to involve our technology stack and our capability to understand and monetize our audience. We will transform our data lake to a customer data platform, which gives us the ability to harness and leverage our single view of the customer. Also, contextual targeting or aligning advertising messages to content and context is achieved with a tool called natural language processing. And whilst we have initiated this tool, we will accelerate its implementation into the future. Shayne mentioned earlier how important mobile is to our audience, and advertisers now demanding specific products that operate and display seamlessly in a mobile environment. And whilst our product set across mobile app and web is comprehensive, we will continue to develop this further. Small to medium enterprises have enjoyed the efficiencies of being able to directly book their advertising campaigns through self-service portals on the main global platforms. At NZME, we're currently trialing a range of options to allow advertisers to purchase our audiences in a new range of ways. We view this as an important alternative to utilizing our sales experts to create great advertising campaigns for advertisers. And lastly, the third strategy is to ensure we continue to provide a brand-safe environment for our advertisers. Never before has trust been so important. And the trusted local brands that we have here at our NZME's table provide a brilliant halo for other brands to advertise for them. The data governance framework we have established ensures that we are compliant and transparent with the collection, storage and utilization of data. We take data security seriously and respect the value exchange of our audience and advertisers. We have a large audience spread throughout the country. So to make it easier to purchase, we will be creating a range of synchronized print and digital packages for our customers to access our audiences easily. These will be based on the insights that we have of how our audiences operate on our sites and when and where is the best place to serve them an advertising message to deliver the best result. Content is at our core. And our expertise in creating content that delivers messages, creates emotional and logical responses and delivers it amongst an enviable range of channels and brands is an advantage where we'll be leveraging further. We are home to influencers throughout a wide range of audience segments and our talent behind and in front of the keyboard, the camera and the microphone are integral to ensuring we continue to develop great native content propositions for our advertisers. And the third subtrend is personalization, which looks back to my earlier commentary regarding authenticated audiences and our ad-serving ability to connect them with messages, whether they're on the couch or on the move. So the culmination of the monetization strategy for publishing, leverage audience insights, best technology and tools, and creating a brand-safe environment for our advertisers will result in an inflection point in 2025, where digital advertising revenue is greater than print advertising revenue in publishing.

That concludes our publishing strategy with Shayne, Matt and Laura, really telling us how we're going to become New Zealand's herald rather than just the New Zealand Herald. Laura is going to stay with me now, though, and she's going to talk to you about OneRoof, your complete property destination.

New Zealanders love property and housing is a central part of the New Zealand economy and accounts for around half of the assets of most New Zealand households according to the Reserve Bank. In 2020, the real estate market after a couple of sluggish years was really starting to build momentum until COVID-19 hit and then ensuring lockdown basically brought the market to a halt. In May, even with a surging property market out the back of lockdown, you can see that for the past few years, that annual listings have been a negative growth. And even now with a very active property market, new listings remain a challenge for the market. The real estate vertical continues to be the #1 vertical for NZME, and we generate revenue across print, radio and digital channels right throughout the country. In the graph on the left-hand side, you can see the mix of revenue, and you can also see the trend line on the top, which shows the annual listings in the market each year. This revenue on the left-hand side is all the real estate revenue that NZME generates. But on the right-hand side, you can see we've broken it down into segments so that you can see the subsegment of OneRoof real estate, which is OneRoof print, products and also oneroof.co.nz. And for today's presentation, I'm going to focus on the OneRoof real estate products, which are the 2 orange segments on the slide. Growing the OneRoof business has always been based on a foundation of ensuring that we have listings in markets. And the graph on the left here shows you that we have achieved the most residential for sale listings in Auckland. On the right-hand side, you can see where we -- our listing share sits amongst our key competitors in the market and shows you the opportunity that we have to grow that listing share outside of the Auckland marketplace. Of course, growing a great listings business means we also need to grow a really large audience. And as you can see from the statistics on this slide, we're really achieving some goals here. In September, you can see from the results that our audience growth was 92% year-on-year for oneroof.co.nz. And in addition, month-on-month for September was the fastest-growing real estate site in New Zealand. Apart from the other stats on this slide, one I'd like to point to your attention is the 1 million-plus e-mails that we send each month to audience members who've opted in to receive information on listings update, data and market commentary, and this forms a solid foundation for building a loyal audience user base. You can see here on this slide that the audience is a strong #2 in market. And if you think where we were a year ago, we were pushing really hard to achieve this, and we've achieved this here in August and September. On the right-hand side, you can see our prompted awareness growing both in Auckland and nationally. You can see, though, that we've got a stronger penetration in Auckland, which is where we've really focused on growing the audience for oneroof.co.nz. It's heartening too to see that our audience reliance on NZ Herald has really reduced as equity in the brand of OneRoof has grown amongst the New Zealand population. Diving deeper into OneRoof revenue can see the mix of print and digital plus the listings and advertising revenue that OneRoof currently generates. Overlaid on the top of the graph is the annual listings numbers, and you can see this follows the trajectory of the revenue for OneRoof. Our print revenue share has increased to 50%, and the graph shows that the digital assets are providing a growing offset to the Print revenue decline. The listings revenue, where we're focused on building Auckland first shows the listings upgrade percentages we're currently achieving, which is 20% in Auckland. The media advertising packages we sell cover all 3 channels and are available for agents to build their brands and for advertisers to connect with OneRoof audiences. Looking into listings upgrade revenue further. You can see that it's skewed to Auckland. And this is no surprise given that we're focused on Auckland to build listings, foundations, a large engaged audience, and obviously, the revenue has followed that. It does also highlight, though, that opportunity for us to grow revenue outside of Auckland for listings upgrades. So that's an overview of where the business currently sits. Now I'd like to take you through the 3 strategies to continue the growth of the OneRoof business. There's 3 pillars to the strategy. The first is strengthening the core residential listings business. The second is be indispensable to agents. And the third is expanding the portfolio. You can see the scorecard by which we'll measure our success. And this ranges across residential listings, audience, listings upgrade and our revenue mix between digital and print and the targets that we will achieve in 2023. Firstly, I'll take you through the strategy of strengthening our core residential listings business. We will utilize NZME's sales capability throughout the country to reach our goal of 100% of listings. We'll also continue to leverage our solid agency relationships and become an essential place for vendors to place their listings and for audiences and property seekers to visit. The OneRoof Local Magazines create a local print complement for the digital listings on the OneRoof platform also. The NZME audience is huge, and we can leverage this to grow our audience outside of Auckland and to reach our goals for 2023. We're focused predominantly on growing the Auckland market, and this has resulted in 50% of the OneRoof audience currently residing in Auckland as well as utilizing NZME's range of platforms across radio, digital and print. We'll also use OneRoof Local Magazines as they're an excellent marketing tool to get the OneRoof brand into the hands of new audiences. A unique advantage of OneRoof is that unlike any other property portal, we connect with audiences at all stages of their property life cycle, and some of these are highlighted on the screen for you now. Our editorial team and rich data sets are 2 strategies for use and also our marketing automation and AI tools, which will drive audience acquisition and engagement with OneRoof. In addition, we'll focus on creating more registered and signed-in OneRoof audience members as this will allow us to connect in a more personal way with relevant products and relevant advertising messages. All basic listings are free on OneRoof, so we generate listings revenue through selling upgrade packages. To grow revenue from listings in the future, we will increase the sell-through of our current products, create new products and also extend our cross-channel products and bundling between print, radio, digital and also our social products for off-network amplification for listings and for vendors. Advertising revenue growth will focus on creating both data-driven products and new native content opportunities, which brings me to the second strategy of being indispensable to agents. There are 2 ways that we'll become indispensable to agents, and the first is being able to generate leads. We'll use our data technology to find and understand our audience. And by understanding our audience, I mean, looking for potential buying signals or signals that a homeowner may be looking to put their property on the market. We currently align agent advertising products to suburbs. However, in the future, we will create micro data sets, which will improve the relevancy of the leads that agents will pay for. The second area of focus for agents and being indispensable to them is to help them build their brands. Our natural content strength provides a range of canvases for the agents to tell their story and build their brand. You can see we currently have articles, video panels, radio show and podcasts as native content platforms for them. But in the future, we'll build more products based on content and context and underpinned by OneRoof audience data. The final pillar to the strategy is about expanding the portfolio. You can see with the graph on the left, our share of listings types compared to the market. And that shows you the opportunity we have to grow the listings verticals outside residential for sale. We'll also provide aligned services for all our property audiences, where it makes sense and where there is a financial opportunity. Finally, our investment in data, automation and AI tools will grow and diversify the OneRoof revenue mix. Our scorecard highlights the results we will achieve for listings share, audience growth, listings upgrade and our transition to digital revenue in 2023 for OneRoof, your complete property destination.

Thank you, Laura. And I'd like to thank Laura especially for the work that she's done with OneRoof. As I mentioned earlier, Paul Maher will be joining us in the new year to lead the OneRoof business, but Laura has phenomenally led the team over the last couple of years to bring OneRoof from a dream to reality. So thank you. I'm now going to be joined with our CFO, David Mackrell. He'll take you through our financial performance to date and where we're looking to go in the years ahead.

Thank you, Michael. As you have seen from the presentation this morning, we have a strong focus on our 3 strategic priorities and what we are doing to achieve these outcomes. Our efforts to date have put us in a position where we have stabilized earnings, improve the earnings margin and strengthen the balance sheet. The chart on the left-hand side shows the revenue performance by division. Prior to COVID, we were on track to stabilize the overall revenue performance in 2020 through growing digital and radio revenues. However, the impact of COVID on the second and third quarter revenue, in particular, has resulted in reduced revenue for 2020. The chart on the right demonstrates that as a result of accelerating planned cost base reductions, we are on track to maintain earnings with an improved margin for 2020. While our business is integrated in many areas, we recognize that it is helpful to understand the performance of the component parts. To facilitate this, we have developed a divisional report showing the performance of our 3 key divisions: audio, publishing and OneRoof. The OneRoof division includes the dedicated real estate products, including the real estate inserts to newspapers with the total revenue making up about half of NZME's total real estate industry revenue. Publishing includes all the newspaper products and the digital revenues generated through the newspaper websites. Where possible, revenues and costs have been applied directly to each division, but where cost pools relate to multiple divisions, these costs have been allocated on an appropriate basis. The table on this slide has been prepared based on the midpoint of our guidance for 2020, and so includes the impacts of COVID on revenues. You should also note that it includes $8.6 million of government wage subsidy and other revenue allocated across the divisions. The publishing business is the major contributor to earnings, with an EBITDA margin of around 19%. While the audio division, which has a higher proportion of fixed costs, shows a lower margin of 14%. The OneRoof performance should be considered in the context that it includes the faster-growing Digital Classifieds business. We have separated GrabOne to show the level it contributes. At 30%, the reported margin is higher than the other areas, but it should be noted that the revenue is net commission revenue rather than gross deal revenue. Cost-saving initiatives in 2020 have resulted in permanent savings of around $20 million per annum. The chart on the left highlights how we have been able to reduce the cost base each year with the most significant reduction through reduced people costs. In addition, there were significant savings in 2020 that were temporary and activity based, which together with the permanent reductions, enabled us to reduce 2020 cost base by $46 million and offset the revenue impacts of COVID. We've covered the 3 key areas of audio, publishing and OneRoof. The other area that we want to talk to is GrabOne. GrabOne is not a core part of our strategic focus. GrabOne was primarily a daily deal site. The chart on the left shows how its core product experiences have been declining over the last few years. So in 2019, we transitioned from a daily deal site to an always-on platform. COVID-19 saw an acceleration in store e-commerce revenues with gross store sales of $12 million compared to $9 million in 2019. While the recent performance has been encouraging, we have reflected on GrabOne's fit with our strategic guiding principles and assessed that it's not a core strategic focus. As a result, we have appointed Grant Samuel to assist in exploring divestment options. I'd like to take a moment just to talk about DRIVEN, which remains a future opportunity. As Michael showed earlier, automotive is one of the top 5 advertising verticals. Hence, we continue to believe that there is an opportunity to grow and expand our automotive site driven.co.nz. The site is established with over 42,000 listings and a monthly audience of 172,000. It is monetized through display revenue and lead generation revenue. However, it is not currently 1 of our 3 strategic priorities for significant investment. Now I'd like to turn to capital expenditure. As the chart shows, we have reduced the level of annual capital expenditure in recent years. This reduction was even more significant in 2020 as we took action early in the year to preserve cash in response to the uncertain impacts of COVID. Looking forward, we expect the capital expenditure required to sustain our planned developments will be between $10 million and $12 million per annum. As a result of achieving each division's strategic objectives, we are targeting improved EBITDA margins across each division. For audio, improved market share on a relatively stable cost base will improve the margin from 14% in 2020 to between 15% and 17% in 2023. For publishing, increased digital revenue streams will improve the margin. And similarly for OneRoof, the continued growth of online listings revenue will be the primary driver of improved margin. Turning now to capital management and our revised dividend policy. With debt now under 1x EBITDA, the Board has considered and revised the capital management plan and dividend policy. The Board determined that a target leverage ratio of 0.5 to 1x EBITDA in the current environment is appropriate. The key revision to the dividend policy is that any payout will be based on 30% to 50% of free cash flow rather than impact. On this slide, you'll see an example of the dividend calculation. This example shows the change to free cash flow as the basis for dividend payout. The example is based on a pre-IFRS 16 EBITDA of $50 million, with the other inputs based on normalized historical performance. The major adjustments to NPAT to arrive at free cash flow is to adjust for changes in working capital and to adjust for the difference between the depreciation expense for the year and actual capital expenditure. The result in free cash flow amount better represents cash available for debt repayment, future investment and distribution. I'll now hand back to Michael for the summary.

Thanks, David. I'd like to come now and talk about the 3 strategic priorities and remind you of the scorecards that we're going to measure ourselves against going forward. We will be New Zealand's leading audio company. We will transition the New Zealand Herald to New Zealand's Herald and OneRoof will become your complete property destination. With regard to New Zealand's leading audio company, we will report back to you and measure on our share of audience and our share of revenue. We will report on our growing overall digital revenues, and importantly, as David just mentioned, an improving EBITDA margin target. For New Zealand's Herald, we're very focused on the number of people who are prepared to pay for the quality of our journalism. Our digital-only subscribers will be greater than our print subscribers. We expect to have more than 12% of New Zealand households subscribing by the end of 2023. In fact, in 2025, we expect digital to be the largest component. Again, we will maintain and improve our EBITDA margins in the Publishing business. With OneRoof, we will have 100% of New Zealand's residential listings. We will reduce the audience gap to the #1 player. We will upgrade 50% of those residential listings to paid, and digital will be greater than print. We'll see strong growth in EBITDA margins over this period. I'm excited by the opportunities to deliver shareholder value. We have strengthened our balance sheet. We are returning the business to growth. We are transitioning our revenues to digital. We are growing our margins. And we've revised our capital management and dividend policy. I believe this will deliver significant value. We are New Zealand media and entertainment. We are a leading integrated media company. We will ensure that everyone's here. Let me leave you with this, and we'll be back shortly for Q&A.

[Operator Instructions] Our first question is from Arie Dekker.

I'd have to come back on if it's only two questions to start with. But look, firstly, let me commend you for presenting your strategy and recent performance in such a detailed way and also the additional visibility you've provided. Just in terms of the market radio for advertising. Obviously, the NPAT for FY '20 has been pretty meaningful from COVID. Can you just provide a bit more visibility on how fourth quarter is tracking in radio? And what your view is on sort of a reasonable time frame for market revenue returning to $260 million on an annualized basis?

Thanks for your early comments there. As you will have seen in our update last week and in today's presentation, Q4, we're seeing advertising revenue at about 7% down on the prior year, consistent with early what we talked about at our half year results. We're seeing digital actually in growth, radio actually very nearly in growth, and it's actually the print that is at the other end, with a negative year-on-year. So we're feeling good about radio, and we're coming in strong to the end of this year. So we are really looking for next year for that to be back into growth as a business.

Great. That's fantastic. Just in terms of, I guess, the visibility you provided on your yield and your goals for digital subscription. Is your view that you can hold yield at $0.50 per day and get to the 180,000 target digital-only subs in 2025? Or alternatively, do you see scope for that to increase as you grow your audience to that level, given that you've been offering attractive offers to get people on initially?

What I might do is pass over to Matt, if it's okay, Arie, and he can give you a little bit more insight as to what we're doing. Obviously, we're very volume-focused initially and then what we will do in the future from a yield perspective.

Thanks, Michael. Yes. As Michael said, our first priority is around volume growth, but you would have seen from the presentation that we have managed to maintain yield at around that $0.50 per day. Going forward, there are some opportunities initially to increase yield in the corporate space based on direct usage data, and then in the print bundled space and then further down the track, but not planning this in 2021 but beyond that to actually introduce the yield management program to our individual digital subscribers that will find, again, the optimal price for those without increasing our churn rates.

And just as a follow-up to that, just because in terms of print, by the looks of what you've sort of outlined there, you're looking to, I guess, essentially stabilize print and digital plus print subs by around 2023, there's not a lot of decline post that. I mean what's your view sort of in terms of as you go through time that gap between a print subscription on a daily basis and the digital and your ability, I guess, to stabilize print while there's a reasonable yield gap between the 2?

Yes. The key difference at the moment on the print decline is actually coming from the retail customer base. As you will have seen that quite clearly, that's where the majority of the volume decline is. And we're really using yield in the print subscribers to be able to offset that from a revenue perspective, which we will absolutely continue to do. I think one of the things -- and Matt, you might like to explain a little further, just around the yield management maybe between the print and the digital and how we're looking to manage the 2 combined together further into the future.

Yes. Thank you, Michael, and thanks, again, Arie. Look, into the future, starting with print, there's an opportunity to add our individual print subscribers' digital engagement into our yield management model. So again, that will be another variable to add to our demographic, tenure and service standard variables that go into that model that will help us again manage yield without reducing churn. So that's a really important initiative that will increase. And in terms of the digital piece, again, there are opportunities around that. But with direct live actual data on engagement, that will help us really tune in on the right price for each subscriber.

We now have a written question from [ Nigel Jeffries ]. How has Facebook and Google's share of digital advertising growing? What is your forecast for their future share? And how are you competing against their claim in share?

I'll pass over to Laura maybe to give you a bit more of an update on it, and she may refer to some of what's in the presentation earlier as well.

Thanks, Michael, and thanks for your question, Nigel. So if we look at the IAB data, you can see that Google social and search accounts for about 70% of the total New Zealand advertising revenue, and the other 30% -- or 28% to 30% is classifieds and digital display. The search part of the digital advertising revenue grew about 0.5% H1 '20 on H1 '19. But social grew about 14% and was the strongest growth area from a digital advertising perspective. How we are competing internally with their share or with gaining share of advertising wallet is making sure that we are current in all the areas that are really important. So that's having a really solid data proposition, getting more first-party data and being able to monetize that both at reach, at scale and also from a personalization perspective, making sure we've got a really strong automation proposition from a buying channel perspective with programmatic. So we have a great programmatic desk that is achieving really good revenue for us. And that's something that we didn't have, say, 2 years ago, so that is making a difference to our opportunity to gather revenue that's brought predominantly by ad agencies in a programmatic fashion. The other is content. And content is what we're really good at, it's the core to our business. And this leads ourselves really nicely into being able to monetize native content. And then on top of all of that, we have a very strong direct-to-customer advertising sales force. So that means we can have conversations with the end customer and also resell some of the social and search products, so that we obtain a larger share of advertising wallet from our advertisers.

Thank you, Laura. We now have a written question from an anonymous attendee. How will the OneRoof local magazines be distributed?

Thanks for the question. As Laura mentioned, we are producing about 600,000 copies a week of the OneRoof print magazine. That's quite separate to the OneRoof that appears within our daily publications. So those are letterbox drop delivered. A number of them in areas where we're not currently even having a Herald or a local product -- daily product delivered. So we see that as real opportunity to expand our reach, promote the OneRoof brand into further markets and absolutely gain more share.

We now have a further anonymous question. Can we assume there are no substantive further cost-out opportunities across the business? And any margin gains to FY '23 is through revenue growth?

Thank you for that one. Again, that's probably one for you, David, to be able to talk about.

Thanks, Michael. So just in terms of cost savings looking forward, we'll continue to focus on cost initiatives and ensuring that we're adapting our business to the changing environment. In terms of what we've put together as far as the strategic initiatives, you'll see that what's represented in the pack are predominantly revenue based, but be assured that we've got a very strong focus on cost initiatives going forward.

I think the interesting thing that also just comes from it is as the products transition to be more digital, they are actually higher margin. So for example, as we have more digital subscribers, as we see more OneRoof digital revenues versus print revenues, that actually allows us to have some cost efficiencies at the same time as overall margin improvements moving forward.

We now have a further written question from [ Nigel Jeffries ]. What role does M&A play in the 3 key strategic focus areas?

Well, we absolutely think there's still opportunities in the market for consolidation. We've referred to some of them in the pack, I guess, but not specific entities. So for example, in radio, we do think there's some frequency acquisitions or even some smaller players who may be interested in even just partnering with us to bring our content to our audience, and having a larger audience is really important to us moving forward. From a subscription -- digital subscription business, we think there's continued opportunity there for consolidation overall. Again, whether it be partnering with individuals, organizations, or some organizations may wish to be acquired, but volume will be key for us moving forward overall. And then with OneRoof, it is a fragmented market at the moment. We'd like to continue to look for opportunities to consolidate that. So right now there's no specific entities that we're looking to merge or acquire with, but we think there remains the opportunity. We've obviously clearly see today, though, that OneRoof doesn't -- sorry that GrabOne doesn't fit within our 3 strategic priorities, and we've commenced a review of that externally to look and test the market to see who might be a better owner for that business.

We now have a question from [ Roger Colman ]. Okay. Well, let's come back to Roger. We now have a question from Steve Johnson on the phone. Go ahead, Steve.

Thank you very much for a great presentation. Obviously, a lot of work gone into it, so thank you much. Appreciate it. My main question is about the OneRoof side of things there. You still clearly got a lot of print revenue, the way you're going to reorganize that division. And I wonder what your expectations were for how that might evolve over the next few years and when the digital component might be larger than the print? And then just a really quick one around some of the cost questions before. Are you expecting further one-offs on the restructuring and expense side of things over the next few years as well?

Thanks, Steve, for those couple. So maybe on the OneRoof, and I'll pass over to Laura. And -- but we do see a transition from that print to digital. Obviously, maintaining the print is really, really important to us. And actually, on our scorecard, we made some commitments around what we think that looks like. So Laura, over to you.

Thanks, Michael. So yes, at the moment, you're right in describing the majority of the revenue for the OneRoof real estate. Business within NZME is print, and we do have a really clear path to transitioning that to digital. And 2023 is the inflection point where we see digital revenue outpacing print revenue as far as the share of revenue we generate. What we're finding in market is that having a print listings business, which has great history and continues to thrive in the active market we see at the moment, combined with our digital listings business, gives us a really important point from a couple of areas. One is gaining penetration into new markets that NZME has not been in before. And the second one is from a vendor perspective, being able to seamlessly put their marketing campaign for their property across print and digital. Now I did mention in the presentation earlier that all basic listings are free on OneRoof at the moment. And as we gain 100% of listing share throughout the country and the business continues to build, we do see a time when the basic listings will not be free, and there will be a paid proposition there. The other area from a digital perspective is the agent revenue. So building brands for agents and also finding their next lead. With the data tools that we have under the OneRoof business, we've got a real ability to find that next potential vendor for an agent, and there's a range of monetization tools that we'll be looking through to roll out in the future that will enhance our digital advertising or the digital revenue component of the OneRoof real estate business.

Thanks, Laura. And Steve, I'll get David to answer, I think your question was around the level of exceptional costs moving forward. So David, maybe that's one for you.

Thanks, Michael. Steve, yes, I think if we look forward and think about the level of restructuring that's going on this year has been very significant in the context of what -- the changes that we've made and the outputs and outcomes that we've delivered as a result of that. I think looking forward, we're -- as I said before, we continue to look for opportunities to adjust the business and to ensure that we've got an efficient cost base. As a result of that, there's likely to be some restructuring costs, but I wouldn't expect it to be at the level of this year.

Thanks, all. We now have a written-in question from Tim Carleton. Good morning, Barbara, Michael and team, great presentation. Thanks for all of the additional color. Is there any discussion of a digital code in New Zealand, similar to the one proposed to be implemented prior to the end of the year in Australia?

Hi Tim, thanks for your question. And it's certainly a conversation that I've personally had with the minister here in New Zealand. So I think probably the key thing is the government is aware of what the global platforms are doing. They are concerned about it and do want to do something. I think the things that they're looking at, though, are firstly, talked about as a digital service tax. Now that's more around taxation, I would say, in a fee or playing field as opposed to supporting journalism, which is what you're seeing in Australia. They're also looking at opportunities to maybe fund journalism directly themselves in New Zealand as opposed to putting any further constraints necessarily on the global platforms. But I can tell you it is top of our agenda and discussions with them and as an industry, and we will continue to have those conversations with them.

Thank you, Michael. We now have a written question from Paul Robertshawe. Is there a time line to take OneRoof to a subscription model -- sorry, or as a free-listing model, apologies.

Hi Paul, you might have just heard Laura just briefly mention there regarding the free listings versus subscription. I think the key thing for us is we want to get 100% of listings onto the platform. So that's our first objective. The other objective for us, which you will have seen is actually one of the pillars of the OneRoof strategy is we really want to become indispensable to agents. And we think when we have those 2 things, it does create an opportunity for future monetization, but it's not something that we're focused on right at the moment. We want to be that indispensable first.

We'll now return to Roger Colman.

The question relating to -- the company's got a dominant position in New Zealand, in terms of the incubator group inside the company, if you look at most of the digital developments that are coming are unknowns, and in terms of whether it's transactional businesses in real estate or motor vehicles, et cetera, et cetera, what's a group strategy over the next 2, 3 years to get the digital incubator group going internally?

I'm happy to answer that. Thanks, Roger. So as you will have seen, I mean, OneRoof's just over 2 years old, and we have effectively incubated that within the business, as really -- it's had a slightly separate culture. It's had its own ability to get things done and not be integrated as much into the wider business, while at the same time, it's got to use the overall power of its audience, of its sales teams and so on. It's now at a stage where we think we can go actually, let's really put some single leadership over it and push it harder. And I think you'll see us do that more and more as we see small opportunities into the future to incubate, see if things have actual traction to then be able to push harder and then bring back to life again. So Barbara, is there any more?

Thank you. Hi Roger, thanks for joining the call. And could I say to everybody, thanks for participating today and joining us. From a Board's perspective, Roger, we've certainly had a good hard look at the skills that we have on the Board and the gaps that we have on the Board. And so you would have heard in my presentation that what we're looking to do is to find someone with those kinds of sort of, I hate this expression, but digital native kind of skills, to come on to the Board, to give us a bit of a push and to help us challenge management on some of the digital disruption going on around us. And so we're in the process of finding that sort of person, and it shouldn't be too far away, but I recognize what you are saying and have listened to what you've said to me in the past, that those sorts of skills we need as part of our future.

Okay. Can I just ask some follow-up questions, please? All right. Just to Wendy. Wendy? I went through the historic data for APM Media and with [indiscernible] business. The EBITDA margins in radio, that you're all forecasting is 17% to 19%, and much lower than the 22% to 30% plus during the period 2004 to 2010 that APN released to the stock market. In a duopoly business where you should be able to manage talent acquisition and competition for talent acquisition, why is a 17% to 19% margin so far lower than the historic averages?

Maybe if you'd like me, I'm just -- Roger, just quickly maybe to give a little bit of perspective on that. So firstly, New Zealand is quite a competitive marketplace. And as you just know, it's -- Wendy said earlier, the most deregulated in the market. But one of the things I think Wendy can sort of elaborate further on is the number of stations we have compared to other markets, the amount of talent we have to have, the amount of support we have to have for the business, which truly does have a bit of an impact on the overall margin levels that we achieve in New Zealand versus other markets overall.

Thanks, Michael, and hello, Roger. Yes, New Zealand differs to Australia quite markedly, I guess, demonstrated by the amount of local versus -- this is Australia, and there, your agency sales, for example, are traditionally around about 75% revenue agency versus 25% direct. We are the converse opposite here. At the moment, we're probably more 2/3, 1/3. So we've got a significant opportunity regionally. And therefore, we have a lot of regional activity and costs at a regional level, which, I guess, plays into that side of things. That would be a key area. We also have more frequencies, therefore, more infrastructure that's required to support those frequencies, more transmitters. So there was a larger fixed cost component to radio here in New Zealand.

Sorry, I do want to go back. Wendy, I used to own 25% of excess right down 40% in the North Land with a bunch of investors. I mean, even the regional radio guys can get over 30% in those days when I had those investments. You look at the Australian market, which you've got 4 competitors, 4 network competitors. They can get margins well into the 20s and up to 36%, if I remember it correctly, with Australia with its peak. I'm just saying, Wendy, many thanks for coming along and getting that 42% revenue share, which is a fantastic power factor against Michael Anderson from Australia, but I think the Board has really got to make sure they -- as far as competition allows, not to compete for talent between 2 companies.

Yes. And thanks for that, Roger. And I agree. My greatest desire is to take that 42% and grow it, given that I used to be over the road. Now I'm here. And just in terms of cost management, it's definitely a key focus. We managed to do all the changes you saw in radio with that talent, moving virtually everyone and bringing in new people, and we did that all within the existing cost structure. I hear you on the EBITDA. It's something that I'm personally very driven by and very aware of. And I know what the numbers are in Australia. And for me, our goal is to increase that number to where you, our investors and shareholders would expect it to be.

Right. Okay. Could I ask another follow-up question, please?

Go for it, Roger.

Well, you're looking there, smiling there, right? Look, I want to thank this team. This is 1 of the best thought out from a bunch of smart people, investment presentations, I've come across, compared with Australian media companies. I congratulate the astute bunch of people you've assembled there. To Shayne though, in respect of your journalist right, and the gaps in the market led by the Bauer group, right? I note there's -- if you do the calculation, New Zealand is, North and South, Metro Magazine used to have about $11 million that's covered by its revenues, just in those segments. Women, to say, Women's Weekly, another, call it, $7 million to $8 million there. I mean, in terms of your print product, in the semi magazine field, what's your plans there, if any? Or is it just an illogical section of the market to go for?

No. Thank you, Roger, and great to connect. And hello, everybody. No, we're -- when Bauer exited the New Zealand market, we were very agile in terms of our own current magazine product and stable. And we quickly actually produced a glossy Viva magazine. So Viva normally exists in the Wednesday edition of the New Zealand Herald, and we turned that into a glossy publication that sells stand-alone on the newsstand as a glossy product. We've launched a first edition already very successfully. And the second glossy edition hits the markets in the next few weeks. So we do see gaps in the market despite the return of some of the Bauer titles under new ownership, we do see there is potential for us, for new revenue streams outside of our existing magazine stable. And that means leveraging current brands that are very successful in their own right as standalone products.

Right and just -- sorry?

Sorry Roger, carry on.

Can I do another one?

One more, go on.

I'm just going through the digital -- sorry, the digital $184 per annum versus $511 worth of revenue from print. What's the EBITDA margin projection for the digital versus the print? Within that analysis?

Yes. Just interesting enough, Roger, the actual contribution from the 2 of them is extremely similar, once you take off the print and distribution costs. So the actual difference only becomes the print advertising revenues that you still draw on a printed product. So fundamentally, as I say, very, very similar.