NZME Limited (NZM) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to New Zealand Media and Entertainment's 2022 Annual Results Webcast. My name is Kelly Gunn, GM Communications at NZME. Presenting on the call today will be NZME's Chief Executive Officer, Michael Boggs; and NZME's Chief Financial Officer, David Mackrell. [Operator Instructions] I will now hand you over to our CEO, Michael Boggs.

Good morning. Thanks for joining David and I as we take you through NZME's 2022 annual results. If you're on the webcast, you will be able to follow us as we take you through the presentation pack. I'll first take you through a summary of our results. I'll then have an overview of our advertising revenue and an overview of the progress against these each of our platforms in 2022. We do continue to see strong digital revenue growth across each of our business units, we will tell you more about that today. David will then talk you through the financial results. Following that, I'll return to cover the performance of each of our divisions, how we are seeing the market and comment on the current outlook for 2023. Dave and I will then be very happy to take any questions you might have. I'm once again pleased to be able to report another year of operating earnings growth. This is being delivered through revenue growth across each of our key strategic pillars. On Page 3, you'll see our 2022 results summary, which highlights operating revenue growth of 7% on last year. Operating EBITDA was $64.7 million. This is a 4% improvement on last year after excluding GrabOne, which was sold in October 2021. Net profit after tax was $22.7 million, which was also ahead of last year, excluding the gain on sale of GrabOne of $15.4 million that boosted last year's net profit after tax. Pleasingly, operating [ NPAT ] was 10% higher than last year at $23.3 million. During 2022, we were pleased to distribute $43 million to shareholders. That's a reflection of the strength of NZME's balance sheet. These distributions were made through a capital return program of $27.3 million via the buyback of shares and a special dividend and the payment of normal dividends of $15.7 million. Given these distributions, [ net debt ] increased by $31 million and was $17.5 million at the end of the year. You'll see operating earnings per share was $0.0121 per share. This was 13% higher than last year on the basis of the improved earnings and the reduced average number of shares during the year due to the share buyback. Based on the business outlook, capital requirements and our continued strong cash flows, the NZME Board has declared a fully imputed final dividend of $0.06 per share. This brings the total normal dividends declared for the year to $0.09 per share. We've made significant progress across each of the 3 strategic pillars of audio, publishing and OneRoof during the year. Some of the highlights include: firstly, digital revenue continuing to grow at a faster rate than traditional revenue, continuing our digital transformation. Our radio market share reached 41.4%, continuing its growth since 2016. Publishing subscriptions increased to 209,000. That includes 113,000 paid digital subscribers. And finally, despite our cooling housing market, OneRoof digital revenue grew by 30% compared to last year. This result demonstrates the significant progress and improvement of our business during what continues to be a challenging operating environment. Let's now turn to Page 4. The chart on the left shows the quarterly business confidence across the last 4 years as measured by the ANZ Business Confidence Index. While there was some encouraging recovery through 2021, in 2022, business confidence weakened to record lows in the last quarter. While there has been some improvement in January 2023, inflationary pressures, in particular, remain [indiscernible]. The graph on the right shows the quarterly advertising revenue over the last 4 years. Also identified are the quarters that have been impacted by COVID-19 restrictions in 2020 and 2021. Our objective has been to return advertising revenues to pre-COVID 2019 levels. These are the dark orange bars on the chart. This continued to progress well in 2022. We'll talk more about this later in today's presentation. Overall, you'll see advertising revenue in 2022 was 4.3% higher than 2021. Quarters 2 and 3 both showed good growth with the fourth quarter finishing lower than 2021. Total advertising revenue returned to pre-pandemic levels, finishing 0.3% ahead of 2019. I'd now like to cover our 3 strategic priorities and our performance in the context of the overall market performance. On Slide 7, you'll see that we remain focused on our 3 strategic priorities that we set in 2020. To recap, our strategic priorities are, firstly, to be New Zealand's leading audio company. Secondly, for the New Zealand Herald to become New Zealand's herald; and finally, for OneRoof to become your complete property destination. As you'll see, we have key pillars of delivery under each priority. I'll talk to progress on these later in today's presentation. We continue to grow compelling platforms for audiences and advertisers with an integrated multichannel approach for our customers. You can see these on Slide 8. We connect advertisers with our audio, publishing and OneRoof audiences. These have increased to have a total reach of over 3.6 million New Zealanders. Our 10 audio brands reach 2 million people every week and includes New Zealand's #1 radio station, Newstalk ZB, by both its broadcast and digital audio formats. We also have New Zealand's #1 podcast network, iHeartRadio, which is reaching 800,000 listeners. This remains a huge growth opportunity for us. Our publishing platforms reach an audience of 2.7 million. This includes the 50% of New Zealanders who engage with newzealandherald.co.nz per month, together with those who read New Zealand's #1 daily newspaper and a subscriber base of more than 209,000 people. OneRoof products reached over 820,000 people through both our OneRoof digital platform and our various dedicated property newspaper publications. Page 9 highlights the diverse revenue streams that we have across multiple platforms with the split of revenue for each platform clearly displayed. We hold strong positions in each respective market. We are pleased to improve both audience and revenue market share for each division in 2022, which is a key strategic focus for our business. You'll note that revenue market shares have increased to 41.4% in radio and 47.5% in publishing. Print real estate market share increased to 51.7% by leveraging the overall OneRoof proposition. Not only have we seen revenue market share growth in the last year, but we have seen growth across each platform over the last 4 years, as shown in the charts on Page 10. It has also been pleasing to see market revenue growth in radio and digital advertising as markets continue to recover post COVID. You'll see that publishing has been quite stable over recent years. The digital [indiscernible] market data for the last quarter of 2022 has not yet been published, so the chart includes a bar representing quarter 1 to quarter 3 of each of the years. Our digital transformation is delivering revenue growth across each of our digital platforms. You can see that on Page 11. The chart on the left shows the momentum that is building with digital radio and the success of our iHeart product, which is 54% higher than last year. Within our publishing division, digital revenue now makes up 36.5% of the total publishing advertising and reader revenue. Despite a weaker property market in the second half, which resulted in a lower level of new residential property listings for sale, the OneRoof property platform grew digital revenues by 30% in the year. Let me now hand over to David Mackrell, NZME's CFO, to take you through the financial results.

Thanks, Michael, and thank you to all those that have joined us on the call today. Page 13 shows the operating results for the year with operating NPAT of $23.3 million, 10% higher than 2021, as a result of improved operating earnings. The improved operating earnings was driven by a 7% increase in operating revenue and other income. Reader revenue was [ 2% ] higher, driven by digital subscription growth and advertising revenue was up 4% on the prior year, with radio and digital advertising, the main components of the increase. Other revenue growth reflects the payments from Google and Meta as well as grants to fund investment in public interest journalism and [ cadet ] development. These grants partially offset increased people costs. Operating expenses increased by 7% compared to 2021. I'll now cover these on the next slide. You'll see on Page 14, we highlight the key expense categories with increased costs reflecting an investment in journalism and growth initiatives. Half of the people and contributors cost increase reflects the addition of businesses, the additional resources, which we see it are offset by grant income and one-off $1,000 bonus paid in 2022 to each eligible employee. The remaining increase relates to additional resources to deliver growth and rate increases. Rent and distribution costs were similar year-on-year with increased paper and distribution costs, offset by lower volumes. Content costs were higher due to increased activity and reselling of digital services and increased license costs. Total other expenses grew 14%, reflecting the impact of the BusinessDesk and Radio Wanaka acquisitions, higher radio broadcast costs and the return to more normal levels of activity. NZME continues to focus on ensuring it has an efficient cost base. Page 15 shows a strong balance sheet with net debt remaining below the target leverage range. Net working capital, excluding cash, was $11.6 million higher in 2021 as a result of higher receivables, which are expected to be a temporary change as they are due to one-off timing [indiscernible] tax. Inventories increased due to larger volumes of paper stock being held in the higher price of [indiscernible], reduced tax payable due to the earlier payment of tax in 2022 as a result of supplementary dividends paid. Net debt increased by $31 million to $17.5 million as at 31 December 2022, primarily due to the capital return program completed during the year. Turning now to the capital management slide on Page 16. As Michael mentioned, distributions to shareholders totaled $43 million during the year, which comprised of the final dividend for 2021 of $0.05 paid in March and the interim dividend of $0.03 per share paid in September together with a special dividend of $0.05 per share paid in July and the share buyback program of $17.6 million, which concluded in December. The Board has also declared a fully imputed dividend of $0.06 per share, which is payable on the 2nd of March. The net deposition of $17.5 million results in a leverage ratio of 0.4x EBITDA, which is below the lower end of the target range. The center graph on the left of the page shows how the company repaid $100 million of debt over 3 years, and the execution of the recent capital program has lifted [indiscernible] towards the target range. Moving now to the cash flow summary on Page 17. Cash flows continue to support investment and distribution to shareholders. The cash flow from operations for the year was $37.5 million, which is lower than 2021 due to the decrease in working capital that I talked about earlier. Tax paid in the year was higher due to the stronger 2021 taxable earnings, resulting in a larger final tax payment in January 2022. Additional supplementary dividends, which are treated in the tax credit also lifted the tax paid for the year. Capital expenditure was lower in 2021 due to reductions during COVID. I'll now hand back to Michael to talk about divisional performance.

Thanks for that, David. I'll now have the opportunity to take you through the performance of each division for the year, together with an update on the strategic initiatives. Let's turn first to audio. Page 19 shows the key audience metrics across listeners, audience, market share and digital listening. Weekly radio listeners have remained around $2 million, which is shown on the left-hand chart. This shows the continued strength of radio across our brands. NZME's audience market share is shown in the center chart, the darker section of each bar reflects the music stations contribution to audience and the lighter section the sheer made up by the torque audience. With Newstalk ZB being New Zealand's #1 radio station, its strength was highlighted with significant growth during key COVID and election periods. This has been key to maintaining overall audience share, while changes have been made to music stations to position them for growth. The final chart on the right shows the average monthly listening hours on NZME's digital audio platform, iHeart Radio. It's increased significantly to around 7 million hours. The financial performance of the audio division is shown on Page 20. We continue to see digital advertising as a rapidly growing component of the audio business. Digital revenue for the audio division was up 54%, driven by NZME's digital audio platform, iHeart Radio. Overall, audio revenue was 7% higher than last year as revenue continued to recover following prior year impacts of COVID and we continue to grow overall revenue market share. The people and contributor costs were higher, driven by a one-off bonus in 2022, investments in digital audio and rising labor costs. Other costs increased due to the costs associated with additional frequencies, which expand the reach of the broadcast network. Overall, the EBITDA for audio improved by 9% to $22.8 million, resulting in an overall audio EBITDA margin of 13% for the year. On Page 21, we highlight the progress we're making towards our 2023 targets for audio. With audience share for 2022 at 37.7%, we are ahead of our goal to grow by 1% per annum. We continue to grow reach through frequency acquisitions, but we are also expanding our audience appeal through our focus on podcast content, youth audio and sports entertainment with the alternate commentary collective. As I noted, we have also positioned our music radio stations for growth. Our radio revenue market share grew half of a percentage point in 2022, which is short of our target growth. In 2023, we're also working as an industry to improve audio efficacy with the objective of growing the overall radio market size. We have continued to grow the portion of revenue from digital audio with 5.1% of total audio revenue now from digital platforms, mainly iHeart Radio. We have achieved the 2023 targets during 2022. Now you'll see many of the initiatives we outlined at our November 2022 Investor Day included within the 2023 initiatives on this page. These are focused on growing the market and NZME's share of it with a continued increase in the digital audio revenue contribution to the business. Podcasting remains at the core of this growth. I'll now talk about our publishing business. Our digital transition continues at pace for our publishing business, while we focus on maintaining the profitable print business for our readers and our advertisers. The left-hand chart on Page 23 shows our print subscriber volumes and the yield trend over recent years. During 2022, we reduced the number of free trials, which has seen a reduction in subscriber volume and an increase in the overall average yield. We believe that this will provide an improved financial result in the years ahead. The chart in the center shows the growing engagement with our digital products with more than 80% of our subscription customers now engaging with us digitally. We now have 209,000 subscriptions across digital and print platforms. And the chart on the right shows the continued growth in paid digital subscribers. We now reach 113,000 since launching in the second quarter of 2019. The green line on the chart shows that the annual yield has reduced due to additional short-term acquisition offers in the market and the increase in corporate customer base, which continues to grow at pace. So let's move to Page 24 to review publishing's financial performance. The increased number of paid digital subscribers delivered a 39% growth in revenue for the year. This was more than enough to offset the decline in print subscriptions and retail sales with overall radio revenues growing 2%. Digital advertising revenue grew 6% compared to 2021, with print advertising remaining relatively stable with a decline of only 2%. Digital advertising revenues are now within 7% of print advertising revenues. The increase in other revenue reflects the payments from Google and Meta along with the grants we have received to allow us to increase investment in editorial resources and [indiscernible] development. People and contributor costs included an increased resourcing due to the acquisition of BusinessDesk and the investment in the new editorial resources as a result of these grants. Print and distribution cost increases were limited to only 1% with substantial increases offset by lower volumes and ongoing cost control programs. The result was the publishing EBITDA for the year was 5% higher at [ $47.4 million ]. Page 25 shows the significant progress that we've made towards making the Herald New Zealand's Herald. Many of the 2023 targets set in 2020 have already been met. Total subscribers increased to 209,000, with more than half of these being paid digital subscribers. During the year, we acquired BusinessDesk and launched a new paid vertical, Viva Premium. Both of these provide us with significant opportunities for growth. With the continued growth in digital advertising revenue, it now represents 48% of total publishing advertising revenue. You'll see in the 2023 initiatives that we have a number of new developments underway. These will allow us to continue to personalize our experience, grow our audience and deliver new products for advertisers. Let's turn now to NZME's real estate division, OneRoof on Page 27. The chart on the left shows the OneRoof platform has a strong position in the market with a significant number of the for-sale residential listings in Auckland and the rest of the country. This inventory provides us with ample opportunity to continue to grow audience and revenue. Despite the call in real estate market, OneRoof's monthly audience continues to grow as shown in the center chart, the gap to Trade Me has closed significantly, and we were pleased with the OneRoof platform's performance and delivering inquiries on listings and leads for our agents. Listings upgrade growth as shown in the chart on the right of the page. The ongoing upgrades in Auckland has continued to lift the upgrade percentage to nearly 41% in the last quarter. Regional upgrades have also continued to be an increased trend over the last 2 years. On Page 28, you'll see that the increase in listing upgrades delivered OneRoof digital revenue growth of 30% to $10.5 million. This ensured that one roof total revenues grew 7% for the year. We've been investing in people and contributors to set the business up for further strong growth. These resources have been in national sales roles and audience and data specialists. Marketing costs have increased significantly during the year as we continue to build the brand. This has delivered the strong audience growth and supported upgrade revenues. The increase in costs has been made to support the planned growth of the business. This has seen a reduction in EBITDA to a loss of $1.4 million for the year but positions the business well to improve overall upgrade performance and take advantage of future recovery in the property market. You'll see on Page 29 that OneRoof's made continued progress against its 2023 strategic targets. As I just noted, OneRoof has grown its audience significantly closing the gap to the #1 player in the market. The percentage of listings upgraded has continued its impressive growth in Auckland. The last year has seen a marked improvement in listings upgrade outside of Auckland, reflecting the increased resourcing around New Zealand. With listings outside of Auckland, representing nearly 2/3 of total new listings, this remains a key opportunity for faster growth. We remain focused on growing overall digital OneRoof revenue while substantially maintaining the print revenue within the business. As noted at the November 22 and yesterday with continued growth in a more normal market, OneRoof is well positioned to deliver to EBITDA targets in 2024 and beyond. Slide 31 shows the performance of the Corporate Division, which also includes our events business. With a small improvement in revenue and a reduction in corporate costs, we've seen an improvement in the overall corporate EBITDA for the year. Let me now talk a little bit about the market on Page 32. As we've noted, NZME has been increasing market shares across each of its platforms. However, business and consumer confidence have impacted the overall market over recent months. The left-hand chart shows NZME's overall advertising revenue by month right back to January '22. The black line compares to the prior year, that's either 2021 or 2022 for January to March '23. The orange line compares to 2019. As you'll see, quarter 4 2022 was below the levels achieved in quarter 4 2021. However, we have seen an improving trend into 2023 with March 2023 currently tracking to deliver growth over 2022. The right-hand chart highlights the total market change and new residential for sale listings by month. Once again, you'll see that quarter 4 2022 has seen a significant reduction in new listings from those listed in quarter 4 2021. We expect it may be some time before we can see improvement in the stream. Finally, I'll now talk about the operating environment outlook and capital management outlook as provided on Page 33. As I just noted, it has been a soft start to 2023, especially given the subdued real estate market. However, March 2023 is tracking to deliver growth over 2022. Cost pressures do remain across the business, and we continue to be focused on substantially mitigating these through disciplined cost controls. There is obviously uncertainty across the economy and the market, and we will update you further at the Annual Shareholders Meeting on 25th of April 2023. Given the ongoing capital management, we are pleased to have made significant distributions to shareholders over the past year. The Board does have a desire to operate at the lower end of the target leverage ratio in this current environment, but it will continue to return excess capital to shareholders, subject to the operating environment and investment opportunities. Now that concludes the formalities of our presentation, but David and I are obviously now happy to take your questions.

Thank you, Michael and David. We will now open the webcast for questions. [Operator Instructions] Our first question is from Arie Dekker.

Just firstly, on subs momentum, obviously, as you focus a bit more on yield and front, that was more moderate in the second half. How much like do you expect print subs to stabilize more in line with previous trends? Or is there still a little bit more to play out in FY '23 as you focus more on yield?

Arie, Michael here. Firstly, just on subs momentum. I think second half is actually quite a strong half, just noting that first half obviously included the acquisition of BusinessDesk, which was about 8,000 subscribers. So when you look at that, I think you'll see that second half was strong and it's a continued focus to continue growing that base quickly. We've also, as we noted, launched Viva Premium at the end of last year, and we're continuing to look at other new verticals to bring to market. So growing subscriber number is really important for us from a digital perspective, and we will continue actually to just look at that yield. We're pushing it hard at the moment. We're obviously seeing growth from corporate subscribers, which are slightly lower. But we definitely see it as an ongoing significant growth business for us. From the print perspective, you'll note that I mentioned that we've actually stopped a number of our free trials. And so what we're finding with increased printing and delivery costs, a number of free trials that you're being used as a promotion was no longer a good acquisition opportunity for us. So those free trials were obviously high-cost acquisition and then usually high churn. So we do think we'll see a stabilization of that. And we actually think that's the right decision for moving forward from an overall continued yield improvement from the print subscriber base.

Yes. Great. I mean I was focusing on the 9,000 loss on print subscribers in the half, which is obviously a step up, but good to hear that, that should sort of stabilize. I mean to your point on digital only, I mean, that growth was still solid in the second half. With regards strategy into FY '23 on that, are you going to continue to focus more on growing the base there? And will you be willing to give up some overall yield as you do that still?

We absolutely will continue to grow that base because we fundamentally think there is significant opportunity there. You will have seen some of the previous work we've done from our strategy days, we think the overall reader market is about 1 million subscribers. So we see plenty more potential to continue to grow that base. Yield will be one of those levers. So those acquisition offers and actually growing from a corporate subscriber perspective, but volume is the first thing to then be able to do yield management moving forward.

Yes. I guess I'll just ask one more question on the outlook before coming back once I had a chance. So just on the outlook, can you just give some context on how soft the start to the year has been. I mean, particularly in light of we have been some pretty big news events I take the point on the macro, but political leadership change, weather-related events. That's obviously provided some momentum still. And I guess just on the interest of, if you can be specific in terms of overall profitability in the first 2 months, is this likely to be more or less than 5% down on PCP at this point?

Yes. So I think to your first point there, we've seen really strong audiences in the first couple of months so far this year. So in fact, with a number of record days just given changes whether it be a new cycle or a Prime Minister changing or whether it be weather events. And so we've certainly played our part in keeping people informed on that. I guess all I do is refer you back to that Page 32, which showed it's less than 5% revenue year-on-year reductions in January and February and closer to 5% positive for March. So it is early days in the year. I think what we saw at the end of last year, there was obviously significantly well, in fact, the worst in recent times from a business confidence perspective and it's taken some time for people to readjust. Advertisers realize that they need to advertise to continue getting customers back in the door and the more certainty that advertisers have and what's happening in the economy and the market will provide more certainty for us from an advertising revenue perspective.

Thanks, Ari. We now have a question from [ Roger Colman ].

Okay. I just want to zero in on OneRoof, if I could. The 69% increase in marketing to $7.4 million a year. Is that now a plateau? Or are you going to go increase density in marketing?

No. We feel like we have all the resources and marketing that we need for that business. As you can see, the audience is growing extremely well, the engagement well. So our focus now is absolutely on top line revenue growth.

Yes. I've got an issue with Page 31, which is the, I think it's Page 31, yes. It's to do with the 152,000 UV gap to Trade Me of 2022, yet looking at the chart on, sorry, I think it would have been Page 3, I've written this down incorrectly. But it looks like the chart for quarter 4 at a gap of only around 50,000 to 70,000, right between you and Trade Me, right? So your total full year fee was 152,000. you draw some line across closing jaws think about 50,000 to 70,000 gap. What's correct?

Yes, I'm just trying to look at the footnote, one is a quarter and the last one is obviously months, it's the last month of December. So I think it's Slide 29... Or the average...

You're this close to winning...

You're right.

Right. Could I just ask on the question relating to the and this is a continuation of that definition issue. Your audience reach for digital property is 47.4%. And that's described as in the footnote of footnote 5, I think it is. So that's unduplicated. Is that correct or incorrect? That sounds extraordinary.

That is correct. It's of audience of real estate customers. That's right.

Right. Well, congratulations, gentlemen, if we got close to 50% of the market unduplicated in audience. Then nothing more to say about that. All right. And just one quick question follow-up. We'll talk later on the CapEx for this year.

So CapEx this year would be in line with our guidance, which has been $8 million to $10 million going forward. And I think this year will be similar.

Right, right, right. Look, I'll let other people ask questions.

Thanks, Roger. We now have a written question from Kim Moody. What challenges does NZME expect to face in the year ahead? And how will the potential recession affect advertiser [indiscernible]?

Yes. Thanks for that, Kim. I think it comes back to just what we're seeing in the market at the moment. It's the predictability of advertising revenues overall. So there's obviously been some variability as we've had in that chart that we put in our outlook page on Page 32. And so that's what we're monitoring really closely, at the same time, as we mentioned, there are cost pressures across the business. So things that were specifically being focused on is print and distribution costs, as an example, print paper, for example, was up over 50% by a roll of paper. So that's seen us over the last year look for alternative suppliers. The distribution costs have been increasing, so that's seen us managing routes [indiscernible]. So as you saw our print of distribution costs during this last year, even with all that pressure actually only went up 1%. So I think we've been doing a good job of managing risks to revenue and they're not growing as quickly as we would like at the same time as ensuring that we have great cost control, and that will be a key focus for us moving forward.

Okay. Thanks for that, Tom. We now have a question again from Arie Dekker. Thanks Arie.

Just 2 or 3 groupings. Just on OneRoof, obviously, there is pleasing progress there against obviously, what was a really challenging backdrop for listings. But just on those audience figures, I mean I assume that there are some structural changes going in terms of how audience is engaging in that. Like are those monthly audience stages compared to Trade Me property, are they for, I guess, PC sort of desktop sort of viewership only? And how are you sort of going, are you able to track what's happening on sort of mobile devices and that sort of thing? And how are you going there?

These are audience across all platforms, which I'm positive is the case, but you say absolutely are across all platforms. So again, we are obviously really pleased that we're pushing. We still see the highest engagement from people on a desktop, as I'm sure our competitors would because that's when people are in a much more experience of doing more hunting on a desktop and wanting more information, but we do obviously see substantial engagement too from a mobile device.

No, that's great. Just audio, I mean that was a pretty solid result in audio. Obviously, the macro environment will be a factor in audio in FY '23. But do you still see, I guess, and what's happened with your market share and that sort of stuff, the potential for further lift in your core audio advertising revenues into FY '23 from a share gain perspective?

Yes. So there's 2 things we're looking with the audio. I mentioned that we're investing in audio advocacy, and that's something we're doing as an industry. So we've actually appointed a person and a number of support resources to focus on growing the overall audio market. And so that's been an industry initiative that we're doing right across the board. So I think that's really pleasing that we're saying, we think audio is really important, and we want to make sure that advertisers know about it more into the future. Secondly, over the last couple of years, we've been supported by strong growth in the talk business with Newstalk ZB and that is absolutely continuing. We have another election year this year, obviously, and there's plenty of news events, while at the same time, we've been making changes to our radio networks and many of those happened over 2 years ago, and those just take time and we're seeing really good growth starting to come through with the audiences and those entertainment brands. So 2 things. One, obviously, trying to grow the overall market as an industry. And then secondly, we think we've made good changes that will see us grow our share of an increased market.

Great. And then, David, just a few very quick ones just on the numbers. Just inventories, do you expect to hold higher inventories through FY '23? Or should we expect some unwind there?

They'll be higher than they've been. There'll be a little bit of unwind, but it will depend a little bit on how good the supply chain is and just how much we want to hold, but we'll probably unwind just a little bit from where it is.

Question, Arie, I think, around working capital overall. So I think there are a number of components to it, which were inventories, which were tax... And there was a...

Yes. I mean there were some receivables, which were sort of one-off temporary changes that will unwind as well.

So I think you're thinking...

About a half...$11 million will unwind.

Great. Okay. Yes. And then just trying to talk back quick, yes, so the cash exceptional items was low also. Do you expect that now will sort of stay at quite de minimis levels? Anything sort of significant we should be thinking about there for FY '23?

I would expect them to be minimal in the current year and looking forward...

Great. And then last one, just the level of lease payments, principal plus interest from a cash perspective. I mean that is sort of ticking up, and there was a reasonable step up in FY '22. Were there any one-offs to call out there? Or the structure of your leases such that we should sort of expect sort of moderate growth there to be ongoing?

I'd probably expect that, that would be a peak. So there was a couple of things through the year where we've been making some changes in Wellington. We had moved our team out of the office there because of the new rating around earthquake. So we've shifted them out temporarily somewhere else and then now we'll find permanent homes that we've had a little bit of double up. And then we've just moved into a new facility in Christchurch as well. So that's the 2. But my expectation is I'll probably see this as the peak and it will come off from here.

I mean just following up on David's question, that's another area we're focused on from an efficiency perspective is obviously with different ways of working these days. A number of our offices are nowhere near as full as they used to be. So we've got a program to that over the next 12 months to ensure we have the best efficiency we can from a property perspective, while we've got great working environments for our people. Just prior to the meeting, we did receive a recent inquiry, and it was you have stated a target deep level of 0.5 to 1x EBITDA when and preferably how do you expect to reach that target. So I think probably the key answer for that is actually in our outlook statement. So fundamentally, you will have seen the Board has increased the dividend payout in this financial result. And we still remain at the lower level there of our 50% to 80% target range for paying out of dividends. And so there still remains opportunity to increase dividends overall. And then secondly, the last dot point on Page 33 just refers to the desire of the Board to operate at the lower end of that target range. Now obviously, we're below it at the moment. We're at 0.4, so the lower being 0.5 to 1x. but the Board will continue to return that excess capital to shareholders, obviously, subject to what's happening in the environment at the time or other opportunities. So this is a key focus of the Board, the capital management operating at the right level of leverage while ensuring that any excess capital is returned to shareholders as soon as possible. So I would expect that we'll be able to give a further update and the Board will be able to do that at the ASC.

We have another resin question from Paul Robertshawe. OneRoof, with catching up on audience, are you following Trade Me's customers or are you now at a bigger discount? What's the strategy moving forward?

Paul, we haven't been following Trade Me from a price perspective. We still have significant opportunity, obviously, to grow from an upgrade perspective. And the first thing we want to do is grow the audience and the second thing, we want agents who are our sales team at the end of the day, selling our product. As you pointed out, Trade Me has been making significant price increases and continue to do so. So that creates initial opportunity for us to get higher market share of listings and that's where our initial focus is right now.

And Roger Colman has another question. Thanks Roger.

Gentlemen, I'd also like [indiscernible] actually making to do here for the amount of effort that gets put in the presentation, at least you've got some questions from some people. I just want to cover on the print market share. You guys seemed to top it out at 0.1% creep. Is that a geographic problem in South Island where your share is weaker and especially down at Queenstown or is [indiscernible] outperforming you guys?

So what was the first part of your question there Roger...

Sorry.

What was the first part of your question there about what was the sheer number that you just quoted...

Or you've got your print share at 47.5% versus 47.4%. It's only... the competitors rejuvenated themselves to restrict your growth.

Okay. Well, I think overall, print market shares and that scenario do include property market overall. So in the last year, Auckland properties, obviously, have been doing it tougher than the rest of the country. The rest of the countries move to follow since. So that has actually some due down print market share for some chunks of last year.

Right. Got it. And then the Google and Meta grants. Are they inflation index or UV indexed or what's the mechanism or is it at a steady level?

It's substantially at a steady level other than new products that might be introduced to market but not material.

Right. And my last question relates to getting close to OneRoof in UB share. Is that UB share includes your editorial capital [indiscernible] inside the guide?

Yes. So there's 2 things. One is Trade Me's includes the rental market and OneRoof does include editorial.

Right. netting those out, is your guess what's your gap now?

I don't have the detail on either of those actually what the is versus ours. But I think proof we're getting told is that our listings when upgraded on OneRoof are delivering quality leads and that agents are really valuing them.

Right, right. Before Trade Me vanished in 2018, their revenues were $35 million in the property vertical. Is that what you're looking for once you reach parity? And when do you expect to reach parity on the current trend?

The number won't be exactly right. But I think in Trade Me, strictly 2 accounts, I think their current property revenue is around $90 million.

Well, let's hope you guys make it for the change of the company.

Thanks Roger. We have another written question from [ Mickey ]. Congratulations on another strong result given the low leverage, strong and improving operating metrics and the fact that NZME remains deeply undervalued, will the Board consider a further share buyback this year, especially as uncertainty could make this an opportune time to implement a buyback given the strong outlook.

Yes, I think that's the key thing that the Board will continue to look at is the balance of what's the operating environment, what's the dividends? And I think the share buyback has been a key tool over the last year and will absolutely be something that they will continue to look at.

Okay. Everyone, that concludes our presentation and Q&A for today. Thanks for those excellent questions and interest. We'll continue to obviously catch up with many of you over the coming days and weeks, and we look forward to updating the rest of you at the ASM in a couple of months' time. Thanks, everyone.