NZME Limited (NZM) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to New Zealand Media and Entertainment 2024 Half Year Results Webcast. My name is Kelly Gunn Communications at NZME. Presenting on the call today will be Michael Boggs, NZME's Chief Executive Officer; and David Mackrell, NZME's Chief Financial Officer. [Operator Instructions] I will now hand over to our CEO, Michael Boggs.

Good morning, everyone. Thank you for joining us as we take you through NZME's 2024 Half Year Results. For those of you joining through our webcast, you'll be able to follow the presentation pack, which is in front of you on the screen now. Firstly, and as usual, I'll go over the summary of our results and take you through some of the key highlights for the first 6 months of the year. I'll also discuss the current trading environment, our strategic priorities and our market performance. David will then take you through the financial results for the half. Following that, I'll return to cover the performance of each of our divisions, that's one roof, audio and publishing, concluding on the outlook for the remainder of 2024. As usual, David and I will be very happy to take any questions you may have. Firstly, Slide 3 has a summary of our results for the first half compared to the same period in 2023. I am pleased to report that our operating revenue increased by 3% to $171 million for the first half of the year. This was a great result, especially given the challenges facing the New Zealand economy and its impact on the advertising market. I'll speak more about that shortly. As you'll see, operating EBITDA was $21.4 million for the half. That's in line with the $21.3 million in the first half of last year. The statutory net profit after tax was $1.9 million, also substantially in line with last year and our operating earnings per share was $0.015 per share. Our cash flow from operations was $12.1 million. That's an increase of $3.3 million on the same period last year. That meant that our net debt was $1.6 million lower than 30 June last year. Now this is higher than December given the seasonal cash flows in the first half, which obviously include the final 2023 dividend that was paid in March. Additionally, the Board has declared a fully imputed interim dividend of $0.03 per share. That's consistent with last year. At the very half of NZME's 3-year strategy, which we've obviously spoken about previously is digital transformation. This is focused on ensuring we continue our market-leading digital growth and innovation to deliver value for you, our shareholders. As you can see from the results on Slide 4, we have delivered digital growth across each of our 3 strategic pillars of OneRoof, audio and publishing. OneRoof has been a standout performer with a 63% growth in digital listings revenue and a 70% increase in OneRoof listings upgrades. These highlights that vendors are seeing value in upgrading their advertising packages with us. In audio, we've increased our digital audio revenue by 33%, demonstrating the value our advertisers are placing on our online audio platform, iHeartRadio as well as in our leading podcast network. Total digital listening hours have also increased 14% year-on-year. In Publishing, we've seen a 13% lift in digital subscription revenue and an 11% increase in digital subscription uptake year-on-year. Value continues to be added to our digital subscription offering. These results are a clear demonstration of our digital-first strategy connection. NZME has outperformed the market in what has been very challenging market conditions for the media industry, both locally and globally. The graph on the left of Slide 5 shows that for the 6 months to June, business and consumer confidence were at depressed levels with high interest rates and inflation, leading to lower consumer demand and reduced advertiser marketing spend. These challenges have led to a number of media industry participants making large-scale changes or, in some cases, closing parts of their operations. The graph on the right shows NZME's performance against the market. The black dotted line shows agency advertising levels across the market over the past year. The blue line shows agency advertising spend at NZME over that same time. This demonstrates that we have been outperforming our media industry competitors in the agency advertising market. At the end of 2023, we refreshed our strategy, looking ahead to the next 3 years with, as we just discussed, digital transformation at the very heart of the strategy. Our OneRoof business is focused on being your central property platform. That means having superior listings experience and performance by our channels, growing listings revenue and accelerating our other non-listing product revenue. In audio, we're committed to being #1 in audio. We will achieve this by creating the most listen-to and loved content, growing revenue share by delivering effective customer solutions and growing podcast engagement and monetizing it. In Publishing, we're focused on being New Zealand's leading news destination with a scalable digital audience and advertising news platform, expert journalism to grow subscriber lifetime value and continuing to have a high-quality and efficient print business. We're really proud that at NZME, we attract Kiwi audiences like no other, reaching 9 out of every 10 Kiwis by our OneRoof, audio and publishing platforms. On Slide 7, you'll see the number of people across the country who are engaging with our platforms. The top line shows engagement with our traditional media of either print or terrestrial radio platforms. The bottom line shows our digital audience engagement. As you'll see, there are substantial audiences across each of our market-leading platforms. The overall result of our digital-first strategy demonstrated in the earlier slide is the changing mix of revenue. On Slide 8, you'll see our strong focus has seen us grow our digital revenue from $44 million in the first half of last year to over $50 million this half. The growth is significant for NZME with total digital revenue as a percentage of total revenue, more than doubling since 2019. It also reinforces the ongoing strength of traditional media, such as print and terrestrial radio and a huge part that it continues to play in our business. So, let me now hand you over to David to take you through the first half financial results.

Thanks, Michael, and thank you to everyone joining us on the call today. In the first 6 months, we have delivered solid profitability in a challenging market. As Michael mentioned, this stands us apart from others within the industry. Slide 10 shows the performance of each division compared to the first half of last year. OneRoof has been the standout performer with a significant growth in digital revenue with increased listings upgrades and an increase in new listings coming to market. Audio's result was lower with strong digital revenue growth, offset by planned marketing and promotional spend and higher selling costs given a temporary change in the revenue mix. Our digital publishing performance for the half was underpinned by continued subscriber growth. Print advertising revenue declines were partially offset by additional third-party print revenue. Now, turning to our operating results for the half on Slide 11. Operating EBITDA of $21.4 million was just a head of last year despite difficult operating conditions. Operating revenue was 3% higher, but this was offset by higher operating expenses. Advertising revenue increased by 3%, and radio revenue was also higher, driven by a 13% increase in digital subscription revenue, partially offset by print subscriber revenue, which was down 1% and a 3% decline in retail sales. Operating NPAT was $2.8 million for the half, just below the $2.9 million in the previous corresponding period. Slide 12 highlights the key expense categories and shows that overall expenses were up 3%, largely due to higher selling and marketing costs incurred to achieve the revenue results. People costs were contained to a 1% increase, reflecting a continued focus on achieving business-wide efficiencies. Print and distribution costs increased, reflecting higher levels of activity. This was particularly due to increased OneRoof print advertising and additional third-party print contracts. Selling and marketing cost increases for the half relate to a number of revenue-driven factors. These include a higher proportion of our overall revenue for the business going through the agency channel, which led to higher agency commission and also higher audio marketing costs from planned promotional activity in the first half. Third party fulfillment costs were lower, in line with our reduced focus on selling third-party digital performance marketing. Property cost increases relate to increased audio transmission costs. Our nonrecurring expenses are at a similar level to last year and relate primarily to restructuring activity. Slide 13 highlights the continued strength of the balance sheet. With the seasonal increase in working capital and net debt, the key change are the key changes compared to December. Net working capital, excluding cash, was $3.7 million higher than the previous year-end. This was due to the seasonally higher tax receivable, which was partly offset by a lower paper stock inventory. Net debt increased by $12 million to $30 million over the half due to that increased working capital and payment of the 2023 final dividend in March 2024. Net debt was $1.6 million lower than 30 June '23. Turning now to the cash flows on Slide 14. Cash flows from operations totaled $12.1 million, which was $3.3 million higher than 2023. This was primarily due to a favorable working capital movement and lower tax paid. The movement of those in the line labeled other relates to a tax obligation on the issue of shares under a long-term incentive plan. Capital expenditure was higher due to accelerated product development activity, which supports our continued digital transformation program and the purchase of a small radio regional media business. Distributions to shareholders of $11.2 million relates to the final dividend for 2023, which was $0.06 per share and paid in March. The graph at the bottom of Page 15 highlights the changes in net debt and the leverage over the last 6 years, and in particular, the increase in June. The seasonal increase in leverage ratio remains within the target range of 0.5 to 1x EBITDA and is consistent with the first half of last year. Net debt is projected to reduce by the end of 2024, with a leverage ratio returning to the lower end of the target range. As we've seen, the Board has declared a fully imputed interim dividend of $0.03 per share, which is payable on the 25th of September 2024. I'll now hand back to Michael, who will take you through the performance of each division.

Thanks for taking us through that, David. So, the first division will turn to is our property platform, OneRoof. We have a strategic focus on it being your essential property platform. Slide 18 highlights the progress on the 3 strategic pillars for OneRoof and recent progress. Listing performance has continued its strong growth with a 29% increase in inquiries on listings year-on-year. The revenue growth is supported by the number of listings upgrades, which are up 70% on last year. We're also focused on growing non-listing revenue with our display and native advertising up 13%. These highlights confirm the strength of the OneRoof platform for both agents and advertisers. Slide 19 shows OneRoof's monthly online audience compared to the #1 in the market, shown by the black line. You can see that we're continuing to do an excellent job of reducing the audience gap to that #1 player and it now sits at around 10%. Agents continue to tell us that they are achieving great results from the OneRoof platform and audience. Some of the operating highlights for the OneRoof business are shown on Page 20. Total residential listings have reached more than 60,000, and we have demonstrated significant growth in Auckland, with total listings up 38% and listings upgrades increasing by 62% year-on-year. We're also pleased to report a 20% growth on listings across the rest of the country and an increase of 82% in listings upgrades. With the rest of the country representing 2/3 of the total real estate market nationwide, this continues to be a growth opportunity for us. We remain focused on other key opportunities within the real estate sector, including rental, retirement and commercial property listings. In addition, the mix of higher value listing packages has improved yield by 7% during the year. OneRoof has been the standout performer, delivering both revenue and profitability growth to achieve a first half EBITDA of $1.4 million, improving on the loss for the first half of 2023. Digital revenue increased by 63% due to increased listings upgrades and higher tier product penetration, driving a higher average yield. Building on underlying real estate listings market recovery, Auckland Listings revenue achieved growth of 71%, while revenue for listings from the rest of the country grew by 84%. Print revenue also benefited from a recovering market with year-on-year growth of 32%. People cost increases reflect additional sales resource as seen and in line with the second half of last year. Higher print and distribution costs supported the print revenue growth that we saw. Turning now to Slide 22, which highlights the very strong progress made on OneRoof's strategic priorities. As I've already noted, the audience gap is closing, listing inquiries are up. Listing upgrades are up and profitability has significantly improved. A key product development focus has been website optimization, including improved lead generation capture and adding new customer engagement features for agents. Product development is also underway on improved agent-customer relationship management integrations and reviewing the user experience of the OneRoof ad. We have continued our OneRoof marketing success by leveraging NZME's wider assets and platforms. Our dedicated New Zealand wide sales team has delivered excellent results with listing upgrades up 62% for Auckland and 82% for the rest of New Zealand. We look forward to the summer months approaching where we expect to see higher value homes coming to market, attracting a higher marketing budget. This is expected to see increased listing upgrade percentages. The total listings coming to market continue to be below historical norms by approximately 20%. This provides further opportunity for growth into the future. Let's now move on to our audio division, which includes our mini radio stations, our digital audio platform, iHeartRadio and our leading podcast network. Our strategic focus is to be #1 in audio. Page 24 highlights some of the key achievements of our audio platforms. We've dedicated to creating the most listen to and loved content across all our radio brands. One of the examples of this has been Newstalk ZB remaining the #1 commercial radio station for the past 16 years. We're also delivering customer solutions to grow revenue shares, which includes leveraging NZME's wide portfolio of brands and talent and aligning them with customer needs to create bespoke campaigns and brand engagement. Podcast engagement and revenue continues to increase, and NZME remains at the forefront of the content that is consumed. The operating highlights for our audio division are on Slide 25. As you can see, our total podcast downloads numbers have continued to grow, reaching $48 million, and total listening hours has grown to over $90 million. Our total audio revenue share has continued to outperform our audience share, reflecting the strength of NZME's advertising solutions. Moving to Slide 26. This sets out the audio financial results for the half. The digital momentum continues with digital audio advertising revenue growing by 33%. Broadcast radio revenue also grew by 1%. This was pleasing, given the total market declined slightly year-on-year. Overall EBITDA reduced as a result of higher first half costs. Higher selling and marketing costs were the key drivers with planned first half spend to deliver benefits later in 2024. In addition, increased agency commissions were incurred with more revenue sold through this channel. We expect the direct customer market to improve as the economy does. Other expenses were higher primarily due to increased transmission costs. Slide 27 highlights the key progress on the audio division's key strategic priorities. We've seen improvement in audience and revenue share, but there remains plenty more to achieve. Digital audio is continuing its strong growth, and we continue to feel positive about its trajectory. We up-weighted the marketing investment for the hits, and this has delivered its highest audience since its 2014 brand launch. Sustained [indiscernible] share continues to underpin the total NZME audience reach. New shows, including SportsCafe and the Montoyas, strengthened the podcast content offering, adding to the existing roster of many popular shows. We have a focus on key genres to drive podcast consumption, including sports, comedy and onboarding of the TED network content. Recent alignment with a leading audience targeting solution will deliver increased data capability, better customer solutions and we believe increased revenue. Finally, coordinated industry collaboration is being used to advance audio advocacy, targeting key events and client decision makers. As I've noted, we have strong momentum with podcasting and digital listening, and we are continuing to simplify how we go to market to sustain the strong revenue growth. Turning now to our publishing division, which has had a strategic focus to be New Zealand's leading news destination. Some key achievements of our publishing business are highlighted on Page 29. In June, nzherald.co.nz was ranked the #1 news website in the country based on Nielsen's online ratings. While this can fluctuate from month to month, we are pleased that we have closed the audience gap while still having a large paywall site. Digital subscriptions have grown 11% year-on-year, and our key print products are also ranked #1. The operating highlights for our publishing division are on Slide 30. Digital subscriptions have increased over the last 3 years at a compound annual growth rate of 27%, with yield also improving. While the volume of print subscribers has reduced, yield improvements have offset much of this decline. The publishing financial results are presented on Page 31. Overall reader revenue increased by 2%, driven by the strong 13% growth in digital subscription revenue despite the tough economic environment. Newspaper circulation revenue declined by 2%, with 3% lower retail outlet sales and print subscription revenues just 1% lower. Despite the market being down, digital advertising revenue grew but at a slower rate. This growth was more than offset by print advertising declines and highlights the need to grow digital revenues faster as the market recovers. Our continued emphasis on efficiency and cost control delivered a net 1% cost reduction in the first half of this year. So, in summary, the overall publishing EBITDA was 2% lower than the comparative period last year driven by increased digital publishing meetings almost offsetting the lower print publishing meetings. Let me show you that now. Page 32 separates the financial performance of the distinct digital and print parts of the publishing business. The results demonstrate the digital business delivering a positive result on a stand-alone basis. Digital saw a significant improvement in profitability during the half. As a reminder, all editorial people and content costs are allocated to the digital business and list there specifically and only for the print business. The print business is treated as a byproduct and has only allocated the cost of transitioning digital content into the print product. On this basis, the print product continues to deliver a very strong EBITDA contribution. Slide 33 highlights the key progress on publishing's 2026 strategic priorities. An enhanced subscription platform has been developed and will go live in the second half of this year. This includes a dynamic experience that will maximize subscriber lifetime value and open up new segments. This will allow us to increase new subscriber targeting, accelerate acquisition and improve retention. A redesign of the New Zealand Herald is rolling out alongside new homepage variants and personalization to increase audience engagement and build deeper reader relationships. Enhanced advertising experiences are being implemented with new high-impact ad units to improve yield and effectiveness. Our new truly digital-first operating model has been embedded with a focus on leveraging data and experiments to optimize story planning and selection. This is resulting in a more efficient operation. In addition, we're pleased with the performance of the print products and subscriber base despite of these declines. The 4 graphs on Page 34 support our cautious optimism in the near term. The graph on the top left shows that business confidence improved significantly in July. As noted in the other charts, there has been a recent drop in the official cash rate and lower inflation metrics. These suggest that market conditions are improving. Let me now cover off the operating environment outlook on Slide 35. NZME delivered growth in advertising revenue were 4% in the first quarter of the year. However, this slowed in the second quarter to 2%. Quarter 3 is currently tracking to 1% growth year-on-year, reflecting the difficult trading conditions and reduced confidence levels that we have witnessed with the business community. This has seen the advertising market reduce year-on-year. We have already implemented initiatives to remove $6 million of annualized costs, which will come into effect in the second half. We are heading into our largest quarter of the financial year. Businesses are signaling their intention to spend as sentiment improves, and NZME remains well-positioned to take advantage of this. As you've seen, OneRoof is continuing to deliver record audience, revenue and profitability growth. However, the operating environment remains uncertain. Based on the current performance, NZME confirms that expects to be at the lower end of the EBITDA range previously issued of $57 million to $61 million. We are pleased to have declared an interim dividend at the same level as last year. There is significant seasonality of cash flow. Based on this and the current outlook, net debt is forecast to reduce to the lower end of the target leverage ratio at year-end. The Board regularly reviews the capital management position of the company. It continues to have a desire to operate at the lower end of the target leverage ratio given the uncertain market conditions that we're operating in. I'd like to finish with Slide 36, which sets out how the key elements of our strategy will deliver superior returns. Our central objective is to relentlessly pursue a digital-led strategy across our 3 key platforms. As we've said, OneRoof has been a standout performer with its digital growth, meaning that it's now profitable, and we are confident that it can continue to strengthen its share of a sector, which has a large profit pool. We are getting real traction on our leading podcast position in New Zealand, and this will drive future digital revenue growth. Our strong position in news, politics and business continues to grow strongly and is improving our audio profitability. And finally, we continue to invest in our digital publishing platform and a new business of journalism operating model. We believe this will provide us with a very different and superior capability relative to our competitors, one that supports journalism for future iterations. Now, that concludes our presentation. David and I would obviously be very happy to take your questions.

Thank you, Michael and David. [Operator Instructions] Our first question is from Arie Dekker.

Just starting with OneRoof, can you just sort of give an indication of your comfort that OneRoof can maintain that positive EBITDA in second half and possibly build on the momentum, what the sort of the key risks to that outcome would be? And then also just in relation to OneRoof, what you're generating in terms of non-listing revenues as the digital proposition progresses?

Good morning, Arie and thanks for your questions and attendance. Yes, as we sit here today, we are confident of OneRoof's performance and how it moves into the second half of the year. Second half last year, I think we did have a small profit for OneRoof, and we would expect to see definitely a gain on the first half of this year. Dynamics will really come down to what's happening with the property market. What we've seen in the first half is initially a large number of properties coming to market. And then it's been quite quiet for the last couple of months, and much of that has been lower-value properties who don't spend as much on marketing. We do see that momentum right now changing, I think, driven by interest rates coming down a bit and would expect to see the market improve in the second half of the year. One of the things I think we also called out, and it would be nice to see it this year, but it certainly will be in the years ahead as listing volumes coming to market are still 20% down on historical averages and there's still plenty more momentum to be built an inventory to come to market in a much more normal market.

And just in terms of that non-listing revenue?

Yes. So, the non-listing revenue, as you will have seen, was up, I think, 13% during the period. It's certainly the smaller component now of listings upgrades, but it's an area that we're continuing to see more and more interest from advertisers wanting to be on the platform as we bring more functionality to the site. So, we do think we'll continue to see good growth here.

And then just the only other question I'll ask and I'll go back into the queue, I guess. Just on the cost out. I mean, it's good to see those targets. Can you just give a bit of a sense of where those savings will be focused? I mean, presumably not much in OneRoof and then also, how much of the benefit will flow through in second half versus into next year and whether you expect any significant exceptional costs as part of it?

Thanks, Arie. So, just in terms of that survey, those initiatives have been implemented. So, in terms of the benefit that will flow through to the second half will perhaps quite early on in the second half. And then we haven't impacted the resources around OneRoof. So, we continue to see that momentum of growth here and won't affect that outcome. And what we have looked at is the areas where we've improved efficiencies and probably 2/3 of that has come from people cost and the balance from other areas or able to create more efficiencies in the business.

And have the exceptional costs being realized in the first half?

No. Some will be at the start of the second half, but they're not significant.

We now have a question from Roger Colman. We might just move on to the next question, which is from James Lindsay.

Just on carrying on conversations on costs. In audio transmission costs obviously lifted quite a bit, I think, 89% or so. Can you just give us an indication of sort of the next few years for transmission costs there? And then secondly, just following on from that the conversation about OneRoof for the second half and carrying on, just with regard to your expectations on price, your sort of headline premium listing is obviously at quite a discount to the leader in the market. So, just interested in we all take that.

So, I'll take the transmission costs, James. In terms of debt, part of it will flow out and reduce in the second half, and part of it relates to the inflationary pressures around the maintenance of sites and the servicing of sites, which are coming from a supplier to us. So, they were higher over these last 6 months. That inflationary pressure, I suspect will continue, but there is a portion of it, which was specific to the first half, which went well into the second half.

And, James, with regard to your one last question on price. Price isn't something we are pushing with regards to OneRoof. As you mentioned, we are significantly lower than the #1 in the market. Our focus is actually twofold. I guess, one, getting deeper penetration of listing upgrades. And so, we definitely don't want price to be a determined for that. And then secondly, to actually sell higher-value packages because when we do that, we can then improve the power of the platform even more. So, right now, it's about gaining share, and that's what our focus is.

And just a follow-up on that. Just what do you think is sort of holding back getting very high penetration? I mean, obviously, you've made really good gains in that premium listing side of things. But where is the roadblock because is it from a customer perspective or at the agent level?

Probably twofold. One is, customers will spend money when they think they're going to sell their house. If they don't think they're going to sell the house, they might not spend the money. That's part of it. So, we need to be back into a cycle of people thinking they're going to sell the house. Now, obviously, we will be saying to customers, well, if you don't spend any money, you're not going to sell your house on marketing. So, you get into a little bit of a circular there. But definitely, when properties are selling, people are prepared to spend more. So, that would be a good place to be. And then the other thing is it's actually the agent who does the selling for us. And so, it is a numbers game of getting around the agents and starting with the top agents and then making sure that you can bring all the others with you, and that's just the process we're continuing to go through.

And then just last one for me then I go back in the queue. Yes, thanks for Slide 5 with regard to the sort of your revenue versus the rest of the market that's good information. Just interested in your thoughts about the sort of specifics about what's driving your significant outperformance?

I genuinely think it as the ability for us to package up all of our products. So, it will be very really that we sell, would you like a radio schedule or a print schedule or a digital schedule. We approach the market with what's the business problem you're trying to solve. Here's some content that will work across all of our platforms, and that allows us to get a larger share.

And now we'll just go back to Roger Colman.

Just got a query on the traffic gap to Trade Me property. And it's to do with the refined rentals, which is about 22% of their total listings, including rentals and your ratio is only 11%. I make the net gap that you're leading them already, but only if there's no editorial traffic thrown into the OneRoof data you presented. So, the question I’ve got is, what do you think your percentage of your traffic is editorial granted? And if it's not much at all possible implications you're already ahead of them.

I think I'd love to be able to dig into that further. And so, in some regards, it can be a bit of a blunt metric. So, as you say, rentals aren't our focus for us from a driving monetization at the moment. And, as with many other areas, whether it be commercial, rural and so on. We do have a number of those listings on a site, but it's not an area we're really pushing hard and focused on, but it will be. Similarly, from the #1 player, they don't have as much editorial as we have. So, there are ups and downs and each editorial would be less than 20% of our overall audience. But as you say, they'll be having a lot more from a rental and other products than us.

So, I've got a conclusion to come from that. What do you think the value of your cost promotion is to the OneRoof arithmetic, the profit and loss balance sheet?

Yes. It's not something I've tried to work out because we don't cost it across the business that way. And we'll just be having to look, I assume at what a Trade Me does or a real estate code, which I'm sure would be a number of millions of dollars in total.

I've got one very quick one, which has to do with radio. Culturally, you don't seem to have ever made a big time in ratings, and therefore, revenue share in the music segment. Is it logical to keep one complete pyramid structure in the radio or we also have a 2-pyramid structure to culturally get into the music advantage that radio works has gone?

Yes. I think firstly, overall, we do have a higher revenue share than we have audience shares. So, I might debate with you. The first thing you made about we haven't been able to be successful in music because we are getting -- yes. The key thing for us is 2 brands, The Hits and Coast. [ NZME ] is in the top 5 and then 25, 54. In fact, it's leading it. And so, it's the next 2 stations, which are our focus stations on improving performance overall, and we have a couple of people very focused on that.

We just have a couple of written ones from Denis. The first is excellent progress on OneRoof, particularly on the margin profile of 8% within the first semester breaking out of unprofitable territory. This is a strong validation that the 15% to 25% EBITDA margin range is quite achievable. How do we think about the fixed cost portion of OneRoof's expense base? Is it mostly fully in place? Asked in another way, how should we think about the incremental margins from here as revenue continues to grow?

So, as we've talked about in terms of layering in the cost for OneRoof, we put a lot of that cost base in last year in terms of making sure we had the right size around the sales resource in particular. And the growth in that cost base is relatively small moving forward. So, as we've said before, we expect that leverage to create improved margins and hence, the target margin range of 15% to 25% that we have for 2026. So, to your point, absolutely, we expect that leverage to translate to improved margin.

I think the only thing I would add to that David and for you, Denis, is as we go up some of the higher packages in OneRoof upgrade, some of that money we do pay on to third-party platforms to ensure we get further reach. That becomes less of a requirement as the OneRoof audience grows and the get to #1 grows and the acquirer generates. So, firstly, it's every dollar still incremental as we go up the packages, which means the margins will improve as revenue grows because the costs are substantially fixed other than that piece we might put on to third-party platforms. And then secondly, in the future, we expect to put lease on those third-party platforms because we have the audience. So, again, we would see that improving margins. So, you're feeling very confident about the 15% to 25% margin range.

And just another follow-up on OneRoof from Denis. Regarding average yield on OneRoof, it's hard to idle those charts, what was the year-on-year percentage growth in Auckland yields complete to the rest of New Zealand? Qualitatively, how do these yields in each region compared to our big competitor that will inform how we think about the growth in yields in each region over the near term.

Yes. Sorry, Denis, I don't have those percentages with me, but what I can tell you is these are directions of our competitor. So, you can see there for Auckland, an average yield of less than $500, for example, whereas you'd look at our main competitor will be up at $1,500, $2,000, for example, and beyond. David, if you had any more you wanted to add on yields?

Yes, the Auckland yields have grown at a higher rate overall, and they grew by that.

We'll now go back to Arie Dekker, who has a follow-up question.

Just a couple of publishing related questions. Firstly, just on display advertising revenue and publishing, can you just sort of confirm that you're sort of comfortable with your share there and just what you're sort of seeing on the display advertising and publishing because it has been a bit flatter. And then just in terms of the corporate yield, it's good to see some stabilization there but just what do you expect to see that growing in the next 12 months? And do you have an immediate target for that yield? And what sort of level is it?

Yes. I'll take those, if you like, David. So, on the digital advertising, the way we look at it is through the IRB data, which shows we are growing our overall share of digital revenue. So, as you see, while we are up 1%, the market is down, low percentage points. And so, we are pleased to be growing that. And I think we spoke about this probably earlier this year, as digital seems to be the one that can be switched on and off quicker by high advertisers actually. So, they're making their decisions very quickly as to whether he's feeling today or not. And, as the market has been tough, it's been the one that they've been deciding to not spend on as much, that is one we would expect to see improvement on as the market improves. And then on the yield on corporate subscribers, yes. That has been a key focus for us, improving yield. We don't have a specific forecast, but we would even with just the work that's going on in recent months seeing overall yields actually going up. The other thing that's happening, as I mentioned, is we've got a new paywall software going in the next month. And that will allow us to open and close stories based on your propensity to pay. It will allow us to target different segments that allow us to offer different pricing for overseas subscribers. So, I think we'll be much more dynamic, and we expect to see an acceleration in digital subscription growth.

And don't worry you've already got me paying. The way you take money out self is very effective.

Excellent. We'll just work on the yield now.

And we have another follow-up from James Lindsay.

Yes. Well, that ties in beautifully into what I was going to ask on the publishing side of things as well on price. Just progress in print, just with regard to sort of lifting that price versus the headline rates, just your expectations of progress on that and relate that to the economy at the moment?

Yes. So, as you'll see, the yield price continues to move up. $2, you can see on the right-hand side there versus, say, $5 as a headline price of a print subscription. So, we do continue to push that. And it is managed, as you'll know, to the individual. In the last 12 months, we have had a yield increase of 8% on print products. And so, that's where we're continuing to push as hard as we can.

And given where the economy is just with regard to -- you always do one particularly good job on win-back rates, and things like that for people that do. Is there any sort of trends in the economy on that? Or you're expecting that to be able to be improved if the economy does see some tick up in the next 6, 12 months?

Yes, I think we would see an improvement. Having said that, you'll see on Slide 33, our print subscription volumes are 89,000. We started at 92,000. That did include some removal of some New Zealand post weekend deliveries. And so, we think that rates being pretty good in the first half, but I think if the economy improves, we'd see it improve even better.

And then just lastly on the [ payroll ] side of things, just your view of growing price there over sort of the next 2 or 3 years?

I think price would come from some of the new targeting solutions that we're putting in. So, it's not a direct focus. Right at the moment, we're just like, obviously, the market to improve and thus continue to hang on to the largest share we're getting. But a number of the advertising units are now highly targeted, which are allowing us to get a larger yield and that is beginning to flow through.

We may have another follow-up from Roger Colman.

Gentlemen, I got quick statements from you, what's happening with Google Money, and that's number one. Number 2, in terms of shareholder polling in respect of OneRoof. Obviously, the tension between people who want to see profits and people want to see reinvestments. So, what's your view of what the company will do and what it recommends to shareholders?

So, there's a couple of questions there, thank you. So, firstly, we're obviously supportive of the legislation that the government is working through at the moment. That's the fair digital news bargaining bill. Some of the things that we're making sure we talk to the government about is to ensure that it includes artificial intelligence. So, initially, the viewers from the global platforms, like a Google is that the legislation doesn't. Our belief is that legislation does include a reach through to artificial intelligence. And so that, therefore, opens it up to a number of other players would be captured by it. We're expecting to hear that more on that in the coming weeks even and it would be in place next year. So, we're looking forward to that bringing lots of people to the bargaining table. So, I think it's an important piece of legislation that Paul Goldsmith is working on at the moment. With regard to OneRoof, I think it's a fine balance. We're one wanting to ensure that we continue to grow it as quickly as possible and deliver on profitability because we want to prove that it is a profitable, sustainable business, which we've obviously done in the first half of this year, and now we want to deliver the growth for it. I think the other argument, obviously, is invest more, maybe incur some losses for a few more years to then have a much bigger business. I think we have a real mix of shareholders who are saying actually, you've invested a lot already, proved that it works and deliver some value from it. So, we're sort of walking a tight rope down the middle of that.

And just a quick rider to that. CapEx for 2025 will still be around the $10 million range or you can get it lower after a bit of a pickup now in this fiscal year?

Yes. I think it's seemingly that sort of $10 million-ish range. I'm not sure it will go a lot lower. I think that represents about the level which I would expect us to track it. We're certainly a little bit ahead of that for the first half of this year as we've got a number of projects in place, but I would expect us to be a similar level next year, Roger.

Well done in the economic circumstances, if there is a recovery, it should have a boomer in calendar '25, is that right?

We're with you, Roger.

That brings to the end of our Q&A. Thank you all for joining us. Just while I've got everyone here, I wouldn't mind just doing a shelf out to the NZME team. It's been a big half. Everyone's tend to work really hard, and the team should be really proud of the results. As usual, there'll be a recording of this presentation on our website later today, but to our shareholders and those on the call, thanks again for your support of NZME. We'll be catching up with some of you over the coming days and weeks, and so, we look forward to that. We're also in our planning mode for an update to all shareholders at Investor Day currently planned for November, we will be able to present more of an update for 2024 and beyond and how we're going to deliver further on the strategic priorities in the 3-year plan we've laid out. Thanks again, everyone, for your interest and your support. Have a great day.