NZME Limited (NZM) Earnings Call Transcript & Summary

Good morning, and welcome to New Zealand Media and Entertainment's 2025 Annual Results Webcast. I'm Kelly Gunn, General Manager Communications at NZME. Presented on the call today is Michael Boggs, our Chief Executive Officer; and Jo Hempstead, our new Chief Financial Officer. [Operator Instructions] I will now hand over to our CEO, Michael Boggs.

Hi, everyone. Good morning, and thanks for joining us today. As Kelly just mentioned, I'm joined this morning by our new Chief Financial Officer, Jo Hempstead. So joined us less than 1 month ago, she's really hit the ground running coming into the business just as we report our full year results. I look forward to introducing Jo's or many of you in person in the coming days and months. Now on to the presentation, which you will see on the screen in front of you if you're joining us webcast. I'll start this morning by taking you through some of the highlights from across the business in relation to some of our key focus areas before taking you through our top-level results. I'll also talk a bit more about what we're seeing in terms of the market as well as consumer and business sentiment trends here in New Zealand. Jo will then present our financial results for the year. Before I go over further detail on each of the divisions, it's OneRoof audio and publishing. I'll then be able to provide an update on how we're tracking so far in 2026, and then Jo and I will be happy to answer any questions you may have for us. So let's move on to Slide 3. Importantly, each of our businesses delivered strong performances in 2025. This is despite the broader market backdrop. I'll be able to give you some deep insights into these shortly. We invested in innovation, particularly with OneRoof and video-led news offerings, and we launched Herald NOW and iHeartCountry to align with changing audience behavior. 2025 was a year of disciplined governance and financial management trends. We remain tight cost control while continuing to invest in areas critical to our long-term strategy. ensuring we balance near-term performance with long-term value creation. Our balance sheet strengthened materially during the year, providing increased flexibility to support shareholder returns. We had a strong return to statutory profit in 2025. Impact was $13.1 million. This compares to a $16 million loss in 2024. This included a $24 million intangible asset impairment last year. Operating revenue was $345.1 million, which is 1% below 24% on face value, about that reflects our strategic [indiscernible] in 2024 to close the 14 unprofitable computer community -- sorry, newspaper times. When you strip those out, our underlying revenue was actually 1% higher year-on-year. This is a good result given a challenging economic backdrop. Operating EBITDA came in at $62.3 million. This was a 15% increase over last year's $54.2 million. and acceleration of growth in the second half of 2025 was actually delivered. This reflects the work done right across the business to focus on both revenue and cost improvements. You'll see operating NPAT was $17.7 million with earnings per share of $0.94. That's up from $0.065 in 2024. As I mentioned earlier, our balance sheet is in excellent shape. Net debt has reduced, and our leverage ratio has dropped below our target range of 0.5 to 1x EBITDA. That gives us real flexibility to pursue growth opportunities should they arise and support shareholder returns without compromising our financial discipline. The Board has declared total dividends of $0.09 per share. That's consistent with 2024. This currently fits within the dividend policy of paying dividends between 50% and 80% of free cash flow and this is a total payout ratio of 67%. This reflects our confidence in the business and NZME's commitment to returning value to shareholders. EBITDA growth was broad-based across the group, highlighting the benefits of NZME's diversified portfolio. One roof EBITDA grew by 32%. This was supported by continued digital revenue growth and improving operating lease bridge. Audio delivered a strong result with EBITDA up 23% and driven by much stronger profitability in the second half of the year come 2024. Digital Publishing EBITDA increased by 31%. This reflects cost discipline and improved yield management. And finally, Print publishing remains resilient and declined by only 2% despite the ongoing structural pressures on the business. Let's turn to the trading environment, where 2025 remained challenging for much of the year. Elevated inflation and interest rates continue to weigh on business and consumer confidence, and advertising demand, particularly first half. Encouraging, though, conditions improved in the latter part of the year with business and consumer confidence beginning to recover. While global uncertainty and domestic cost pressures remain, the momentum heading into 2026 has improved. This next slide brings together a lot of important information about NZME's audience scale and how that scale translates into revenue. We continue to reach around 9 out of 10 New Zealanders each month across our print, digital, audio, podcast and property. That [indiscernible] reaches a core strength of the group, giving us a diversified revenue base across subscriptions, advertising, audio and property listings. Starting with OneRoof, digital listing revenue continued to grow strongly through the year. This was driven by higher upgrade rates and improving yields, even though overall property market listing volumes remained subdued. In audio, digital audio revenue increased year-on-year supported by continued growth in streaming and podcast consumption. Turning now to Publishing. Digital subscription revenue increased modestly, reflecting continued subscriber growth and this was offset by lower individual yields as a growing number of subscribers are onboarded and retained. At the same time, digital advertising revenue declined year-on-year. It's important to be clear that this decline was not purely market for. A meaningful portion reflects a deliberate reduction in low-margin digital performance market. While that decision reduced revenue in the short term, that improved overall margin quality and supports more sustainable earnings over time. The key takeaway from this slide is that this is strong audience scale, improving revenue quality and deliberate long-term bad choices. With that context in mind, I'll now pass over to Jo to move into a more detailed discussion of the financial results. we'll talk you through how these operating dynamics flow through to earnings, cash flow and balance sheet outcomes. Over to you, Jo.

Good morning, everyone, and thank you, Michael, for the warm welcome. It's certainly a pleasure to be here. While I am new to the role, the story and NZME's results is clear. In a still challenging market, indeed, may delivered a strong improvement in underlying profitability. This reflects disciplined cost management and improved performance across our core operating divisions. I'll start with operating revenue, which declined slightly on a reported basis, largely reflecting the closure of community publications in December 2024. After adjusting for those closures, normalized operating revenue increased 1% year-on-year. Operating expenses reduced by 4%, driven by savings initiatives implemented early in the financial year. and a continued focus on cost discipline across the group. As a result, operating EBITDA increased by 15% compared to the prior year. Depreciation increased as capital investment continued to shift towards shorter life digital and technology assets. Operating NPAT increased by 46% year-on-year and operating earnings per share rose to $0.094, demonstrating improved earnings quality and a challenging market backdrop. I'll move on now to explain what changed underneath the headline revenue number between 2024 and 2025. After adjusting for the closure of community publications, underlying operating revenue increased, OneRoof, digital revenue and audio advertising were positive contributors, particularly in the second half of the year. These gains were partly offset by declines in digital, programmatic and digital performance marketing revenue, reflecting both market conditions and our deliberate reduction in low-margin activity. Core digital and print advertising revenues were broadly stable on a like-for-like basis. The next slide shows how we delivered a $13 million reduction in operating expenses year-on-year. People costs declined following restructuring and savings initiatives implemented early in the financial year. Print and distribution costs reduced in line with lower volumes and the exit of community publications. Selling and marketing costs increased modestly due to a higher agency max. Third-party fulfillment costs reduced significantly following the reduction in performance marketing activity. and nonrecurring expenses relate primarily to restructuring undertaken in the first quarter to deliver sustainable ongoing savings. The full annualized impact of these savings will be recognized in 2026. Moving on to the balance sheet. The balance sheet strengthened materially during the year. Net debt reduced by $8.6 million to finish at $15.5 million driven by improvements in operating earnings and lower tax payments. Working capital improved and leverage finished below our target range, providing resilience and flexibility going forward. On the next slide, you will see that cash flow from operations increased to $50.4 million. This again reflects higher operating earnings and lower tax paid during the year. Capital expenditure reduced following elevated investment levels and digital product development in 2024. As a result, free cash flow increased significantly $25.4 million. supporting our ability to maintain consistent dividends and improving the strength of the balance sheet. As we look now to capital management, the strength of the balance sheet coming out of 2025 is a key outcome of the year. Net debt finished the year at $15.5 million, representing the reduction of $8.6 million compared to December 2024. And as just noted, this reduction is primarily driven by improved operating earnings and strong cash generation, supported by lower tax payments and disciplined capital expenditure. As a result, leverage finished the year at just 0.3x EBITDA, which is below our target range and provides significant financial flexibility. A fully imputed final dividend has been declared in line with our dividend policy reflecting both the strength of the balance sheet and the board's continued focus on shareholder returns. I'll now hand you back to Michael to talk in more detail about divisional performance.

Thanks, Jo. And let me now start with the OneRoof business. OneRoof continues to be one of NZME's most important strategic growth exits and is an increasingly important contributor to group performance and shareholder value creation. Throughout 2025, OneRoof execute against its strategy with a clear focus on digital growth, yield improvement and it will move into 2026 by strengthening product and engineering capability. You'll see that this progress was delivered despite a challenging real estate market, particularly in the first half of the year, when listings volumes remained subdued. What's important is that OneRoof performance is not solely dependent on market listing volumes. Growth is increasingly being driven by better monetization improved upgrade rates and the value that OneRoof can deliver to agents and advertisers. The next slide is a key proof point for the OneRoof strategy. In 2025, OneRoof delivered 19% growth in digital residential listings revenue. That compares with new market listings growth of approximately 3% over the same period. Market listings are still to return to historical averages. This level of outperformance to market reflects the higher grade conversion rates, the improved product mix and the strong yields rather than a reliance on listing volume growth alone. It demonstrates that OneRoof is continuing to take share and improve monetization even in a subdued market. We believe we have significant opportunity to continue to improve on every one of these metrics. Turning to the financial results for OneRoof from operating revenue increased by 5% year-on-year. As just noted, strong digital performance delivered 19% growth year-on-year. Unfortunately, print revenue declined by 19%, similar to what we saw in the first half of the year. We do not believe this is a permanent trend, and we expect a recovery in 2026 as the overall market improves. People costs increased during the year as we deliberately invested in sales capability outside of Auckland. These investments are targeted and designed to support future regional growth rather than short-term volume. Operating EBITDA increased by 32% with margin improving to 9% on a pre 16 basis. This margin expansion reflects revenue growth despite the high incremental margin print declines and improved operating leverage as the business continues to scale from a small profitability base. This next slide focuses on how OneRoof is balancing audience growth with inquiry quality. During the second half of 2025, marketing was deliberately refocused towards delivering high-quality and yeast agents. This is depicted by the orange dotted line on the chart. That approach has been effective in driving inquiries, although it did come at the cost of some short-term audience growth, which is depicted in the solid orange line. In 2026, initiatives are focused on sustaining inquiry growth while accelerating audience growth through improved product experience and functionality. I'll talk more on this shortly. This next slide tracks OneRoof's progress against its key strategic priorities over time. As just noted, audience growth softened through 2025 as we deliberately focused marketing efforts towards delivering the high-quality inquiries to agents rather than the total audience numbers. To improve our audience experience and engagement, we are delivering a new mobile app in early. This will significantly increase the user functionality. In addition, we are in-sourcing our technology development team to allow us to speed up product and technology enhancements. We really have some exciting developments in the pipeline. Listing upgrade rates increased across both Auckland and the rest of New Zealand. With the improvement outside of Auckland, particularly important for long-term diversification. We are focused on accelerating the upgrade trajectory through the strong agency relationships that we have built. The revenue mix continues to shift towards digital. However, we do expect a recovery in overall print revenues during 2016. EBITDA margins have improved again in 2 reflecting a business moving steadily towards scale and sustainable profitability. We expect further steady improvements in the short term with acceleration in the midterm for this business. The next slide looks beyond the historical performance for the future growth opportunity for OneRoof. Residential listings volumes in 2025 remain below the long-term historical average. This creates meaningful upside as market conditions normalize over time. Importantly, One Root's growth opportunity is multidimensional. It comes from listings recovery, continued improvement in upgrade rates and further yield growth through pricing and product innovation. This means OneRoof does not need a full market recovery to continue to grow its revenue and its profitability. So let's move on and talk about the upcoming OneRoof app, which is a key enabler of future growth. In fact, it's more than an update that's a completely new app proposition for our audience and our agents. The new app delivers an improved search experience, here are a value context through estimates and valuations and a more intuitive user interface. These enhancements are designed to increase engagement, encourage higher value actions such as inquiries and ultimately will support revenue growth. Mobile remains central to the OneRoof strategy, and this update is an important step forward for the OneRoof business. So to bring the OneRoof story together, the platform creates value for agents buyers and sellers by improving transparency, reach and access to the property market. Agents belted from higher-quality inquiries, buyers gained clarity and confidence and sellers benefit from improved exposure and competition. Profitability is expected to continue improving in the short term with acceleration in value creation over the medium term as scale, yield and product capability continue. So let's now turn to our audio business. Audio delivered revenue growth during 2025, with market share gains evident in the later half of the year. We saw agency revenues growing as their clients began to reinvest in the marketing spend during the second half of the year. During 2025, SMEs were still reticent to increase the spend. Digital revenues continue to grow, and they now account for 10% of total audio revenue. Broadcasting is no longer an emerging product brings in me. It's now firmly embedded as a meaningful convertor to digital audio revenue, and it sits at 31% of digital. Importantly, revenue momentum strengthened through the second half of the year, providing a strong foundation heading into 2026, and you'll see this in the market share on the left-hand side. Moving to the next page. Audio operating revenue increased by 5% year-on-year. The increase in selling and marketing costs reflects the higher agency revenue contribution. Operating EBITDA increased by 23%, reflecting improved revenue performance and further disciplined cost control. EBITDA margins expanded to 15% on a pre-IFRS 16 basis delivering a 4 percentage point improvement year-on-year. So this result demonstrates the structural improvement in audio's profitability as revenue growth and operating leverage continue. So let's move on to the audio business' key strategic priorities. NZME continues to have to work to do to increase overall audience share and then the resulting revenue share. We are making changes to key brands that we believe will improve overall audience engagement on our music brands. Our market-leading Newstalk ZB is also expected to benefit from the election cycle in 2020. Digital audio revenue as a percentage of total ad revenue continued to increase, reflecting the growth in streaming and podcast consumption. But this was at a slower pace given the strength of the broadcast radio revenue during the period. So we believe the 2026 initiatives position Audio well with continued margin improvement through increased revenues. I'll now turn to our publishing business, which continued its transition or a more sustainable subscription model in time. This transition is fundamental to improving the quality and durability of publishing earnings over time. During 2025, total subscriptions continue to grow with digital subscribers, including those who take a digital subscription with their print package, increasing to 86% of the total subscriber base. Digital subscriptions revenue has increased by 3% year-on-year. We're focused on increasing overall digital subscription numbers. These are up 10% year-on-year. These are utilizing longer introductory offers to help subscribers build an engagement habit. We'll continue to focus on volume growth. And like we do with print, we'll move to higher revenue growth through ongoing yield management initiatives, particularly across the individual subscribers. Print subscriber declines did continue. However, it's important to note that declines moderated in the second half of the year with yields continuing to grow. Turning to the financial results. Publishing operating revenue declined by 6% year-on-year. Excluding the closing of the community newspapers at the end of 2024, the overall reduction was 2%. Pleasingly, the print advertising revenues adjusted for the closure of communities grew by 1% year-on-year. We'll go into the product split further on the next page. The overall revenue decline was more than offset by disciplined cost reductions that you can see in total across the division. As a result, publishing EBITDA increased by 9% and demonstrating improved operating leverage again and a more resilient earnings profile. The next slide breaks publishing performance into digital and print components. Both components have delivered margin improvements. As you'll note, Digital Publishing delivered strong EBITDA growth and margin expansion driven by subscription growth and cost. The small increase in sales and marketing costs in digital relates to a shift in focus of New Zealand Herald advertising campaigns towards driving digital subscriptions. The print publishing business remained resilient despite ongoing volume ratio. This reflects effective cost management and a deliberate strategy to optimize the print business for profitability. We've turned our focus to overall revenue growth within the Publishing division, while we still have a strong focus on cost discipline. The next slide highlights progress against publishing key metrics. Digital subscription volumes continue to increase. We'll continue to focus on volume growth while increasingly moving to focus on ARPU improvement. Digital advertising now represents a greater proportion of total publishing revenue with solid plans in place to improve the digital advertising revenue contribution. These digital trends support improved margins and reduced reliance on the more volatile advertising reverts over time. ongoing investment in product, data and productivity underpin sustainable long-term force. Our print business continues to deliver strong performance. We're continuing to simplify the operation which in turn is improving the business's long-term trajectory. The next slide illustrates why NZME continues to prioritize as subscription fee strategy. On the left, you can see the print advertising decline in 2025. This is substantially represented by the closure and the community publications at the end of 2020. Current circulation remains steady and is a key contributor to overall revenues. Digital revenues from both advertising and subscriptions continues to grow as a percentage of sites rooms. It now represents 42% of overall revenues. As you can see on the right, we have a significant opportunity to increase revenues by moving digital users from casual to engaged subscribed. As users move through these stages, the value they generate increases significantly. Subscribers deliver materially higher average revenue per user from their advertising and subscription revenues. It's pleasing to see this cohort of subscribed customers delivering a higher proportion of digital revenues, and they now represent more than half of the digital revenues. This dynamic underpins both revenue growth and margin expansion across the publishing business. I'll now speak briefly to the financial results for the corporate [indiscernible]. This includes group costs and our Beats business. As I just noted, the operating revenues within Corporate will reflect our invents business, which is leveraged within our regional communities. People and other costs increased modestly, reflecting changes in our senior leadership and it's normalized for incentive outcomes during the year. Just like within the operating business units, we continue to focus on how we can minimize overall corporate costs within the business. So to summarize this year, NZME delivered a strong set of results in 2025. Operating EBITDA increased by 15%. Profitability improved right across the group, and free cash flow strengthened materially. The balance sheet is robust with low leverage and significant financial flexibility. This positions the business really well as we look at it. So let me now finish with a brief outlook for 2020. We're cautiously optimistic heading into 2020 activity and sentiment improving. We do think this may be gradual given the local global estate. We are focused on continuing top line revenue growth. With this in mind, advertising revenues in the first quarter are currently tracking for growth of more than 3% year-on-year. As previously noted, savings initiatives completed in 2025 will be fully realized in 2026. Given these initiatives are only completed in the first quarter of 2025, these savings will deliver a further $3 million of impact in 2026. We remain absolutely committed to managing our cost structure. Through our review of all 3 operating divisions, we've improved divisional accountability for profitability growth and success. As you know, OneRoof expansion is at the core of NZME's strategic plan, and we expect to deliver improved profitability in the short term. We believe it has significant value creation that can be realized in the medium term. And finally, the Board is committed to creating shareholder value. As you will have seen, the balance sheet is very strong, and this supports strong dividend returns based on performance.

Thank you, Michael and Jo. Now we'd like to welcome any questions from shareholders and analysts. [Operator Instructions] Our first question is from Arie Dekker.

First couple of questions then. Just on -- you talked to the cost and investment focus and the accountability across the divisions as you look to continue to control costs I guess, obviously, we saw a stepwise reduction in costs and $25 million on those initiatives you implemented earlier in the year back into the previous, do you expect any major new cost-out programs in the business in FY '26? And if so, where would those opportunities most likely certain.

Arie, thanks for joining today. So there's nothing material that we have planned, although as you can imagine and as we mentioned, we are continuously looking for opportunities across the business. . One thing you will have picked up as well is, obviously, the $12 million of savings we made annualized last year, $3 million of that extra will flow into this year given we only recognized $9 million in the 2025 year. You also mentioned about the operating division. So one of the things you'll recall at the beginning of last year, we separated the OneRoof business, really have end-to-end accountability. We've done the same now with publishing and with audio within the business. So we have leaders accountable for each of those, where there's much entering accountability as they can have. I think the only thing that really goes across maybe audio and publishing as our sales teams because we think we can get -- currently benefit anyway by making sure we sell all products we visit a customer. So today, we're finding that really helpful. And I'm sure that those business leads will continue to look for, firstly, revenue growth; and then secondly, any cost efficiencies there.

Yes. And then just on outlook at both profitability and guess capital management as well. Firstly, just on operating profitability, would your base expectation be that will be higher than FY '25 and FY '26. And then on capital management, I mean, are you at this stage sort of signaling that you'll head back towards a net cash position in terms of the balance sheet.

Yes. So obviously, we haven't given any guidance for the rest of this year. But obviously, there's a couple of things. One is revenues at this stage are certainly improving, and they're up year-on-year, and we've got some of that cost flow-through from last year. So if those 2 things continue, you'd expect that to be an increase year-on-year. . And then just to your capital management, you all have seen that we've reduced back to around the $10 million of CapEx. That's sort of our normalized view, and there's no plans at this stage to be anything significantly different to that.

We now have a question from James Lindsay.

Thank you very much, and good morning tea. Well done on the result. A couple for me just to flow on from that, actually. Obviously, net debt at 0.3% EBITDA sort of under the range. Are there any sort of changes in your thoughts on the sort of industry economy or sort of AI risks that would -- have you taken a more conservative or more optimistic view of where the industry is relative to that 0.5 to 1x EBITDA range. .

Yes. I think we were pleased to be at the 0.3%. As you mentioned, it's below our target range. The Board at this stage hasn't reviewed whether the 0.5 to 1x should be reviewed. But I think at the same time, the I'm pleased to have a strong balance sheet, which ensures we have flexibility for -- should anything turn up that's worth looking at and there's nothing we're actively looking at, at the moment. . But importantly, ensuring we have strong returns for shareholders moving forward. So in a difficult environment, I think we'd all agree it's better to have a lower debt and higher debt. So it's been nice that that's been trending down over the last few years.

Got it. Yes. And then obviously, Audio had a pretty reasonable year, and you've given that first quarter step 3% growth in ad revenues. Can you sort of give us an indication about where that growth is being seen? Is that an audio as well as publishing or just that mix where it's being seen most.

Yes. Well, audio is still where we are seeing it the most. And as you will have seen in September last year through to December, we did see revenue market share gains. So that's pleasing to see. But the overall market is very strong from an audio perspective and continues to be the case. Having said that, we're continuing to see the growth in the other parts of the business. And so pleasingly, the year has started well. And we'd love to see that carry on in the year.

Yes. And that sort of flows on nicely to the sort of question and carrying on from Arie's question on operating expenses. With the sort of market recovering, does that -- have you got expenses to a level that you could actually just take your foot off pushing hard on that. and actually just see some leverage come through growth? Or are you still expecting to have to push quite hard at some stage in the latter part of the year on cost?

Yes, probably a twofold question on that one. So yes, more revenue would help us with operating leverage and help deliver our margins, obviously, through to the business. There's certainly no foot being taken off on costs. It's something we continue to look at. But there's nothing significant that we're looking at here right now and saying there's a big change program underway. But I can guarantee you, every dollar gets looked at it every day from a cost perspective.

Yes. Got it. And sorry, just one more quickly on the sort of mix. Previously, I think at the first half, you talked about the agency side of the business going pretty well and the SME was a bit weak. Have you got any sort of mix of the type of customers at large or SME or through agency that's seeing growth?

Yes. No, you're exactly right of what we talked about last year. So as we came into the last quarter of last year, we continue to see those larger agency based clients looking through media agencies, they continue to be the growth engine of revenue. We did see, though, in sort of the December, January time frame, so December last year, January this year, slowed down a bit, and maybe I can look at it from a retail perspective and go some of the sales at the end of the year maybe weren't as successful as they like to be. So they took their foot off the accelerator a bit didn't spend this much. But what we have seen in the first quarter of this year is the SMEs are back end market. They are spending with us. As now are in February and March, those large media companies booking through media agencies. So both are on the go and on the up as we speak, which is hopefully a good sign for the economy, but importantly, it's flowing through your business, which we'd like to contend you to see and see the growth.

Right. Thanks, Rich. I've got a few more, but I'll jump back on the queue.

Thanks, James. We now have a question from Roger Colman.

I've got 2 queries, right? One is the gap. Can you hear me now?

Yes, we can. Roger.

You've still got a 7% gap on listing volumes against Trade Me. That still gives people in score to visit their website. What are you doing about that?

Yes, Roger, I think that's a good question and something we're very focused on. Private listings are the biggest component of that. There's a very small number that are to do with listings through agents. And I think you'll see us addressing that this year because it's a gap we want to close.

Right. And the second question comes with the business test bundling with the general newspaper. 9 network Australia and also News Corp with the Wall Street Journal shows that if you want 25% to 40-odd percent EBITDA margins, they're only available in a financial online newspaper effectively. So bundling business starts with what is typically a teen margin in the general newspaper digitally, seems to be a losing proposition. What's your answer to that?

Yes. So business disk has actually been one of our growth -- biggest growth engines in the 2025 year. And it's been a key element of a number of subscribers coming to us. Now as part of the entry to the product, it's obviously been at a lower ARPU, but we do think it can be significantly more than a year or a it will be one that we're focused on increasing quicker than the Herald. . We are putting more focus and effort into business disk as well from an editorial perspective. So we think we'll have a much stronger offering as we go through this year because we do see it as a growth engine for the business.

I've just got follow-up questions later, but a short one now. With respect to breaking out the TV, Ryan Bridge at the water Concat of New Zealand, what plans long term have you got for the profit and loss for that division?

It's something we've considered recently actually is should it be a fourth division for the business. It's still in single-digit millions. We'd obviously like it to be double digits and large double digits. We have over 30 people in the business who have a video focus. And some of those are in audio, for example, but a number of those obviously are in the new broadcast programs that we're bringing. So we have a significant dose allocated that is profitable even with that resource. And again, it's an area that we believe we can expand. We're getting great engagement from our advertisers and people wanting to sponsor the current shows. We're extending it to have a business show now ahead of the Ryan Bridge show. So that's a new incremental product and we'll continue to look at growth overall and something that we think has got a good opportunity for the future for us.

We now have a question from Nigel, Jefferies.

Good morning, Michael, and hello to Jo, and congratulations on a good result. I'm interested in sort of in a wider context, the competitive positioning and the competitive environment, particularly as you think about audience share and advertising share. And we can show growth at a divisional level, but overall, we may be seeing a decline in our audience share and our competitive position because of other options that audience and advertisers actually have. So I'm interested in comments regarding what's going on globally, is more of a share going to social. We're seeing growth in digital TV globally. Do we still have a strong position as a country-centric business as we're up against some of these global players that have slightly different offerings. Yes, so it's sort of a larger strategic question, but interested in your comments on what you're up against and how you're positioning the business to compete in what is effectively a global set of offerings.

Yes, I think you're right, Nigel, those global competitors obviously remain really strong, and they continue to take the largest share of incremental revenue that's being spent on media. So they are significant competitors and continuing to get more significant. Our market share estimates or actuals are actually versus the New Zealand players because we don't get good insight into those overall global players. But a lot of our focus actually is around how we bundle our overall offering and take those to customers. And we have our create team, as you'll be aware of, which is really what's the problem our customers trying to solve? What's the advertising the solution they're looking for? And then we have our team put together an overall package, which has a creative element has a production element and then actually uses all of the assets of our business. So we think that's a competitive advantage to us. It's obviously an advantage to versus some of the global players. They just have technology, obviously, that we don't have access to. If I think about, say, though, our Herald platform, as you all know, and others on the call will know, we currently personalize a large number of the stories that are on the homepage, but they're personalized by cohorts as opposed to personalized to an individual. And so that's something we're just looking at is can we do better personalization. Can we do it for more stories? We obviously don't want people to be in an eco chamber, a little bit different to, if you're on a social media platform where you do end up in an echo-chamber. But we do think there's an opportunity for us to get better revenue share by more personalization and that help. The other thing we're just looking at is our ad load on our products. we're like to compare to many others and very light on our premium offering. So we're just looking at that from a, one, should we put more ads on some of those offerings? Or if you're a premium customer, could we charge more for having no ads. And so again, looking to either replicate offerings from overseas and looking to take a greater share in the market here overall. But back to the local market, you will have seen in the radio business in the last half of the year, we've started to increase our revenue share. We do think we need to improve our audience share to continue to increase that revenue share overall.

And just a follow-up question. Just interested in on cost pressure at a consumer end, I mean, we're hearing that there's a cohort of consumers that are spending $300 a month on streaming services and that will compete against the lack of subscription-based news type services. So are you seeing pressure at a consumer level? And is that static? Or is the pressure building?

Certainly haven't seen the pressure building. And in fact, we've started the year with a very strong subscription uptake. And so volumes coming. And the key thing for us, and I know you're an expert in this nodule is actually the pricing we now use on those. And as we get those clients more engaged, how do we improve the overall yield that we're getting from them. And we've got a large customer base now, both across digital and print. We've done a great job for many years on yield management, and I think that was the time to more focus on to the digital side so that we get a big share of that overall subscription revenue that's in the market across all products.

We now have some further questions from Arie Dekker.

Just on digital subscriptions, which sort of finished off there. I mean obviously, you're clear, you're sort of focusing on growing the subs more than the yield at this point. And I think you actually mentioned that you're looking to continue to focus on subscriber growth in FY '26. So I guess a couple of questions. How long before you look -- before we can see sort of yield and digital subs start to tick up again? Will you be able to get sort of double-digit subscriber growth this year, while also sort of at least holding yield because of that focus you just talked to. And then also there wasn't any progress, I guess, in corporate subs in FY '25 yield lift it a little, but not meaningfully. I mean, yes -- Is your view that you're better to actually focus on the individual subs and our expectations for corporate should be sort of muted? What are the plans there?

I think -- maybe I'll start with the corporates. And I think what we've seen a bit like our business is the market has been tough for everyone's business. So they've been really looking to see where can they save money. And so I think that's really been the reason for the subdued corporate. And I'd like to think that, that will improve as the business fortunes improve across the market. And so I don't see that as a flat line but that might take a little bit of time as businesses want to start reinvesting and where they're spending the money. On the consumer side, Yes. The biggest impact, as you noted that while subscription volumes are up 10%, the ARPU is actually not up like that. And so the thing I take a bit of hard from, and it's on the bottom right-hand side of Slide 33, is the subscription revenues and the advertising that comes from them is now 55% of our overall digital revenue. And we think we can continue to grow that even with the existing subscriber base. So you can see that other engaged group who are on average, only giving us $4 to $6. And that's about 40% of our digital revenues. And those are the ones who are ready to start moving up to subscribe because they are engaged. And so what you are seeing, obviously, is that subscribed piece is getting bigger. Those are engaged people coming over. We did actually see the casuals come down a little bit as they've moved in to engage. So I think that's the right trend. So we just need to keep that happening, but yield will be a key component moving forward. And the yield softening has been by putting more products into a bundle by putting more products into a bundle, we're getting better engagement. We're making them stickier and then we'll be able to move them up from a yield perspective.

And then some of the sort of overlaps with your response to Nigel's question. But just on digital advertising, where you were down $4 million or 7%, and there really hasn't been a lot of progress there for a while now in digital advertising in the publishing business. I mean you did you don't sort of refer to the removal of some low-margin party channels, but the amount of the revenue decline there looks like it's more than just that. So what should our expectations be for digital advertising revenues? I mean, is that just your the mercy of these structural changes and not much prospect of that sort of picking back up?

If you go to Slide 10, we do actually -- in the middle of it, we do actually break out that digital movement. So you can see there, programmatic advertising is down $2 million year-on-year. The digital performance marketing down 1.4% in the core digital down 1%. So maybe the programmatic. That's obviously the larger advertisers who are buying programmatically every day. That's something can be switched on and off at their whim and based on their budgets. So we're putting more effort into that. We put actually some improved resourcing into that. to help with that. So we do think we will see an improvement in the programmatic. I'm not sure we'll see an -- the return of the $2 million in this financial year we're in, but I definitely think we'll see some growth in that line. The DPM is obviously the one that we have removed because we're making very low margins on it and it cost us actually to deliver in addition to that. And then the core digital one is, again, that as it says at the core digital is down. I would expect that to be in growth again in 2026. So the programmatic and the core digital, I would say, a market perspective significantly large customers who have held off and I would expect those to return to growth.

Thanks, Arie. And James Lindsay had some follow-up questions.

Great. Thanks so much. At least a few on Slide 21, just with regard to 1 or, if I may. You've called out that short-term listings target, just keen to here other than potentially commencing private listings, as you sort of alluded to, what else are sort of the key changes needed to achieve those short-term targets given I suppose that Auckland residential listings upgrade actually has been relatively muted sort of growth more recently over the last 2 or 3 years.

Yes. Great. So the first thing we've done, and I know that you might not say this is an instant impact, but we have appointed a new Head of Commercial, he to sales for OneRoof. It's actually someone who runs our direct business out of the Wellington business at the moment. So she will still stay in Wellington, and we'll definitely have a big focus on our regional markets, but will also be accountable for the Auckland market overall. So it's a sales leader who's proven within the business. And I think we'll bring some real skill and experience working with our national sales team here. So that's one, I guess, from a people perspective that I think will be really helpful from we we've been in the past. The other thing is we've got a real focus at the moment on signing partnership agreements with each of the real estate companies. Now those partnership agreements are commitments from those agencies to upgrade a percentage and usually a very large percentage of their listings because they understand that -- it's an offering they can take to the customers. And therefore, it's good for us, for them overall. Betters -- our focus on doing that across the board. The only unfortunate thing is we have to go franchise by franchise as just the head office doing it. So that does take a bit of time, but we're having real good success on that right at the moment. So that's an area we think will show that continuing to increase.

And then just the definition of your short term. So is that sort of first half '26, you should be able to get that sort of mix.

No, I wouldn't -- short term, I would say, is a couple of years rather than a couple of months.

Okay. And just interested on that same slide as well. You've given that those sort of ARPU and package mix as well. Just how are in the market, are you hearing sort of agents and customers talking about either your pricing or Trade Me's property pricing about where they push it to?

We're certainly continuing to hear as we will look for the last couple of years about the trade me pricing being problematic and how they continue to put up prices. And I think that's some of the reason as to why we get some of the business. . And I would have mentioned this before, but we are seeing more and more where a real estate agent or recommend to vendor, maybe not taking the largest packages on the trade. And we still obviously being on a trade because they're nervous about not being there. but then moving up the packages of OneRoof. So that's a positive to us. But I think there's still some nervousness from dropping a trading together. They continue to put up their rates. They've had partnership programs for some time. So it's usually a double-digit rate increase, a large double-digit rate increase. But if you sign 1 of the partnership agreements, then is smaller double-digit increase. And so that is really hurting what the agency then have to do with the binders. So yes, I think we're getting more and more competitive. We've not put our base prices up. Many of our agents are charged below our base price, whereas, again, with the trade, they're just putting up their base prices all the time because most of the people are on full price. So -- not only do we have the ability to increase prices within our core rates. And at some point, we may look to what the core range is from an increase perspective.

I think your net debt might be slightly lower than their number as well.

Yes.

So on that same slide, you talked about market recovery as far as volumes. Just interested, when do you think that listings could return to that sort of more average level that we've seen historically?

You will have seen this year were up 3% on the prior year. And again, just to be clear, it's new listings coming to market as opposed to total listings on the market. So I think total listings on the market are nearly at some record highs or they have been over the last year. . So this is all about the new listings that come to market because that's the time we actually get to charge the money. And so I think the market's muted. I mean you have better productions and eye about it, whether it's improving or not. We keep hearing that people say the market is going to improve. And then I would think if the market's improving, we'd see more people bringing their properties to market because they know they'll clear. And so I think that's what's been holding us up over the last couple of years.

And you've mentioned, obviously, sort of potential trying to push for some ARPU growth inside publishing. Just interested in that mix versus print versus digital for ARPU growth?

Yes. So front overall, you will have seen the subscription revenues down 5% overall. That's about a 9% in volume and a 4% improvement in yield to that 5%. And that's been fairly consistent over recent years. So we are seeing clients continue to be pretty sticky but also continuing to take that yield improvement. And then on subscription revenues, you saw that we were 10% up in volume overall. Revenue is only up 3% and a little bit like I mentioned earlier, it's actually more products going into the bundle on average reduces the ARPU. But because they're having more products in the bundle, that's making them stickier and that gives us a better chance to increase the yield back to a more normalized level side, expect to see yield improving over this financial year.

All right. And last one for me. Just -- just interested in your view about how you're sort of seeing the AI situation at the moment. Are you viewing it as a revenue risk or more a sort of an efficiency benefit for the business for, say, the next 1, 2 or 3 years?

It's definitely a bit of both. So I mean, yes, there is revenue at risk, and I'm sure you see some of the summaries that you can get on these platforms now, which is stealing our news. But we also see it as a revenue opportunity. And we still have government talking about the fair news digital bargaining bill. That's not something top of mind for them at the moment. But even in recent conversations, it's still on the agenda and that would be beneficial to us from all players in the market. We do have discussions with a number of them around them being able to reimburse us for some of the content they're taking, but none of those are progress being anything to talk about right now. But anything the government does, I think, will quickly follow what happens in Australia. So we've certainly got a watching brief on specifically Australia, but what's happening around the world from actually gaining income from these organizations. And then on to the other side, we're absolutely using AI within the business. We just had a demonstration last week from one of our technology leads specifically on the OneRoof business, where AI is currently being used for development within that team. And it's a small example, but within 2 minutes, a substantial amount of code was able to be written on by AI, which would have taken 3 people, 6 weeks and probably $150,000 of cost to produce all done in 10 minutes. So the ability to use that across our business and across all business units, I think, is pretty powerful from a cost or a velocity of actually what we can bring to market.

We have a follow-up question from Roger Colman.

Okay. On the statement about net debt to EBITDA and the range, it's mentioned that the -- not so much capital management. Are you moving towards a more regular dividend pattern rather than individual capital returns.

Well, I think we've been pretty consistent on dividends over the last few years. There's been no new policy agreed by the Board. So I'd hate to sort of preempt anything they might think about or might decide. But I think continuing to pay strong dividends is important. We've got a strong balance sheet I'd like to continue, obviously, to see improved earnings, and I think that then would flow through to dividends.

Right. In respect of all the problems of maintaining copyright, and relying on the government to have legislation strong enough. But within the existing copy rights -- rights that you have, do you have to augment your legal team that hunt down copyright breaches similar to what NBR doing in respective subscriptions?

Yes. So I think probably taking some of these big players to call not be short-term winner for us, especially the size of the legal teams versus ours, but it's something that we definitely want to continue on. I think we're likely to see government talk about this and show support for publishers about this content being stolen. And I'd be very happy to hear them even just talking about it over the coming weeks and months is that it's something they want to look at. They're certainly saying it's something I want to look at I just don't think it will be something the side of an election that they'll be passing some legislation on, but there'll certainly be giving some commentary around it, I would expect to say these organizations better be coming and dealing with us. We have had -- we have had 1 copyright breach. And I can tell you our legal team did go and deal with it, and we did get a little bit of money for it. So it's a focus for us when we think it's the right time.

Thanks, Roger. And we have a final question from Nigel, Jefferies.

Thank you. Just picking up on my theme around audience and competitors just interested in specific comments around X. We saw that platform change hands. I think it was April 22, probably a year after that, they re-envisaged it. I think in some countries, it's probably the #1 news platform they do have an advantage given that it's largely user-generated content that the news coming through is faster and built quite a strong advertising platform. So interested in what you're seeing with X in New Zealand and how it competes against our news audience and whether you think that's going to be a net positive because we can put content on that or whether really it is building to be a substantial competitor for eyeballs for news content.

Yes, I think X isn't something that we see today anyway as a big competitor. But as you say, content going on there and advertising going on there may have an effect. I liken it a little bit to some of the social media platforms where we proactively do put our content on to those. There's good things and bad things about that. The good thing is that it brings people back to our site. Those are actually a large number of the casual users because they come and bounce out and aren't subscribers, but it does bring them we do get income of them, and it gives us a chance to know who they are and then try and turn them in to engage and turn them drivers. . The other thing, though, which I know our government didn't realize until recently, there's a number of these platforms, we're actually liable for the comments on some of these platforms if we've posted the content. So we have to put quite a bit of focus and we're using AI to do this to review every comment. I'll use Facebook as an example, someone putting a comment on something we've posted on Facebook is actually our liability currently. And so we actually review all of those comments to make sure that we're comfortable with what that's there so that we don't have promotion risk, as an example. So it's a bit of a double-edged sword, but at the moment, it's a net win given we can use AI to help us with reviewing those. All right. So that brings us to the end of the full year results. Thanks, everyone, for listening in today. As you know, we'll share a recording of this a little later today. And Jo and I will have the privilege and pleasure of meeting with you a number of you over the next few days or next week to give you further updates. So thanks for joining, and enjoy the rest of good day, everyone.