TE WHAKAARATANGA O AOTEROA KI NGA RIANGI WHAKAATA KATOA INSPIRING NEW ZEALANDERS ON EVERY SCREEN

Transcription

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2 TE WHAKAARATANGA O AOTEROA KI NGA RIANGI WHAKAATA KATOA INSPIRING NEW ZEALANDERS ON EVERY SCREEN

3 CONTENTS Chairman s Introduction 04 Chief Executive s Overview 05 Financial Performance 10 TVNZ in Society 14 Performance and Engagement Measures 16 Financial Statements 20 Corporate Governance 69 Directors Profiles 70 Main Locations 71

4 4 CHAIRMAN S INTRODUCTION The company has had a good year and these are exciting times to be in the media industry. I am pleased to report a satisfactory result for the financial year ending 30 June TVNZ has recorded full year Operating Earnings of $27.9 million, and a Net Profit After Tax of $14.2 million, up from $2.1 million the previous year. This gives a return on shareholders equity of 9.2%. The result reflects a strong performance despite a variable and increasingly competitive market. The Board has declared a Dividend of $11.3 million. As in prior years, non-cash impairment charges have been added back to the after tax profit to arrive at that figure. The after tax profit of $14.2 million includes the impairment of assets held for sale, and impairment and remediation costs associated with the switching off of the analogue transmission service. The results also reflect a share of associates relating to the start up costs of the Igloo joint venture undertaken with SKY TV. As the incoming Chairman of TVNZ s Board of Directors, I have been in a position to observe the effort, creativity and diligence of management and staff at all levels in achieving this result something that provides a strong platform for the new era we are now entering. Our market has changed and with it, the nature of the game. There is no longer such a thing as a standalone Free to Air broadcast market. In a converged media market, which offers both huge challenge and huge opportunity, new definitions are required. We are urgently re-working our own role and the position we will occupy in a global age of highly-personalised, instantly available media consumption. The Board intends to take an active role in assisting the company to define its strategic direction during the transition from a chartered broadcaster to a full participant in an intensely competitive, wider media environment that goes well beyond what has traditionally been called broadcasting. A review is underway, and may prove to be a watershed in the evolution of TVNZ. Many of the traditional boundaries have blurred in recent times television people engage in print journalism, online publishers offer video, and everywhere there is competition for the advertising dollar from global players. To make our mark commercially while meeting the expectations of our viewers we will need to become more sharply focused, be willing to take a few risks, make new partnerships and examine ways to make better use of those resources and skills we already have. The company has had a good year and these are exciting times to be in the media industry. I have every confidence that the Company has the people and the capacity to continue to deliver good financial results while ensuring the most compelling content for mass audiences in New Zealand. Wayne Walden

5 5 CHIEF EXECUTIVE'S OVERVIEW Each year, TVNZ sets out its business priorities in the annual Statement of Intent. At the close of the financial year, the company is required to report on progress against these goals. While most of this year s work took place before I started as CEO in May, I am pleased to report the business has made good progress and delivered a satisfactory financial outcome for the year. This doesn t mean we get to rest on our laurels; the media environment is throwing up new challenges on an almost daily basis and we need to constantly adapt and keep pace with these media industry changes. While the coming year will be intensely busy the achievements against priorities over the last year are significant: 1. Grow commercial performance of TV ONE and TV2 TV ONE and TV 2 continue to be New Zealand's leading Free to Air channels delivering the vast majority of the programmes New Zealanders prefer to watch. Both channels exceeded all commercial and yield targets for the year, driven largely by strong local content on TV ONE and the continuing success of TV2, which has now held the lead in its targeted demographic of 18 to 39 year olds for an unbroken run of 44 consecutive months. The strength of the network s content was reflected in the annual Top 20 list 17 out of the 20 most popular shows during the year came from TVNZ. TV ONE's commercial performance has been underpinned by strong local shows such as ONE News, MasterChef New Zealand, Nothing Trivial, Food Truck, Country Calendar and the hugely popular New Zealand Sunday Theatre season including titles such as Billy, Tangiwai, Bliss and City Under Seige. It has also been pleasing to see the way New Zealand audiences have embraced quality natural history series such as Frozen Planet and Yellowstone was a special year for TV2 with the celebration of the 20th Anniversary of Shortland Street offering a range of special programming and unprecedented audience numbers. 2. Increase TVNZ s share of NZ On Air funding NZ On Air funding has allowed us, together with local production companies, to create a rich and diverse range of local content including acclaimed dramas Billy and Tangiwai, comedy such as Auckland Daze, popular factual series such as Foodtruck, The Politically Incorrect Guide to Grown Ups and Radar's Pacific and long form factual series such as NZ Detectives, Beyond the Darklands and Intrepid Journeys. Pleasingly we have been able to place more NZ On Air funded programmes in primetime, ensuring the maximum available audience for these outstanding shows. 3. Grow TVNZ s advertising revenues and be the preferred television and digital media company for advertisers and agencies TVNZ s advertising revenue was $313.7 million, up $9 million on the prior year. The company increased its share of television advertising revenue to 62.2% from 61.6% in the previous financial year and secured 92% of the TV market growth for the year ended 30 June Continue the profitable diversification of TVNZ and its activities During the year the company signed a joint venture deal with SKY TV for Igloo, a new pay platform due to launch towards the end of the 2012 calendar year. It s expected that this platform will bridge the gap between full cost Pay TV and Free to Air reception. TVNZ's Ondemand platform has experienced strong growth during the year, serving on average 1.9m streams to more than 400,000 unique browsers per month. Distribution of the platform is being extended to more devices as technical testing is completed and the ongoing success of TVNZ Ondemand is expected to provide future options given the impending UFB roll out. TVNZ's digital pay channels - Kidzone24 and Heartland - continue to perform very well, consistently over-achieving audience targets. Heartland consistently reaches well over 800,000 viewers each month. TVNZ's digital-only Free to Air channel, TVNZ U, now reaches audiences of more than 1.5 million each month. Market research confirms the channel is perceived as being significantly the most focussed on young New Zealanders, and by far the most strongly connected to social media.

6 6 Kevin KENRICK, TVNZ CHIEF EXECUTIVE

7 Photo: NZ HERALD 7 5. Continue transformation to a consumer and customer focussed organisation TV One and TV2 s channel demographic targets were closely examined during the year to ensure they were best placed to maximise performance and revenue. As a result, we repositioned the channel brands more firmly within their core revenue demographics and adjusted content to reflect consumer needs within these targets. onenews.co.nz was launched as a separate url destination for news loyalists, and TVNZ Ondemand has evolved from a catch- up service to a primary viewing destination option. TVNZ Heartland was rejuvenated in September 2011, moving the channel to a more contemporary brand position. 6. Address unprofitable and uneconomic TVNZ business activities, and continue process and cost efficiency initiatives across the company The sale of the Avalon complex was negotiated on a conditional basis during the year, and this became unconditional in September The ownership transfer to Avalon Holdings will take place in March There are cost efficiencies from the move of the Good Morning programme from Avalon to Auckland in January 2012, and more will follow on settlement of the sale agreement. Last year TVNZ designed a new versatile studio facility capable of handling both Good Morning and the One News stable of programmes. It handles high volume throughput; does not require sets to be changed between shows; has improved efficiency through automation of cameras, and fast turnaround in graphics and lighting. In summary, the year has been a good one which has reinforced the company s position as New Zealand s leading Free to Air broadcaster and digital media company. To hold our position and grow in a dynamically evolving media market will require even more of us, and my initial observation as a newcomer to TVNZ is that we are absolutely up for it. Kevin Kenrick

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9 9 NZ On Air funding has allowed us, together with local production companies, to create a rich and diverse range of local content. SUNDAY THEATRE, 'Rage' TV ONE

10 10 FINANCIAL PERFORMANCE TVNZ has reported a Net Profit after Tax of $14.2 million; this is a $12.1 million increase on the prior period. Television advertising revenues were $313.7 million, an increase of $9.0 million on the prior year. TVNZ secured 92% of the television advertising growth in the year and has a 62.2% share of the total television advertising market. Government funding revenue continues to decline due to TVNZ 7 being the only digital channel funded in the current year and fewer government funded programmes being broadcast in the current year. The government funding for TVNZ 7 ceased on 30 June 2012 and the final broadcast of TVNZ 7 was on this date. The insurance settlement for the losses relating to the Christchurch earthquakes in September 2010 and February 2011 were concluded during the year. The current year insurance receipt covers lost earnings, additional costs of business and the loss of plant and equipment. The prior year insurance receipt relates to the loss of buildings in the Christchurch earthquakes. Underlying earnings of $27.9 million decreased by $3.9 million on the prior year. Increases in the costs of television programming, particularly overseas sourced programming, were the primary driver of lower earnings. The management and staff at TVNZ have maintained a disciplined approach to managing costs of the business while focusing on improving the performance of our channels and digital media activities. A $5.7 million asset impairment and remediation charge has been included in the current year accounts. This includes the estimated costs of the Group s obligation to decommission its analogue transmitters and make good the sites; the impairment of analogue assets and frequency licences that will be obsolete post analogue transmission switch off and the impairment of the Avalon assets held for sale has also been recognised. The share of associates results relate to the start-up operation costs of Igloo Ltd. TVNZ declared a dividend of $11.3 million, to be paid at the end of September. As in prior years, non-cash impairment charges were added back to the after tax profit when calculating the dividend. Financial measures FY2012 FY2011 Measurement Actual Target Actual Profitability Return on average equity (reported earnings) 9.2% 9.1% 1.3% Return on average equity (normalised earnings)* 12.5% 9.1% 12.3% EBITDA/core television revenue 16.2% 12.5% 17.5% Gearing Net interest bearing debt/net interest bearing Debt plus equity 6.1% Less than 40% 6.1% Financial Stability Total equity/total assets 63.5% More than 40% 67.5% Interest cover EBITDA/interest expense 31.5 times More than 4 times 19.6 times * Normalised earnings excludes net tax effect of financial instruments/foreign currency gains/(losses), associate earnings, asset impairments and income tax changes.

11 11 PERFORMANCE measures The following set of measures demonstrate efficiency and productivity at TVNZ. Return on programme investment Programme cost increases, mainly overseas sourced programmes, have increased at a higher rate than revenues. This has resulted in a lower yield than the prior period but better than budget. Measurement FY2012 FY2012 FY2011 Actual $000 Budget $000 Actual $000 Aggregate programme revenue 1 348, , ,670 Programme amortisation cost 199, , ,440 % programme cost of revenue 57.3% 58.4% 56.0% Business efficiency non-programme costs Non-programme costs as a percentage of revenue are consistent with the prior year. The small increase in non-programme costs reflects increases in staff remuneration and depreciation. Measurement FY2012 FY2012 FY2011 Actual $000 Budget $000 Actual $000 Total revenue 381, , ,896 Total non-programme costs 154, , ,645 % non-programme costs to revenue 40.4% 39.5% 40.4% Note 1: Aggregrate programme revenue includes advertising and sponsorship revenue, programme funding, licensing revenue. Revenue productivity employees There has been a small increase in revenue per full time equivalent (FTE) staff member from the prior period. The small increase in FTE s have been offset by a comparable increase in revenue. Measurement FY2012 FY2012 FY2011 Actual $000 Budget $000 Actual $000 Total revenue 381, , ,896 Employees (FTE) Revenue per FTE

12 SHORTLAND STREET cast, TV was a special year for TV2 with the celebration of the 20th Anniversary of Shortland Street

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14 14 TVNZ IN SOCIETY TVNZ s unique place in the homes of the nation as a primary source of information and entertainment carries with it a responsibility to seek to have a positive influence in society. This is expressed through care for the environment, community support and high standards as an employer. ENVIRONMENTAL SUSTAINABILITY TVNZ remains committed to reducing its impact on the environment. Waste management and energy efficiency initiatives have been the key factors in reducing TVNZ s carbon footprint in FY Electricity Usage A number of initiatives are in place to help reduce electricity usage. This year we commenced a programme of replacing old technology fluorescent lights throughout the Television Centre with new LED alternatives. This project has been supported with funding from the Energy Efficiency and Conservation Authority (EECA) Total electricity consumption for FY2012 at 12,700,472 kwhrs represented a saving of 5.8% compared with the previous year. 2. General Waste to Landfill Recycling materials and thereby reducing the volume of waste transferred to landfill is a key objective in TVNZ s ongoing environmental sustainability efforts. A focus on e-waste during the year has helped reduce the amount of general waste transferred to landfill to 84.2 tonnes, 13.6% less than the previous year. 3. Vehicle Fleet The strategy of replacing petrol fuelled vehicles with diesel alternatives is proving successful in terms of reducing carbon emissions as well as costs. During FY2012 a further 13 diesel vehicles were added to the fleet in place of petrol powered vehicles. This means that 61% of TVNZ s vehicle fleet is diesel powered. 4. Air Travel The number of air kilometres travelled by TVNZ staff on International and Trans Tasman routes reduced in FY2012 by 68% over the previous year. However due primarily to the consequences of the Christchurch earthquake and its aftermath Domestic air kilometres travelled increased from 2.1 million in FY2011 to 5.9 million in FY2012. COST SAVING During FY2012 TVNZ has been an active participant in the All of Government (AoG) Procurement initiatives relating to: Vehicles Multifunctional devices Desktops and Laptops Mobile voice and data Fuel We will continue our participation in areas that are identified as having the potential to provide cost savings for TVNZ. SPONSORSHIP This year TVNZ varied its usual Community Support Foundation sponsorship structure to undertake a joint engagement along with NZ Post for just one recipient Water Safety New Zealand. Over the years TVNZ has provided many millions of dollars of free air time to organisations that reflect important aspects of Kiwi life. This helps them to promote their services and drive fundraising activities. The relationship with Water Safety New Zealand is for two years, and aims to help the organisation make an impact on the country s unacceptably high rate of drownings. CAPABILITY Many aspects of Capability, as it relates to development of individuals and strengthening of company-wide capacity, are covered in the Good Employer section of this report. However a particular development this year has been the establishment of an in-house creative and production unit, titled Blacksand. The primary role of TVNZ Blacksand is to support the company s own requirements, but as a major broadcaster the company has a unique range of skills and facilities available under one roof, which can mean cost efficiencies for external clients where spare capacity is available.

15 15 GOOD EMPLOYER TVNZ is serious about its responsibilities as a good employer. Since 1992 the company has been a member of the EEO Trust a not-for-profit organisation charged with providing Equal Employment Opportunity information and tools to employers, and with raising awareness of diversity issues in New Zealand workplaces. The Human Rights Commission has established seven key elements that identify a good employer, which are discussed below: 1. Leadership, accountability and culture TVNZ continued its strong leadership development programme for high potential staff, and has begun a refinement of the Performance Framework for staff assessment, which fosters a work culture of high achievement and accountability. During the year a values framework was launched, identifying four personality attributes of the company We love what we do, Succeeding Together, Make Things Happen, and Mad about New Zealand. The selection of these attributes is aiming for alignment between culture and strategy. This year, TVNZ also offered a very successful week of lunchtime lectures by prominent personalities on the subject of Leadership - designed to encourage employees to consider and explore their own potential in this field. 2. Recruitment, selection and induction TVNZ has a multi-layered induction programme which is regularly reviewed. Job vacancies are always advertised internally to facilitate internal promotion where possible. 3. Employee development, promotion and exit Besides the previously mentioned refinement of the Performance Framework for staff assessment, which also requires an individual employee development plan, there are multiple ongoing training opportunities. Among these are a robust programme of training for sales staff, training in new technology and multi-skilling, and specialist journalist coaching. 4. Flexibility and work design TVNZ supports good design methodology in the creation of roles. As a 24 hour 7 day business, a culture of flexibility is inherent, and is reflected in a substantial number of part-time and casual positions, a positive approach to work/life balance and familyoriented activities. There is a high quality child care centre on site. 5. Remuneration, recognition and conditions TVNZ has a transparent and published remuneration framework, with remuneration clearly linked to performance. There is significant investment in high performers. An employee engagement survey was underway at the close of the financial year and action plans from the results are under development. A structured recognition programme is being formalised. 6. Harassment and bullying prevention HR employees across all business units are trained in handling complaints. TVNZ has a published policy and protocols on harassment and bullying. Clear policy has been provided regarding conduct required while using social media. 7. Safe and healthy environment TVNZ s focus in this area is on both physical and psychological wellbeing. The company offers an Employee Assistance Programme as well as outplacement support during times of change. Subsidised gym membership is available, as is a subsidised cafeteria offering healthy options. TVNZ s health and safety environment is audited annually by ACC as part of the Accredited Employer Partnership (AEP).

16 16 Performance and Engagement Measures These measurements provide an indication of output, viewership and public interest in TVNZ s programming across all genres. Engagement measures Average monthly cumulative audience: 3,899,300 people aged 5+watched a TVNZ channel in an average month in FY2012, representing 96% of the 5+ population (Source: Nielsen TAM, consolidated) Online measures Average monthly number of unique viewers of TVNZ Ondemand streams was 401,634 - up 30% compared to FY2011. (Source: Nielsen Net Ratings, Site Census) Average monthly number of unique browsers for TVNZ overall website was 1,893,252 - up 10% compared to FY2011. (Source: Nielsen Net Ratings, Market Intelligence) TVNZ Ondemand average monthly stream views have also shown strong growth jumping 38% compared with the same period last year: TVNZ Ondemand FY2010 FY2011 FY2012 Average Monthly Stream views 1,293,160 1,363,393 1,887,682 Year on Year % increases 5% 38% COMPLIANCE WITH STANDARDS AND CODES Formal Complaints The Broadcasting Standards Authority (BSA) is responsible under the Broadcasting Act 1989 for administering standards in programming and presentation of programming. All formal complaints must be first made in writing to the Broadcaster (with the exception of allegations concerning privacy). Complainants may refer their complaint to the BSA if they are not satisfied with the outcome of the TVNZ process. TVNZ ONDEMAND: WEEKLY STREAM VIEWS 700, , , , , , ,000 Week 27 Week 29 Week 31 Week 33 Week 35 Week 37 Week 41 Week 43 Week 45 Week 47 Week 49 Stream Views Week 51 Week 1 Week 2 Week 3 Week 5 Week 7 Week 9 Week 11 Week 13 Week 15 Week 17 Week 19 Week 21 Week 23 Week 25 July 09 - Jun 10 July 10 - Jun 11 July 11 - Jun 12

17 17 In the period under review, TVNZ answered 1155 formal complaints less than in the previous year. Of these 1155 complaints, 29 were upheld by the TVNZ Complaints Committee complaints upheld (182 for 2 programmes) 1839 (1752 for 3 programmes) 29 In FY2012 the BSA handled 59 referrals about TVNZ programming a decrease of 24 referrals on the previous year (referrals are counted per programme). Of these 4 were upheld by the BSA* referred 83 referred 59 referred 12 upheld 12 upheld 4 upheld* * 10 referrals have yet to be determined by the BSA. AWARDS AND RECOGNITION AFTA Awards For an unprecedented fourth year in a row, TVNZ s ONE News took the Best News award at the annual AFTA Awards. TVNZ also won 3 out of the 4 News and Current Affairs Craft awards for the second year in a row. In all, TVNZ people and programmes won a total of 17 awards. People s Choice and Industry Awards Public voting secured a noteworthy 16 awards out of a possible 25 in the annual TV Guide Best on the Box awards. At the 2011 Netguide Awards, tvnz.co.nz was named Best Entertainment Site, and for the second year in a row public support identified TVNZ as one of New Zealand s top three most attractive employers in the survey conducted by specialist recruitment and HR service provider Randstad. TVNZ was also awarded a Silver at the CAANZ media awards for the Best Use of Content (The Mix). The Promax Australasian Awards recognised TVNZ s creative services in a wide range of genres: Best News - ONE News GOLD Best Use of Social - Shortland Street Summer Fling GOLD Best Directing Masterchef NZ SILVER Best Reality Masterchef NZ SILVER Rocket Award for Producing / Editing Anastasia Doniants BRONZE / PLACE Best Public Service / Community - Conservation Week BRONZE / PLACE North BRONZE / PLACE Rocket Award for Design Ben Stoner - GOLD The Promax (NZ) Awards: Best Special event promo Rugby World Cup GOLD and SILVER Best TV image campaign TV ONE brand GOLD Best TV image promo TV2 brand talent SILVER Best News promo ONE News - SILVER Best Themed campaign ONE News and TV ONE Rugby Word Cup GOLD and SILVER Avid Best Editing MasterChef NZ - SILVER TVNZ also took the Disney international Award for Excellence in Marketing. One of the biggest winners was Breakfast s Tamati Coffey, whose name was attached to three wins.

18 18 TOP 20 PROGRAMMES FY2012: Total People Channel Avg Aud Ratings 1 RWC 2011 Opening Ceremony TV One 1,157, RWC 2011 Live TV One 1,015, Naughty Shorty 20y of Bloopers TV2 697, RWC 2011 Final Live TV One 687, Border Security TV One 658, One News TV One 653, RWC 2011 Closing Ceremony TV One 649, Dog Squad TV One 648, Border Security (R) TV One 642, Global Radar TV One 636, The Food Truck TV One 636, Highway Cops TV One 634, Hyundai Country Calendar TV One 631, RWC 2011 Semi Final Live SKY Sport 1 620, Fair Go Ad Awards 2011 TV One 610, The Force TV One 602, RWC 2011 Final Live SKY Sport 1 600, RWC 2011 Live TV3 596, Border Patrol (R) TV One 594, The Queen's Diamond Jubilee TV One 593, out of 20 were TVNZ programmes FY2012: All people Channel Avg Aud Ratings 1 Naughty Shorty 20y of Bloopers TV2 279, RWC 2011 Opening Ceremony TV One 228, RWC 2011 Final Live TV One 226, The Big Bang Theory TV2 218, Shortland Street TV2 214, Two and a Half Men TV2 210, Neighbours At War TV2 202, Ghosts of Girlfriends Past TV2 196, RWC 2011 Final Live SKY Sport 1 192, The Blind Side TV2 191, Broke Girls TV2 187, My Kitchen Rules TV2 183, RWC 2011 Live TV 3 183, $#*! My Dad Says TV2 179, Police Ten 7 TV2 179, Rescue 1 TV2 172, RWC 2011 Final Live TV3 171, Random Breath Testing TV2 169, Fast And Loose TV2 170, The Big Bang Theory (R) TV2 169, out of 20 were TVNZ programmes

19 19 FY2012: All people Channel Avg Aud Ratings 1 RWC 2011 Opening Ceremony TV One 507, RWC 2011 Live TV One 488, RWC 2011 Final Live SKY Sport 1 347, Naughty Shorty 20y of Bloopers TV2 334, RWC 2011 Final Live TV One 311, The Big Bang Theory TV2 311, RWC 2011 Semi Final Live SKY Sport 1 297, Two and a Half Men TV2 292, RWC 2011 Live TV3 287, Shortland Street TV2 289, My Bigger Fatter Gypsy Wedding TV One 291, RWC 2011 Closing Ceremony SKY Sport 1 285, Broke Girls TV2 274, $#*! My Dad Says TV2 277, RWC 2011 Closing Ceremony TV One 274, Neighbours At War TV2 265, RWC 2011 Quarter Final Live SKY Sport 1 256, Police Ten 7 TV2 256, RWC 2011 Final Live TV3 248, MasterChef New Zealand TV One 247, out of 20 were TVNZ programmes TAMATI COFFEY, RUGBY WORLD CUP 2012, TV ONE Photo: Petrina Hodgson, The Northland Age

20 20 FINANCIAL STATEMENTS Statement of Responsibility 21 Income Statement 22 Statement of Comprehensive Income 23 Statement of Changes in Equity 24 Statement of Financial Position 25 Statement of Cash Flows 26 Notes to the Financial Statements 27 Statement of Service Performance 55 Report of the Auditor-General 63 Five Year Trend Statement 65 Additional Information 66

21 21 STATEMENT OF RESPONSIBILITY The Board and management of Television New Zealand Limited are responsible for: The preparation of these financial statements and the judgements used in them. Establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting. In the opinion of the Board and management these financial statements fairly reflect the financial position of Television New Zealand Limited as at 30 June 2012 and its financial performance and cash flows for the year ended on that date. The Directors have pleasure in presenting the following financial statements for the year ended 30 June For and on behalf of the Board of Directors, Wayne Walden Chairman Alison Gerry Chairman, Audit and Risk Committee 28 September 2012

22 22 INCOME STATEMENT Group Company Notes $000 $000 $000 $000 Revenue Operating revenue 4 346, , , ,416 Government funding 18a 30,819 36,020 30,819 36,020 Insurance recovery - Christchurch earthquake 4,200 1,354 4,200 1,354 Interest income Gain on sale of property, plant and equipment , , , ,896 Expenses Programme amortisation 12 (199,596) (193,440) (199,596) (193,440) Employee benefits 5 (65,616) (63,724) (65,616) (63,724) Depreciation and amortisation 5 (22,964) (21,277) (22,964) (21,277) Transmission (20,687) (21,806) (20,687) (21,806) Marketing (11,243) (12,229) (11,243) (12,229) Other (33,807) (33,609) (33,807) (33,609) (353,913) (346,085) (353,913) (346,085) Earnings before interest, impairments, remediation expenses, financial instruments, associate, subsidiaries and tax 27,924 31,811 27,924 31,811 Interest expense (1,618) (2,702) (1,618) (2,702) Asset impairment and remediation expenses 6 (5,663) 0 (5,663) 0 Financial instruments/foreign currency (losses)/gains (457) 856 (457) Share of results of associate 14 (1,250) (9,417) 0 0 Impairment and provision of associate 14 (800) (8,257) (800) (8,259) Impairment of loan and investment in subsidiaries (10,256) Profit before income tax 19,449 10,978 20,699 10,137 Income tax expense 8 (5,242) (8,898) (5,242) (8,911) Profit for the year 14,207 2,080 15,457 1,226 The accompanying notes form part of these financial statements.

23 Statement of Comprehensive Income 23 Group Company Notes $000 $000 $000 $000 Profit for the year 14,207 2,080 15,457 1,226 Other comprehensive income/(loss) Net changes in the fair value of cash flow hedges (25) 25 (25) 25 Income tax on other comprehensive income 0 (8) 0 (8) Other comprehensive income/(loss) for the year net of income tax (25) 17 (25) 17 Total comprehensive income for the year 14,182 2,097 15,432 1,243 The accompanying notes form part of these financial statements.

24 24 Statement of Changes in Equity Share capital Cash flow hedge reserve Retained earnings Total Notes $000 $000 $000 $000 Group At 1 July ,000 (238) 14, ,281 Profit/(loss) for the year ,207 14,207 Other comprehensive income 0 (25) 0 (25) Total comprehensive income/(loss) for the year 0 (25) 14,207 14,182 Equity transactions Dividend paid in the year 0 0 (13,828) (13,828) At 30 June ,000 (263) 14, ,635 At 1 July ,000 (255) 17, ,055 Profit/(loss) for the year 0 0 2,080 2,080 Other comprehensive income Total comprehensive income/(loss) for the year ,080 2,097 Equity transactions Dividend paid in the year 0 0 (4,871) (4,871) At 30 June ,000 (238) 14, ,281 Company At 1 July ,000 (238) 14, ,281 Profit/(loss) for the year ,457 15,457 Other comprehensive income 0 (25) 0 (25) Total comprehensive income/(loss) for the year 0 (25) 15,457 15,432 Equity transactions Dividend paid in the year 0 0 (13,828) (13,828) At 30 June ,000 (263) 16, ,885 At 1 July ,000 (255) 18, ,909 Profit/(loss) for the year 0 0 1,226 1,226 Other comprehensive income Total comprehensive income/(loss) for the year ,226 1,243 Equity transactions Dividend paid in the year 0 0 (4,871) (4,871) At 30 June ,000 (238) 14, ,281 The accompanying notes form part of these financial statements.

25 Statement of Financial Position As at 30 June ASSETS Current assets Group Company Notes $000 $000 $000 $000 Cash and cash equivalents 9 5,376 4,341 5,376 4,341 Trade and other receivables 10 60,766 55,292 60,766 55,292 Programme rights - intangible assets 12 56,051 44,212 56,051 44,212 Property, plant and equipment held for sale 11 5, ,000 0 Inventories Derivative financial instruments Total current assets 127, , , ,157 Non-current assets Property, plant and equipment 11 83, ,383 83, ,383 Other intangible assets 12 18,536 24,102 18,536 24,102 Deferred tax asset 8 2, ,796 0 Derivative financial instruments Investment in subsidiaries Investment in associate 14 11, ,250 0 Other investments Total non-current assets 115, , , ,533 Total assets 243, , , ,690 LIABILITIES Current liabilities Trade and other payables 17 61,877 47,945 61,877 47,945 Deferred income 18 6,184 9,150 6,184 9,150 Derivative financial instruments , ,289 Provisions 19 4,721 2,341 4,721 2,341 Total current liabilities 73,440 60,725 73,440 60,725 Non-current liabilities Employee entitlements 17 1,840 1,828 1,840 1,828 Derivative financial instruments Provisions 19 3, , Deferred tax liability Loans and borrowings 16 10,000 10,000 10,000 10,000 Total non-current liabilities 15,306 13,684 15,306 13,684 Equity Share capital , , , ,000 Cash flow hedge reserves 22 (263) (238) (263) (238) Retained earnings 14,898 14,519 16,148 14,519 Total equity 154, , , ,281 Total equity and liabilities 243, , , ,690 The accompanying notes form part of these financial statements. For and on behalf of the Board, who authorise the issue of these financial statements on 28 September 2012, Wayne Walden Chairman Alison Gerry Director

26 26 Statement of Cash Flows Group Company Notes $000 $000 $000 $000 Cash flows from/(used in) operating activities Receipts from customers 347, , , ,131 Receipt of government grants 25,667 28,124 25,667 28,124 Interest received Payments to suppliers and employees (330,253) (313,456) (330,253) (313,457) Interest paid (1,623) (2,747) (1,623) (2,747) Income tax paid (5,795) (4,476) (5,795) (4,467) Net cash flows from/(used in) operating activities 23 35,750 44,682 35,750 44,690 Cash flows from/(used in) investing activities Proceeds from sale of property, plant and equipment Proceeds from insurance claim 510 1, ,190 Purchase of property, plant and equipment (6,311) (6,657) (6,311) (6,657) Purchase of intangibles (1,851) (2,114) (1,851) (2,114) Loan to subsidiary (8) Investment in and advances to associates (13,230) (2,290) (13,230) (2,290) Net cash flows from/(used in) investing activities (20,871) (9,829) (20,871) (9,837) Cash flows from/(used in) financing activities Repayment of borrowings 0 (26,600) 0 (26,600) Dividends paid (13,828) (4,871) (13,828) (4,871) Net cash flows from/(used in) financing activities (13,828) (31,471) (13,828) (31,471) Net increase/(decrease) in cash and cash equivalents 1,051 3,382 1,051 3,382 Net foreign exchange differences (16) (36) (16) (36) Cash and cash equivalents at the beginning of the period 4, , Cash and cash equivalents at the end of the period 9 5,376 4,341 5,376 4,341 The accompanying notes form part of these financial statements.

27 Notes to the Financial Statements Corporate information Television New Zealand Limited (the Company ) and its subsidiaries (the Group ) operate as a multi channel television and digital media broadcasting and production company in New Zealand. The Company is a limited liability company incorporated in New Zealand under the Companies Act 1993 and is wholly owned by the Crown. The Company is bound by the requirements of the Television New Zealand Act The Crown does not guarantee the liabilities of Television New Zealand Limited in any way. These consolidated financial statements were approved for issue by the Board of Directors on 28 September Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated. a) Basis of preparation The financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand (NZ GAAP) and the requirements of the Television New Zealand Act 2003, Financial Reporting Act 1993 and the Companies Act The financial statements have been prepared on a historical cost basis except for derivative financial instruments that have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged are adjusted to record changes in the fair values attributable to the risks that are being hedged. The financial statements are presented in New Zealand dollars ($), which is the Company s functional currency. All financial information presented in New Zealand dollars has been rounded to the nearest thousand unless otherwise stated. b) Statement of compliance The financial statements have been prepared in accordance with NZ GAAP. They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), and other applicable Financial Reporting Standards, as appropriate for profit orientated entities. The financial statements comply with International Financial Reporting Standards (IFRS). The accounting policies set out below have been applied consistently to all periods presented in these financial statements, unless otherwise stated. c) Changes in accounting policies and disclosures i) New and amended standards adopted by the Group There were no new or amended standards adopted during FY2012 that had a material impact on the financial statements. ii) Accounting standards and interpretations issued but not yet effective Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ending 30 June These are noted below. NZ IFRS 9 Financial Instruments This standard is part of a wider project to replace NZ IAS 39 Financial Instruments: Recognition and Measurement. The standard establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification will depend on the Group's business model for managing the financial asset and contractual cash flow characteristics of the financial asset. The existing NZ IAS 39 requirements for the classification for financial liabilities and the ability to use the fair value is accounted as follows: the change attributable to the changes in credit risk are presented in other comprehensive income, the remaining change is presented in profit or loss. If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss. The Group has not yet assessed the impact of this standard. The application date for this standard is for accounting periods beginning on or after 1 January 2015, the application date for the Group is 1 July 2015.

28 28 Notes to the Financial Statements (continued) c) Changes in accounting policies and disclosures (continued) ii) Accounting standards and interpretations issued but not yet effective NZ IFRS 10 Consolidated Financial Statements NZ IFRS 10 establishes a new control model and replaces parts of NZ IAS 27 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and SIC 12 Consolidation Special Purpose Entities. The new control model broadens the situations when an entity is considered to control another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority rights may give control. This could lead to more entities being consolidated. This change should have no impact on the Group s financial statements. The application date for this standard is for accounting periods beginning on or after 1 January 2013, the application date for the Group is 1 July NZ IFRS 11 Joint Arrangements NZ IFRS 11 replaces NZ IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities Non Monetary Contributions by Venturers. NZ IFRS 11 uses the principle of control in NZ IFRS 10 to define joint control, and therefore the determination of whether joint control exists may change. NZ IFRS 11 distinguishes joint arrangements between joint operations and joint ventures. NZ IFRS 11 removes the option to account for jointly controlled entities (JCEs) using the equity method or the proportionate consolidation method. JCEs that are joint operations are required to be accounted for by recognising the share of those assets and obligations. JCEs that are joint ventures are required to use the equity method. This change should have no impact on the Group s financial statements. The application date for this standard is for accounting periods beginning on or after 1 January 2013, the application date for the Group is 1 July NZ IFRS 12 Disclosure of Interests in Other Entities NZ IFRS 12 includes all disclosures relating to an entity s interests in subsidiaries, joint arrangement s (joint operations or joint ventures), associates and structured entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates, subsidiaries and structured entities with non controlling interests. NZ IFRS 12 is a disclosure standard and will not impact recognition and measurement in the financial statements. However the standard may impact disclosures. The application date for this standard is for accounting periods beginning on or after 1 January 2013, the application date for the Group is 1 July NZ IFRS 13 Fair Value Measurement NZ IFRS 13 establishes a single source of guidance under NZ IFRS for determining the fair value of assets and liabilities. NZ IFRS 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under NZ IFRS when fair value is required or permitted by NZ IFRS. Application of this guidance may result in different fair values being determined for relevant assets. NZ IFRS 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. The application date for this standard is for accounting periods beginning on or after 1 January 2013, the application date for the Group is 1 July d) Basis of consolidation The consolidated financial statements comprise the financial statements of Television New Zealand Limited and its subsidiaries at 30 June. Subsidiaries are those entities controlled, directly or indirectly, by the Group. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany transactions, balances and unrealised surpluses and deficits on transactions between Group companies are eliminated on consolidation. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Investments in subsidiaries are accounted for at cost, less allowance for impairment, in the separate financial statements of the Company. e) Foreign currency The functional and presentational currency of Television New Zealand Limited and its subsidiaries is the New Zealand dollar ($). Transactions in foreign currencies are translated to the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at balance date.

29 29 Notes to the Financial Statements (continued) e) Foreign currency (continued) Foreign currency differences arising on the translation of monetary assets and liabilities in foreign currencies are recognised in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. f) Revenue recognition Revenue is stated exclusive of goods and services tax (GST) and consists of sales of goods and services to third parties. Revenue from the sale of goods and services is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Key classes of revenue are recognised on the following basis: i) Rendering of services Revenue from advertising and sponsorship is recognised as income at the time of transmission. ii) Government grants Government grants are recognised initially as deferred income when there is reasonable assurance that they will be received and that the Group will comply with the conditions associated with the grant. Grants that compensate the Group for expenses incurred are recognised as income on a systematic basis in the same periods in which the expenses are recognised. Grants that compensate the Group for the cost of an asset are recognised as income in the income statement on a systematic basis over the useful life of the asset. iii) Other revenue Other revenue is recognised when the product has been delivered or in the accounting period in which the actual service has been provided. iv) Interest Revenue is recognised as interest accrues using the effective interest method. g) Income tax expense Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for taxation purposes. Deferred tax assets are recognised where realisation of the asset is probable. Deferred tax is measured at the tax rates that are expected to apply when the temporary differences reverse, based on tax rates (and tax law) that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. h) Leases Operating lease payments, where the lessors substantially retain all the risks and benefits of ownership of the leased items, are recognised as an expense in the income statement on a straight-line basis over the lease term. i) Dividends Provision is made for the amount of dividend declared on or before balance date but not distributed at balance date. j) Property, plant and equipment Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes the cost to acquire the asset and other directly attributable costs incurred to bring the asset to the location and condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Items of work in progress are transferred to the appropriate class of property, plant and equipment on completion. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

30 30 Notes to the Financial Statements (continued) j) Property, plant and equipment (continued) Depreciation is calculated on a straight-line basis to allocate the cost of assets over their estimated useful lives. Land and work in progress is not depreciated. The estimated useful lives for the current and comparable period are: Buildings 40 years Plant and equipment 3 to 10 years Motor vehicles 5 to 10 years Impairment The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit the asset belongs to. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash generating units are written down to their recoverable amount. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Where an item of property, plant and equipment is derecognised, the gain or loss (calculated as the difference between the net proceeds and the carrying value of the item) is included in the income statement in the period the item is derecognised. k) Intangible assets Programme rights Television programmes which are available for use, including those acquired overseas, are recorded at cost less amounts charged to the income statement based on management s assessment of the useful life, which is regularly reviewed and additional write downs are made as considered necessary. Programmes produced internally for the purpose of broadcast are initially recognised as intangible assets at production cost. Production costs only include direct costs associated with the programme. Programme rights are amortised on the following basis: (i) Certain programme rights including news and current affairs, sports and locally commissioned programmes are amortised on transmission. (ii) All other programme rights (movie and non movie programme rights) are amortised on a straight line basis such that all rights are amortised within a period not exceeding one year from the broadcast licence period start date. Frequency licences Frequency licences are recorded at cost less amortisation and impairment losses. Amortisation is calculated on a diminishing value methodology using the sum of digits over the remaining life of the licence, between one and three years. Other intangible assets Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific asset. These costs are amortised on a straight line basis over their estimated useful economic lives of two to ten years. Development costs Development costs on internal projects are only capitalised by the Group when it can be demonstrated that the technical feasibility of completing the intangible asset is valid so that the asset will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Any development costs capitalised are amortised over the period of the estimated economic life of the asset to which they relate. Where an intangible asset is derecognised, the gain or loss (calculated as the difference between the net proceeds and the carrying value of the item) is included in the income statement in the period the item is derecognised. l) Cash and cash equivalents Cash and short term deposits in the statement of financial position comprise cash at the bank and in hand and short term deposits with an original maturity of three months or less. For the purposes of the cash flow statement, cash and cash equivalents comprise cash and cash equivalents as defined above, net of outstanding overdrafts.