Where now for NZME?
Shareholders in media business urged to ‘take deep breath and count to 10’. Tom Pullar-Strecker reports.
Disappointed NZME shareholders promoting a motion to split up the media business at its annual meeting on Thursday say their main hope is to encourage a proper debate on the company’s future.
As rebellions go, the tussle over NZME’s direction appears a civilised and wellmannered affair.
But that may only be because the challenges ahead of NZME – and those of the media generally – appear so hard to solve, even to the combatants.
Shareholder Neil Parker has proposed a motion to break up the business, to try to realise the value of its mastheads ‘‘and encourage an ethos of shareholder wealth creation’’.
Fellow shareholder and supporter Howard Zingel said he agreed the ‘parts’ of NZME, which include the New Zealand Herald newspaper and website and radio stations including Newstalk ZB, were ‘‘more valuable than the ‘whole’.’’
Parker said NZME had not had a lot of success so far in using its cashflow from newspapers to build up a digital business.
‘‘I think NZME shareholders have been watching and waiting and nothing particularly great has materialised.
‘‘If they could sell some bits and pieces and get themselves to a more focused, simpler business maybe they would make a better job of what they have in front of them.’’
NZME chief executive Michael Boggs declined an interview ahead of his address to shareholders at the annual meeting.
But Parker said ‘‘in defence’’ of NZME’s management that he wasn’t claiming it would be easy to make a ‘‘great job’’ of a transformation.
‘‘They have got their work cut out, as evidenced by the sale of Stuff for one dollar.
‘‘That tells you that the whole media sector is a pretty difficult game to be in.’’
Indeed, Zingel said last month’s decision by Stuff’s Australian former owner, Nine, to sell Stuff to Stuff chief executive Sinead Boucher for just $1 had been a ‘‘bit of a shock all round’’.
Stuff’s management buy-out has dashed, for the foreseeable future, NZME’s hope of acquiring Stuff and then rationalising the combined business to boost profitability.
Zingel said Stuff’s sale price ‘‘also implied the business of NZME is not terribly valuable’’.
The rebel shareholders are speaking in measured tones, rather than bruising for a fight.
But that may not make the task facing Boggs and NZME’s board any easier when it comes to crafting their messages to shareholders on Thursday.
NZME has reduced its sizeable net debt from $98 million to $62m over the past couple of years by foregoing dividends, but the earnings that it needs to service and pay off the remainder of that debt have also been in decline.
And that was prior to the extra hit on advertising sales delivered by Covid-19.
Media consultant Gavin Ellis, a former editor of the NZ Herald, said a deal NZME struck with Westpac and the Commonwealth Bank of Australia last week to extend and increase its debt facilities to $110m had given NZME $48m of headroom. ‘‘It is not as if it can’t pay its bills.’’
But he noted that agreement came with conditions including a 0.9 percentage point increase in the interest NZME will need to pay on its debt and at least a 13-month extension on its dividend ban.
The banking facility will also reduce in steps to $75m by the end of 2022, potentially reducing that headroom.
Ellis said he wondered how much longer shareholders’ patience would last, given the suspension of dividends and the decline in NZME’s share price.
On top of that, Parker feared shareholders might be asked to support a ‘‘hefty rights issue’’ not too far down the track to raise cash.
‘‘Then we are faced with the decision of do we throw yet more money at this operation that has already lost a lot of our value?’’
Ellis said requiring NZME to sell off its radio business might be a tempting option for shareholders who wanted to realise some value from NZME before then.
But it would be ‘‘a difficult issue for the company to resolve’’ as any sale would make it harder to operate the remaining newspaper and digital business.
‘‘Anything that diminishes the ability of NZME to sustain itself is not in the public interest.’’
Broadcasting Minister Kris Faafoi is expected to announce new funding for the media within weeks.
That is expected to include extra cash for NZ On Air to subsidise some local news reporting in regional New Zealand and perhaps more long-form journalism.
But Ellis said that alone would be ‘‘at best a stop-gap measure’’.
He still hoped the Government would intervene by convening a ‘‘Bretton Woods’’ type conference to hammer out a new sustainable structure for the media industry.
‘‘If you let either NZME or Stuff fail you are going to fundamentally devalue the fabric of our society.’’
In the meantime, Ellis hoped NZME’s beleaguered shareholders would ‘‘take a deep breath and count to 10.’’
With the Shareholders Association choosing not to back Parker’s motion, that is likely to be the short-term outcome.
But that won’t mean the reassurances that NZME’s board are likely to provide investors on Thursday will have been believed.
‘‘Companies have to show faith in themselves,’’ Parker says.
‘‘Very seldom do the senior executives say ‘actually we think it’s a long shot’.’’
But he says it is hard to imagine it will be a cheerful meeting.
‘‘Shareholders haven’t had anything to be cheerful about that I’m aware of.
‘‘It would be disappointing if there wasn’t at least a debate.’’
‘‘NZME shareholders have been watching and waiting and nothing particularly great has materialised.’’ Shareholder Neil Parker