Australia’s faceless institutions have once again let the side down allowing dud PMP directors to be returned with more than 90 per cent of the vote despite last year’s $500 million loss that left the banks in control.

Serial board candidate and Crikey’s Fearless Leader, Stephen Mayne, threw his hat into the ring, as did printer Ian Milnes, a candidate with far better credentials than the corporate pest for this particular board.

Unfortunately, the instos voted for the old guard, so there was no blood spilt at board level, but the incumbents were given a decent boot in the pants, as was the board over the course of the two hour meeting.

Chairman James Donnelly seemed a nice enough old seppo, but his presentation skills at the AGM didn’t imbue this correspondent with great confidence in the leadership. Unfortunately, shareholders don’t have much by which to judge the competence of their board. The most obvious thing is annual results, the next is their presentation to shareholders at the AGM. On both counts Donnelly was uninspiring, even though he may hail from what once was the world’s biggest printing outfit in Chicago.

The chairman commenced his address by noting that the 2001 financial year’s results were unacceptable and that he “firmly believed” that the current situation is temporary. The chairman said that 2001 involved the company’s toughest competitive environment since their listing and their particular focus was on restoring the company to an investment grade credit rating.

And for about the 15th out of 15 AGMs that this observer has attended in the current season, the chairman sheeted home blame for the poor result on the GST and the post-Olympics slump.

The chairman said that the board’s preference was to have an Australian based chairman and they were working hard to achieve that end. Just who would want to jump on board this sinking ship is another question.

The chairman also noted that the directors had agreed to take half their fees in shares. The chairman later added that he in fact has reinvested all of his fees back into shares in the company. God save the shareholders of PMP if that policy is reflective of the chairman’s judgment on company matters!

CEO Bob Muscat told shareholders that he “shared your frustration in the decline in share price over the last year”. He considered that the company was a “viable, stand alone business with long-term growth potential”.

To paraphrase Arnold Jackson from Diff’rent Strokes (as played by Gary Coleman) “watchu talkin’ about, Mr M”?!

The banks have PMP by the short and curlies, advertising revenues show no sign of picking up (down 11.2% in 2001) and readers have been deserting their publications in droves (circulation down 8% in 2001).

Muscat claimed that the company had suspended their dividend payments to use the funds to reduce debt. This disingenuous claim of sound management was picked up by a shareholder, who noted that the banks and note holders now have security over the company’s assets and part of the re-negotiated debt instruments was that the company could not pay dividends until the banks let them.

Muscat outlined the numerous cost cutting and restructuring initiatives the company was undertaking, but the horse has bolted.

Questioning from shareholders was as hostile as one is ever likely to see, which is understandable when the price has gone from around $3 a few years back to languishing around 65 cents.

Muscat had noted that his reforms involved removing 5 levels of management, selling all “non-core businesses” and consolidating 21 brands into 3. One shareholder asked why it had taken the company so long to discover that they were over managed, had too many divisions and too many non-core businesses. Muscat gave an unconvincing answer along the lines of “these things take time” but that shouldn’t have appeased too many shareholders. The problems with PMP have been firmly entrenched for a long time and the board failed for years to realise them before too much damage was caused. Truth be known, Rupert sold the shareholders a pup.

Another shareholder asked why the board hadn’t called for Muscat’s resignation and how they could justify his salary. The chairman defended his CEO and said they would be doing shareholders a great dis-service by ripping up the management team. As far as Muscat’s salary was concerned, Donnelly stressed that this was based on the going rate in 1998 and Muscat had obtained no bonus and his options were “all under water” given the company’s poor share price.

The ASA’s representative asked why intangibles were valued so highly in the previous year and yet within a few months of year end they were being written down. Donnelly defended this on the basis that the company had just come off the post-Olympics high and at the time there was no reason to consider the mastheads would be worth considerably less.

One shareholder made the very sound point that in business there are “certainties” and there are unexpected events we knew the Olympics and GST were coming many years in advance and the company did not position themselves to cope with the inevitable downturn. Muscat gave the unconvincing explanation that the magnitude of these events’ impact on the economy was very unexpected.

In this humble correspondent’s opinion, the slump that occurred post-GST served only to highlight the deficiencies in PMP’s structure and board direction. Better run companies Harvey Norman for example have said their results are “not great” but a “good outcome” in adverse circumstances. The official line from PMP was that it was a bad result and we’re sorry but it’s not our fault blame the GST and the Olympics.

That is not the line one would like to hear from a board.

A long-suffering shareholder brought some director-speak chickens home to roost and quoted at length from the chairman’s addresses of previous years, which had said such things as “the company has a solid platform for improved earnings and future growth” and that “costs savings and internal efficiencies will come into effect”.

The shareholder concluded that on the basis of these statements the board had a serious credibility problem. Chairman Donnelly defended the previous year’s assertions and said that “we’re back to basics” and that they were now managing the company for a depressed economy, not a booming economy.

What a load of bullspittle!

But the chairman’s most confounding statement was that “we can’t do anything about the share price”!

Hey pal a couple of years of bumper profits wouldn’t hurt it!

One angry shareholder asked why the heck the company borrowed money to pay a dividend “even a housewife would know better than that”.

With all due respect to housewives around the world, it is grossly unfair to compare them to the nincompoops running PMP.

Two of those nincompoops were up for re-election against external candidates Ian Milnes and Stephen Mayne. The chairman disclosed the proxy votes prior to discussion and while the incumbents were returned with huge majorities, they didn’t achieve the usual 98 or 99% “for” votes, rather, their votes were around 91 and 92%.

This was an encouraging kick up the Khyber for the board as a whole, as obviously the smaller shareholders had gone to town en masse to lodge a protest vote.

When the chairman opened the floor for discussion, I said a few impassioned words in favour of the external candidates. I noted that while it was a fait accompli and while there would be no show of hands to for shareholders to publicly show their dis-satisfaction with the board, a “no” vote for the incumbents would send a loud message nonetheless.

Ian Milnes spoke well on his credentials, noting that his concerns and reasons for nominating for the board were the sad demise of the company and their current financial position. He noted that he would be only the second board member with extensive industry experience and that if the board which included two non-residents – were closer to the industry, they would have been able to prevent a good many of the troubles which now beset the company.

Some other shareholders spoke in favour of the external candidates. One noted that the vote showed a paucity of thought by institutional investors, another queried why the board didn’t endorse Milnes’ candidature yet they owned 50% of his company, another asked the board to consider making room for him on the board rather than forcing him into a contested election.

But it was all to no avail.

Sadly, shareholders in a company which has performed pathetically still could not effect change. The shareholders who bothered to turn up to the AGM would surely have voted for at least Milnes and possibly Mayne as well rather than giving the incumbents another run.

The proxies for Milnes and Mayne were roughly 15% and 10% in favour respectively.

But unfortunately the smaller shareholders don’t have a great deal of clout in the end result, it is those faceless institutional investors who have all the say and continue to endorse under-performing executives.

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