With News Corp gone, it is time to compare the AGM performances of Australia’s two biggest media companies – PBL and John Fairfax.
Having been to the annual meetings of both PBL and John Fairfax in Sydney last week, the contrast between the country’s first and second ranked media groups is illuminating.
PBL is dismissive of Fairfax and its culture to the point where it is missing the differences and their importance, while at Fairfax, there’s still the cringe about the Packers, the monsters at PBL and the alleged vengeful return of John Alexander from PBL to Fairfax to settle a few scores.
It’s the stuff of media and investment banking conspiracies. But having been to both meetings, the difference is stunning.
Fairfax, for all its reflexive cringing about PBL, is a more confident and open company, even if the board and CEO Fred Hilmer still don’t fully understand the businesses they are in.
For all the management speak, clumsiness in media matters and bean counting at Fairfax, it is a more open and transparent company.
And the difference is to be found in the way the board approached Friday’s annual meeting.
Fairfax chairman Dean Wills got tough with and gagged shareholder activist (self styled) and bothersome bore, Jack Tilburn. James Packer was courteous, but quietly aggressive with our Jack. Dad Kerry’s partly line was a surly, arrogant “get rid of you” jibe to Tilburn.
And you could imagine the horror and mutterings at PBL had an employee had the guts to stand at the AGM and ask difficult questions about pay deals and bonuses of the chairman and board like senior Sydney Morning Herald reporter Anne Davies did at the Fairfax meeting.
Judging by the body language at the PBL meeting on Wednesday, questions like those asked by the courageous Davies would have been regarded as an affront and the asker’s card would have been ‘marked’.
That is not with any knowledge, that’s merely based on understanding the culture at PBL towards difficult questions from underlings and issues like disclosure and transparency.
At the Fairfax meeting, Davies’ questions were answered in a courteous way, and she was taken seriously by the board and shareholders.
At PBL the dearth of questions from shareholders other than ‘Mad Jack’ showed the contentment perhaps, and also the cowering nature of the PBL culture and the Packer reputation.
The difference in approach, openness and transparency is quite illuminating for the country’s two biggest media groups, now that Rupert has gone to Delaware.
Dean Wills’ address to Fairfax shareholders had more information than James Packer’s address at PBL about current business conditions, guidance on earnings, news on dividends and a bit on strategy, especially in Melbourne.
Shareholders would have left the Fairfax meeting better informed about most parts of the business (but not, amazingly, about the loss of classified advertisements from the company’s papers to the internet). At PBL shareholders left the meeting no better informed about how the company and its businesses were travelling than when the meeting started 65 minutes earlier. Talk about open air mushroom farming!
James Packer merely read a version of his chairman’s address in the PBL annual report. It was not informative, there was little in the way of news (apart from a new magazine in the UK, but no mention of a new one this week in Australia, nor plans to sell out of the Australian Financial Services Group (Wizard) and an interesting senior management change at Burswood Casino.
No guidance on earnings but a trumpeting of the improved dividend payout during the year, of which the Packer family is the single biggest beneficiary.
But even there Fairfax was ahead, having gone past the 60%-plus pay ratio of PBL to a payout ratio now of 80%, which will help drive the share price higher.
But the greatest difference between the two companies was that CEO Fred Hilmer addressed the meeting and talked to shareholders fairly extensively about what the strategies were, how the businesses were going and what lay ahead, especially with the cross media law changes that might happen next year.
The Fairfax share price has been heated by the election win of John Howard, especially in the Senate and the chances of those change in the media ownership laws.
In contrast, PBL CEO John Alexander sat there and didn’t say one word to shareholders. Perhaps he’s not allowed to by the Packers. Certainly the predecessor, Peter Yates was gagged from making speeches by Kerry Packer on most occasions.
But even Yates managed to slip a word or two in to the media somewhere after the AGM. Alexander sat there Tuesday looking as smug and as content as the Packers did. Not a very informative sight.
That way you can’t question what he and the Packers believe the company will be doing, but you could take issue with what Fred said in his address.
But that’s not the point, there was no speech from the PBL CEO to ask questions about, although shareholders did have their chance. Information was not freely offered.
That is the point is about openness and transparency. At PBL it is observed, not practised. At Fairfax there’s a greater transparency, but it’s what was said that was at times, quizzical.
For example Fred thanks the staff for their contribution, as did chairman Dean Wills. But it took those two questions from Anne Davies to expose concerns in the Sydney editorial staff of the SMH, Sun Herald and The Australian Financial Review about a pay deal going sour, more staff cuts to come and pressure on costs.
The board, and Hilmer, couldn’t see the absurdity of him and other managers being paid bonuses when staff in the Australian publishing businesses above a certain income level, missed out because revenue and costs targets were not met.
It didn’t matter than executives responsible for this area didn’t get bonuses, their pay is structured in such a way by the board that they are kept happy by receiving bonuses from other parts of Fairfax where they have responsibilities. The explanation was that by removing the silo approach and making executives responsible for more than just the businesses they were operating in, it made the company more cohesive as a whole.
But publishing staff offered bonuses had no such ‘flexibility’ offered by managers. So while the managers have been ‘de-siloed’ the publishing staff remain in their silos.
Where’s the sense in that? And to top it all off, the ill feeling was added to by the Fairfax board seeking and winning approval for a lift in non-executive pay by $800,000 to $1.5 million.
Several other things from the meeting stood out. Fred and the board still do not understand that people buy newspapers predominantly for the editorial content, not the ads.
His comments that 80% of the revenue from the papers comes from ads and not from the cover price shows the true aim of his and management’s focus, and their biggest weakness, and where someone like Packer would add value.
And why do people buy newspapers for the ads, we hear you all ask? And it is not a chicken and egg argument.
There were a few mentions about platforms, cross selling and cross promotions, but little in the way of editorial highlights for the year except for a couple of good stories in the AFR (Rivkin Swiss banking, for example).
There was no mention of good stories in the Sydney Morning Herald or The Age, especially the coverage of Melbourne’s gangland wars, but lots and lots of management speak.
The crowning moment for Fred though came in a boast that you would not hear publicly from anyone at PBL.
Referring to the New Zealand newspaper businesses the company bought from Rupert Murdoch more than a year ago (and the bagging it got from PBL and its mouthpieces), Fred said that if he wanted to sell today, “they would be worth many hundreds of millions of dollars than we paid for them”. And the purchase price was just over $NZ1 billion. Who would be a possible buyer or buyers was not mentioned.
Fred revealed that the NZ businesses will make around $165 million on an EBIT basis, while the Australian businesses will make around $240 million plus. That’s an increase of more than 50% over the past two years.
Shows the poor management at News Ltd here and in New Zealand. They just had no idea how to make those NZ papers better and more efficient businesses. Dopes! How simple it has been for Fred and the lads from Fairfax. It also makes a mockery of the mockery from PBL and the Packer camp – especially James Packer’s recent claim that News Corp are the world’s best newpaper operators. Not in New Zealand they weren’t.
And finally we have the issue of circulation – down in Sydney, up in Melbourne. But despite the fall in sales in Sydney, “readership share of Sydney market improved”, shareholders were told by Fred.
An inexact science is readership.
Or, as one shareholder asked: “Circulation down, readership up. Doesn’t add up!” Llike so much at Fairfax. But at least you have a chance to do the sums, unlike PBL!