How Domain's update alarmed the whole media market; and Sanger exits The Market Herald - for now
Welcome to a midweek edition of Unmade. Today: Domain kicks off a rout in media stocks; and another development in the battle for The Market Herald.
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An end of year chill
The hurricane has been coming for a while. We may look back upon Tuesday December 20 as the day it finally arrived for the Australian media sector.
This week, the Sydney Morning Herald revealed that the November numbers from Standard Media Index - which tracks almost all of the advertising spend going through media agencies - hit a wall. Compared to the same month last year, metro TV spend was down 9.4%, newspapers by 26.3% (!) and radio by 7.1%.
Commercial Radio Australia put out its November numbers yesterday, which covered both agency and direct spend. They seemed to conflict with the SMI data (which won’t be officially published for a couple more weeks yet). According to CRA, overall radio revenue was down 1% in November, but worse in Sydney where the fall was 4% and Brisbane where the drop was 4.4%.
More significant than the specific CRA number though, was the signal that the post-lockdown boom has peaked after 20 consecutive months of growth for the radio industry.
But the real market-moving news came at 8.30am yesterday. Nine’s majority owned real estate platform Domain told the ASX that it was going to miss its earnings predictions.
In 2021 Domain made a $61m profit for the July to December half.
In 2022 it now only expects to make profits for the half of $48m. That’s a fall of 21%.
This is despite Domain cutting its costs by $6m for the half, with bigger cuts to come after Christmas.
As a result, Domain’s share price slumped by 9.1%, taking its market cap back to $1.64bn.
For the year to date, Domain is now down 55%.
Ten minutes after the Domain announcement, Nine - which owns 60% of Domain - put out its own update seeking to reassure the market that outside of the real estate sector, the rest of the group’s earnings are still on track despite an “increasingly challenging” ad market.
That may be because Nine and Seven West Media are still taking more advertising share than usual from Paramount’s Ten, which had a weak final quarter thanks to the ratings failures of The Challenge, Real Love Boat and The Traitors.
Nonetheless, Nine’s share price fell by 5.8% yesterday, taking it to what is close to a low point for a year. The $5bn organisation CEO Mike Sneesby inherited less than two years ago is now worth $3.16bn.
The downgrade rattled through the other broadcasters. Seven West Media also fell by 5.8%, despite not having issued any update itself. And Southern Cross Austereo, Ten’s main regional affiliate, lost 2.9%.
The contagion also spread to outdoor. Ooh Media fell by 4.55%.
Overall, the Unmade Index, which tracks the performance of the nine locally listed media and marketing companies dropped by 5.37%.
The Unmade Index is now back down to 611.6, only just above the 600-point mark which would indicate a decline in the index of 40% since its 1000-point opening at the start of the year.
Mind you, it wasn’t quite the worst single one day slump of the year. Back on June 14, the Unmade Index dropped by 5.97%.
Movements on stock exchanges can seem removed from everyday working life. But the movement of the share price is a signal on companies’ overall health, and CEOs are obliged to pay attention to it.
For advertising based businesses, the main lever that CEOs can pull during a downturn is to reduce costs.The Domain announcement was full of references to “cost saving initiatives”.
That means jobs.
Sanger departs TMH - but will he go quietly? (No)
Sticking with the Unmade Index, we saw The Market Herald’s founder Jag Sanger depart yesterday afternoon.
Shareholders the Argyle family had used the mechanism of Section 249D of the ASX rules to trigger a vote on whether Sanger should remain as director. Sanger has been placed on leave for the three weeks since, ahead of a shareholder vote in the new year.
But with only a day remaining until TMH would need to set a date for the vote, Sanger has resigned.
Sanger was the architect of the company’s strategy which saw the owner of finance forum Hot Copper pivot to financial commentary site The Market Herald, with plans to launch a weekly newspaper, and the new owner of Gumtree, Carsguide and Autotrader.
But he fell out with fellow board member Gavin Argyle, whose family owns about 40% of the company.
Don’t take from the ASX announcement the idea that the phrase “mutual agreement” means the two sides have made peace. There’s no comment from Sanger in there, which suggests the exit is anything but amicable.
Alongside the announcement came a final director’s interest notice, which revealed the size of Sanger’s own stake in the company.
He currently controls 13.5m shares in TMH. There are a total of 274m shares on issue. Which means that Sanger owns 4.94% of the company.
Under ASX rules, anyone who controls more than 5% of the shares can issue their own Section 249D notice to trigger a shareholder vote on whether directors should remain.
According to the notice, Sanger also has options on another 1.5m shares, exercisable before January 31. The options are priced at 32c each, a discount on the current 39c share price. That would take him over the 5% mark.
If Sanger has the appetite to fight on, one move would be to trigger a shareholder vote on directors Argyle and Alec Pismiris (who chairs the company and sits in Argyle’s camp).
This hypothetical vote would become a referendum on whether non-Argyle aligned shareholders support Sanger’s or Argyle’s vision for the company.
Regular readers of Unmade will recall that Argyle’s unique philosophy on management is that bosses have a lot to learn from the SAS, with soldiers apparently permitted to fight with one another if they disagree about strategy.
What will also focus minds is that TMH has until March 31 to find $60.1m to complete its purchase of Gumtree, Carsguide and Autotrader from Adevinta.
Meanwhile, I hear that the Sydney-based acting CEO Tommy Logtenberg, who came over as part of the Gumtree acquisition, recently visited the Perth headquarters of TMH, spent three hours meeting three staff, then left again, saying he wouldn’t be back until the end of January.
There is plenty more to play out in 2023.
Previous coverage:
The Market Herald saga:
Time to leave you to your day.
I’ll be back with more in the coming days. That includes 2022’s final Best of the Week on Saturday. And more, if interesting things happen in the meantime.
Have a great day.
Toodlepip
Tim Burrowes
Publisher - Unmade
tim@unmade.media
Hi Tim, Happy New Year! Considering it is an advertising business similar to Domain and is actually much larger and diverse, why don't you include REA (RealEstate.com.au) as part of the Unmade Media Index or report it's numbers?
Keep up the great work - Chris