Welcome to a midweek edition of Unmade.

It’s your last chance to get a ticket to our retail media conference, RE:Made. The event takes place in Sydney tomorrow. If you want to get a half-day crash course in the most talked about industry sector of 2023, then you’ll need to be there. Buy tickets today or miss out.

TMH updates the market

Given the turmoil inside the board room, it would not have been a surprise if The Market Herald had struggled to get out its half yearly update on time.

But, just as earnings season was coming to a close, TMH’s update trickled out yesterday.

It was always going to be a difficult one to make sense of. The company which owns market forum Hot Copper bought Gumtree, Carsguide and Autotrader from Adevinta in October last year. That makes year-on-year comparisons almost meaningless.

A lot has happened since then. CEO Jag Sanger was ousted just before Christmas. Adevinta gave TMH an extension until the end of May to pack the $60m it’s still owed on the deal (the money had been due at the end of this month). Shareholder United Investment Ltd complained to the Takeovers Panel that fellow shareholders the Argulye family had not properly disclosed their full interests in the company. None of this stuff has been resolved.

The topline of yesterday’s announcement was that the company had made revenues for the July to December half of $33.7m and EBITDA (earnings before interest, taxation, depreciation and amortisation) profits of $6.5m.

But that only accounts for two-and-a-bit months of the contribution of the new acquisitions.

But what is clear, is that the company is going to need more outside investment to pay what it owes Adevinta, despite last. month’s capital-raising issue of new shares.

Yesterday TMH said it had appointed Gresham Advisory Partners as a “strategic adviser to provide advice to the board on strategies to maximise the value of the group and capitalize on existing growth opportunities.”

That could mean anything, but the two most likely options are that the company is weighing up selling either Gumtree or Carsguide (which was always an option) or preparing for a harder conversation about its balance sheet. Typically, board’s bring in advisory comapanies when they’re looking for a transaction of some kind, and they want potential players in any deal to know about it.

This would all be would be hard enough if the two largest shareholders weren’t locked in a battle for control.

The detail of the accounts reveal a few more things.

If TMH had owned the classified sites for the full half, they would have contributed EBITDA profit of $3.8m on revenue of $43m. That’s surprisingly small considering the brand fame of Gumtree in particular. It looks like Gumtree was losing steam even before the change of ownership.

There’s another spin-heavy paragraph. There’s no dividend for shareholders “as the company remains in a growth period”. Which is one way of saying that it cannot afford to pay one.

Interestingly, the one part of the business showing a loss for the half year is the financial news masthead the overall company gets its name from, The Financial Herald. This division lost $735,000, the accounts showed.

While TMH had $9.7m cash in the bank at the end of the year, it owned a total of $71.9m, mainly to Adevinta. It also has current tax liabilities of $4.5m, along with a further $5.2m of deferred tax liabilities.

In total the company has $112m of liabilities as of December 2022. The balance sheet still shows the company as a going concern though, with $168m in assets. That includes $111m worth of “intangibles” (think the value of the brands, customer goodwill etc). If ever the company needed to write down the value of those intangilbes,the calculus would look different.

By the time the next half year update emerges towardds the end of August, TMH will be a very different organisation. The complaint to the Takeovers Panel should have resolved the control question. The loan from Adevinta should have been paid back, or Gumtree moved on again in a fire sale.

I’m sure the board and shareholders are hating all the bad publicity the ASX reporting spotlight brings. It wouldn’t entirely be a surprise if TMH is no longer a listed company by then.

A dip on the Unmade Index

The Unmade Index edged lower again yesterday, dropping by another 0.52% to 655.4 points.

However, it was a day of much more mixed sentiment.

Ooh Media saw the biggest fall, of 2.45%. But audio players HT&E and Southern Cross Austereo both rose, by 5.19% and 4.43% respectively.

Nine saw a fall of 1.27%, while Seven West Media rose by 1.22%.

Time to let you get on with March.

The Unmade team is getting ready for a busy day tomorrow with RE:Made. Hopefully we’ll see you there.

And we’ll be back in the morning with an audio-led edition of Unmade. We’ll be talking TV trends with the boss of Think TV Kim Portrate, and one of the most respected audience experts in the market, Steve Weaver.

Have a great day

Toodlepip

Tim Burrowes

Publisher - Unmade

tim@unmade.media