SWM annual meeting: Kerry Stokes defends performance and Warburton’s pay

Seven West Media (SWM) chair, Kerry Stokes, has defended the pay and performance of managing director and CEO, James Warburton at today’s annual general meeting.

“It is in the board’s opinion and my personal opinion that he is not overpaid,” said Stokes. “He is paid for performance, and considering the problems we faced with the pandemic and other issues, hitting the company at the same time, James’ dedication and resolve have enabled us to get to where we are now, and I am very pleased with that progress.”

Stokes also told shareholders via the virtual meeting that the board believes that the short-term incentive outcomes for executives this year are “fair and appropriate” and reflect the “strong performance against both financial and non-financial performance metrics,” including significant progress in its transformation strategy.

Source: SWM AGM presentation

The ASX-listed media company has seen its share price fluctuate in the past 12 months from lows of $0.10 a share to over $0.50 a share.

The recent price spike came after the announcement by SWM last week that it would acquire Prime Media Group for roughly $130 million in cash.

Warburton’s current total remuneration inclusive of superannuation and salary sacrifice benefits is $1.35 million. His short-term incentive is $1.35 million at target, and $2.025 million at maximum. His long-term incentive is equal to his base.

The board has proposed to provide Warburton with 3.047 million Performance Rights to acquire shares in the company based on a FY22 long-term incentive grant value of $1.35 million, divided by the five-trading day VWAP of the share price following release of FY21 full-year results ($0.4430).

Martin Currie analysts Patrick Potts said the remuneration for Warburton was lower than that of his predecessor, although was of interest given it is roughly the same as that of Sneesby, despite the market cap difference.

Nine Entertainment Co’s new CEO Mike Sneesby is on a base similar to that of Warburton, at $1.4 million. Nine currently has a share price of $2.99, and a market cap of $4.99 billion, whereas SWM has a market cap of $852.58 million.

Potss added that Warburton and the SWM management had “turned around” the organisation in recent years.  “He has cut costs, he has invested in digital ventures, which was sorely needed.

“Its [SWM] cost base was too high, and they were carrying far too much debt.”

According to Warburton, the company’s BVOD offering 7Plus is performing “very strongly” in terms of growth in both audience and advertising revenue.

“7Plus increased its revenue 78% during FY21 and saw its share of the BVOD ad market increase by 4.8 points. Seven Digital’s EBITDA has soared since FY18, with a compound annual growth rate of 110%,” said Warburton during the annual meeting.

On the recent acquisition of Prime by SWM, Potts said that the higher share price was no doubt to ensure that major investors would agree to the sale, although a normal premium on such takeovers was closer to 20%-25%, not the 57% that SWM has agreed to pay for Prime.

He also expressed some concern over whether SWM could maintain current performance in its core TV ad revenue streams, and whether those were sustainable, off the back on new and developing digital offerings.

“They have runs on the board, but they need to continue to execute on their strategy,” he added.

During the AGM it was also revealed that SWM received $25.7 million in JobKeeper benefits in FY21. According to Stokes this payment, “relieved us of having to make hundreds of staff redundant”.

“SWM was limited in its ability to stand-down staff even in periods where we were seeing greater than 50% revenue declines,” he added.

He also said that close to $8 million of the JobKeeper received is returned to the ATO as tax payments. In contrast, Nine received $8.24 million in JobKeeper payments in FY21, and repaid $7.88 million. SWM has not repaid any.

A shareholder also asked during the meeting when dividends would be re-instated and when the board was going to “do something for the ordinary shareholders?”

Stokes responded: “I think we are doing something for the ordinary shareholders by improving performance. There is no question that there have been issues, particularly from COVID, before COVID the company had a plan in place which would have seen most of those issues resolved.

“It put the company in a very difficult position, and the share price reflected the difficulties we faced.

“I’m confident that we will see this year, where we will see the company’s share price recognised for the work that has been done… I expect we can look at dividends again at the end of this financial year.”


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