Public

Ten Network Holdings (TEN) 2015 AGM Voting Intentions

Company/ASX Code : Ten Network Holdings Limited (TEN)
Registry : Link Market Services
Poll/Show of Hands : Proposed poll on all items
Webcast : Yes
Venue :
10am Four Seasons Hotel
199 George St
Sydney, New South Wales
Monitor : Mr Allan Goldin
AGM Details / NoM : Thursday 17th December, 2015

This company is monitored by Mr Allan Goldin and Ms Carol Limmer.

ASA Position
Not Applicable
Item 1: Consideration of accounts and reports

Has Network Ten turned the corner? No, they didn’t make a profit, but their loss is lower. However the big news is they increased revenue share and ratings (however that is measured) against Nine and Seven for the first time in years. 

Very importantly the gain, only in a small part came from sporting fixtures, was almost entirely by growth in Australian produced programs - new ones such as Family Feud, I’m a Celebrity Get Me Out of Here, the Bachelorette and the Great Australian Spelling Bee. Success with existing ones such as The Project, The Bachelor and the surprise big hit of the long running Masterchef.

Like the other free to air networks, Ten has decided to write off a big portion of its television rights - in Ten’s case $50 million worth – so there is no goodwill left in Australian television. However in an interesting departure from the other two major free to air networks, Ten currently will only undertake occasional live streaming of TV to all our mobile devices and it does not have a share in a Streaming Video on Demand service, but does have the rights to pick up a piece of one in the future (Presto).

The composition of the Board is very interesting and will be revealed at or just before the AGM. What we know is that it is planned that there will be the Independent Chairman and one other independent. This person may or may not be Mr Brian Long, who is up for re election and is currently Chairman of CBA’s Audit Committee. Then there will be 4 non-independent directors, at least one of which will be representing Foxtel and then it gets intriguing as Ten’s largest shareholder is Bruce Gordon who is also now Nine’s largest shareholder. Will he get a seat on both boards, only one of them or none?

We also know that the Chairman will be paid $250,000, the independent director $150,000 and the other 4 directors will receive $100,000 each. The independent Director will chair the Audit Committee and one of the other two members will be the Chairman, who will also chair the Remuneration Committee, of which all directors will be members. 

Hamish McLennan the former CEO and Chairman resigned on 27 July 2015, left immediately but will be paid his normal salary monthly for the next year, plus receive $250,000 in lieu of some possible other bonuses he gives up. All of this is per contract, but for a loss making company to pay out a further $2,225,000 so he can go on a year’s gardening leave is very generous.

Ten as always is hopeful that the government will shortly remove all the existing restrictions on broadcasting companies with the exception of the anti-siphoning rule.


ASA Position
For
Item 2a: Re-election of Mr Brian Long as a Director

Mr Long is Deputy Chairman and is a member of each of the Audit/Risk/Treasury Committee, Board Performance & Renewal Committee and the Remuneration Committee. Mr Long previously chaired the Global Governance and Advisory Council of Ernst & Young. He is currently a director of the Commonwealth Bank of Australia, Brambles Limited and is also a Director of Cantarella Bros Pty Ltd. 

If Mr Long actually stands for re-election and although he has a heavy workload, his experience as deputy Chairman/acting Chairman of Ten, makes him well qualified to be on the board and as such ASA will vote its undirected proxies in his favour


ASA Position
For
Item 3: Re-election of Ms Siobhan McKenna as a Director

Ms McKenna is Managing Partner of Illyria Pty Ltd, non-executive Director of Nova Entertainment, non-executive Director of The Australian Ballet and Trustee of the MCG Trust. Ms McKenna is a former partner of management consulting firm McKinsey & Company.

Ms McKenna is on the board as a representative of a major shareholder and as such is non-independent. As she was actively involved in one of Network Ten’s previous management reshuffles and change of direction she has a good understanding of what does not work.

ASA will vote its undirected proxies in her favour.


ASA Position
For
Item 4: Adoption of Remuneration Report

What a welcome change in the LTI, doing away with a complicated loan share scheme and the very misleading fair value calculation. In its place is performance share rights, calculated on actual market value with 50% of the award based on a revenue share performance hurdle, the most important indicator for a TV broadcast company. It is not perfect as the measurement period is based on only 3 years.

The STI has a major flaw in that none of it is in equity and there is no holdback period. 

Although KMPs with the exception of Mr McLennan received an ex gratia bonus in light of their continuing good work and no bonus for some years, this appears to a reasonable action.

Mr McLennan’s actual total remuneration was $1,975,000 which is in line with his peers, however as we have said earlier his termination rewards were overly generous.

Because of the positive changes in the LTI, for the first time in some years ASA will be voting its undirected proxies in favour of the Remuneration Report


ASA Position
For
Item 5: Approval of issue and allotment of shortfall shares to Foxtel

This is a complicated measure but as the Chairman explains it very clearly and when he does so at the AGM we will be voting our undirected proxies in favour.


ASA Position
For
Item 6: Approval of consolidation of share capital

This resolution is to allow the conversion of every 10 shares to one.  The prime purpose is to allow a more appropriate capital structure and hopefully a share price that is more appealing to investors.


ASA Position
Against
Item 7: Approval to issue securities under the Ten Executive Incentive Plan

This relates to the new issue of performance rights and attempts to exclude the shares that result from the rights being converted, being counted under the maximum of 15% new equity being issued in a year. This exclusion would be in place for 3 years.

ASA believes that when performance rights vest the resulting equity should be purchased on market so that there is no dilution. That if the shares are instead issued as new they should be counted under the 15% cap. Finally if any exclusion is given to the 15% rule it should only be for a year. Because of all of the above we will vote our undirected proxies against this resolution.


ASA Position
For
Item 8: Approval of issue of performance rights to the CEO

The ASA understands that this resolution did not have to brought before the meeting as Mr Anderson is not a director, but appreciates that is was done so and will vote our undirected proxies in favour.


ASA Position
Against
Item 9: Approval of potential future termination benefits

Under the Corporations Act, termination benefits of up to 12 months of base salary can be paid without shareholder approval. This resolution is to allow the company the ability to pay over and above that statutory limitation benefits from the Long Term Incentive plan.

ASA believes that a carte blanche exemption should not be given and on any occasion that the company wants to exceed the statutory limits, such as what they are doing with the previous CEO they should come to the shareholders to expressly seek the right to do that.



An individual involved in the preparation of this voting intention has a shareholding in this company.


This document has been prepared by the Australian Shareholders Association Limited ABN 40 000 625 669 (“ASA”). It is not a disclosure document, it does not constitute investment or legal advice and it does not take into account any person’s particular investment objectives. The statements and information contained in this document are not intended to represent recommendations of a particular course of action to any particular person. Readers should obtain their own independent investment and legal advice in relation to the matters contemplated by this document. To the fullest extent permitted by law, neither ASA nor any of its officers, directors, employees, contractors, agents or related bodies corporate:

  • makes any representations, warranties or guarantees (express or implied) as to the accuracy, reliability, completeness or fitness for purpose of any statements or information contained in this document; or
  • shall have any liability (whether in contract, by reason of negligence or negligent misstatement or otherwise) for any statements or information contained in, or omissions from this document; nor for any person’s acts or omissions undertaken or made in reliance of any such statements, information or omissions.

This document may contain forward looking statements. Such statements are predictions only and are subject to uncertainties. Given these uncertainties, readers are cautioned not to place reliance on any such statements. Any such statements speak only to the date of issue of this document and ASA disclaims any obligation to disseminate any updates or revisions to any such statements to reflect changed expectations or circumstances.