Is Mecom on the road to hell?

Today former Mecom-optimist, media analyst Henrik Schultz, told a colleague of mine he had yet to recover his faith in the pan-Europaen newspaper company despite the rights issue completion, which reminded me of a recent Danish Mecom controversy with an interesting twist:

Ealier this month Jyllands-Posten (JP), a comptetitor to Mecom's Danish flagship Berlingske Tidende, commissioned an independent analysis of the British-based company's accounts and prospected earnings from Dansk Aktie Analyse. The analysis concluded that the company was steering towards bankruptcy and would not be able to meet the next covenant test in 2010.

JP's article on this provoked strong reactions from Mecom, including one especially interesting one from Mecom's Danish CEO, Lisbeth Knudsen."You draw completely irresponsible conclusions without knowing our development plans," she wrote in her repy to the newspaper (my translation) - a reply (at least the bit that JP printed) which didn't contest the actual figures and calculations, including the conclusion that Mecom needed a significant increase in ad revenue to meet the covenant test, but seemed to insinuate that the budgetary goals would be met by cost-cutting and/or increased revenues from innovation.

I am perhaps reading too much into that statement, but the only "innovations" I know of on the agenda for Mecom Denmark are charging for online content and making all journalists online journalists from September on. Will that be enough? Knudsen is a very clever lady, I'm sure the whole industry would pay very close attention if it turns out she has found some new ground-breaking money making scheme to improve the balance sheets of Mecom's worst performing newspaper market, but we'll just have to wait and see.

Mecom boss David Montgomery called JP's accusations "irresponsible and selfish speculations from a rival media player" and said the agreement reached with the company's lenders was sensible and realistic, taking continued financial turbulence into account.

Still, Schultz is not impressed: "Mecom is bankrupt already in the sense that the shareholders have lost their money. In reality the shareholders have lost money by having to put up money for the rights issue," he said, adding that the rights issue gives the company a new chance but that there certainly are challenges ahead (including that ad market the whole industry seems to be hoping against hope will recover soon)- and he wouldn't recommend buying Mecom shares now.

I've seen several positive shareholder reactions to today's RNS though, the gist of it being that to hold a conference call after presenting its half year results 6 August, surely, the company must have some good news to convey. Let's hope that's not another false hope....