Informa has seen a drop in profits, but mostly due to restructuring costs. With a a good subs/paid info base and a strong events portfolio Informa is better placed than most to ride out the storm - but only if there is recovery soon. Delegate sales to conferences remain tough and will get tougher the longer the recession goes on.
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Labels: Informa
posted by Businessmediablogger @ 9:18 am
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They think its all over. But it isn't yet. Goldman Sachs has increased its share price target for a handful of busiiness media companies including Informa and Reed Elsevier. Does this mean as Press Gazette has speculated that we have turned the corner in this media recession? Erm no. The truth is that the share price damage done to the best of the business media companies has been overdone, and if you wanted a safe safe place to put your money, Reed Elsevier wouldn't be a bad bet (when compared to other media companies.)
But lets get real about what is going on here. The peak of the last cycle was around 2006. In that year Reeds share price peaked at 779. Today it is about 530. Pearson peaked at around 800 compared with 666 today. Informa was at about 500 in 2006 and today is at about 250. UBM (not mentioned in the Goldmans note) had a peak of around 750 in 2006 and trades at 415 today. What this tells us is that even these relatively blue chip stocks must improve by around 50% to recover their value. How likely is that in the forseeable future?
Take a look at the P/e ratios for the business media group. Reed already trades at 23, nearly twice the price of any of its peer group. No upside their without strong growth. UBM, Tarsus and Informa are all between 15 and 17 reflecting their common issues as event organisers (Informa would be stronger were it not for its debt mountain). Centaur, Huveaux and ITE are all in the range 6-10; not bargains I am afraid, but rather a reflection of their even weaker prospects for revenue growth any time soon.
Cost cutting will ensure a stabilisation of profits. Revenue decline may slow or stop, but investors expecting a return to average revenue growth rates are goingto be disappointed in the short to medium term
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Labels: Goldman Sachs, Informa, Press gazette, Reed Elsevier, United Business Media
posted by Businessmediablogger @ 2:47 pm
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The debt laden Informa has asked its shareholders for more money to use to reduce it's leverage. It judges that this is better than selling assets at poor prices. Infomra has done well to get this underwritten and reflects the fiath the City has in its management and lng term strategy.
Coould Incisive pull off the same trick. All the rumours are that trading is grim and and getting worse so it could tough for them.
Informa had better hope that their conference business holds up well in the coming months, otherwise they could find themselves in the same position all over again at the end of the year.
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Labels: Informa
posted by Businessmediablogger @ 10:01 am
12 comments
All of the business media publishers are facing unprecedented challenges. The economic downturn, long term decline in magazine profitability, a threat to profits from events, the challenge of making money from the web and so on.
Publishers long since worked out that there was no competitive advantage in running their own circulation management systems or print plants. Exhibition organisers long since contracted out their on site registration. But why has nobody thought of eliminating permanent costs from other areas of hygiene activity?
One of the benefits of APax owning both Incisive and Emap was the merger synergies. They never happened as crunching the two businesses together would have required a refinancing of the whole deal - and you can understand why that didn't happen. But what is to stop these two businesses sharing back office overhead in finance. Locate the credit cotnrol desks for both businesses in a single location where labour is cheaper than in central London, with one group management providing services to both companies on a SLA.
If it could done for these two companies, why not invite RBI, UBM and Informa to join the party? Each party would own an equity stake in the service company which would be run on a cost plu basis, with any profits returned to the shareholders. Make an agrement to protect the confidetiality of data. Consider inviting smaller publishers to enjoy the benefits of the solution for a fee. Cost savings and a profit share too!
Business media comapnies have worked together before. Tower, the circ bureau grew its business in the nineties on the back of a concord agreement with a cadre of blue chip publishers. The Excel Exhibition Centre was built with funds secured from RBI Emap and UBM amongst others.
How big are the savings? Well lets imnagine that back office finance costs 5% of turnover. Lets pretend we could save 20% of that. If we could process £1b of turonver thats a saving of £10m a year or put another way - on a 10% average profit margin, the equivalent of offsetting £100m of revenue loss. Mmmm.
Labels: EMAP, Incisive Media, Informa, RBI
posted by Businessmediablogger @ 12:13 pm
1 comments
The Independent reports that Informa is considering seelling some assets to reduce its debt burden. There have been rumours that Informa is concerned about the possibility of breaching its banking covenants. Certainly the City has been marking down its stock because of the high level of gearing.
Covenrants get tighter as time goes on. They are agreed on the basis that the business grows and in interest cover improves (thats profit/interest due). As trading weakens a breach becomes ever more likely. Informa is not admitting to any possible future breach and they remain confident, but not so confident that disposing of assets to raise some cash is not being seriously considered.
It is not a good time to sell anything - just ask the Board of Reed Elsevier.
Next year I am expecting at least one "oh my god!" moment when something really ugly happens to one of the big players. Informa is already putting down a marker that they don't want it to be them.
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Labels: Informa, Reed Elsevier
posted by Businessmediablogger @ 8:22 am
2 comments
A couple of rumours heard. Ocean Media, the owner of Inside Housing magazine and recently the subject of a buy out led by AAC Capital, is making redundancies.
Also heard is that Mike Danson, founder of Datamonitor (sold to Informa), who recently swept up SPG has been kicking the tyres of troubled Huveaux.
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Labels: Datamonitor, Informa, mike danson, Ocean Media
posted by Businessmediablogger @ 8:04 am
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Crispin Davis, CEO of Reed Elsevier is due to retire next year when he has completed the sale of RBI (he hopes!). He is to be replaced by Bob the Builder.
Knowing something about scientific and technical media clearly not a neceessary qualification of the job. We wish him luck.
Meanwhile, some are speculating about how tight things are at Informa. With huge debt and tight bank covenants, a liekly weakening in the conference sector, it is likely that the the star division will be Datamonitor. Expect cash conservation actions throughout Informa as senior managers do all they can to ensure they don't breach those pesky covenants.
Labels: Informa, Reed Elsevier
posted by Businessmediablogger @ 8:07 am
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According to Folio there has been a 6% drop in B2B revenues in the last half year in the US. No surprises there. The most significant aspect of this report is that trade show revenue declined by 1%. When a downturn hits, there is a lag in trade show deterioration. This years events are based on last years sales. But now we seeing the crunch begin to bite. Unlike publishing where the decline is the reuslt of a perfect storm of cycle and paradigm shift, for shows, this is just about the cycle. Nevertheless high profit margins from shows in the good times mean rapid falls in profits when the downturn bites.
All those companies, (UBM?) smugly congratulating themselves on not being exposed to too much publising because of the strength of the events business shoudl take note and start taking actions now. Conferences will also feel the pinch. Don't hold your breath on the Informa deal.
Labels: folio, Informa, trade shows, UBM
posted by Businessmediablogger @ 9:15 am
0 comments
After months of speculation, private equity interest in Informa has materialised at a rather lower value than shareholders would have hoped, acccording to this interesting analysis by Peter Kirwan.
The standard thinking is that Informa is a solid B2B stock. It is a business with scale, it is not very exposed to advertising, has lots of events and subsctiption based activity and is a well managed beast. Even with all that in its favour valuations are softening.
Readers of this blog will not be surprised then, when the value placed on RBI which is smaller than Informa, is exposed to the advertising cycle, has little events and subs based activity drops in the second round of bids.
Labels: Informa, peter kirwan, Reed Business Information
posted by Businessmediablogger @ 7:44 am
0 comments
Interesting that The Times reports that private equity groups are able to raise the financing to make a real bid for Informa. Contrast this with the ducking and diving of Reed who have had to offer staple finance and are rumoured to be leaving some equity in the deal in order to get it done at all.
The difference of course is that RBI is a publishing company with declining print products, whilst Inforam is events and subs.
posted by Businessmediablogger @ 11:03 am
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Informa, still in the midst of rumours of a private equity bid, has posted its interim results. Revenue is up 18% and profit 21% they brag. With just 3% of its revenues in advertising Informa is faring better than most they argue. Still, I would be pretty unhappy in that circumstane with a low margin of just 12% at the unadjusted profit level. As ever with these things, all is not quite what it seems. The 21% profit growth is after the real number (which is a rather more modest 4% profit growth) has been adjusted for exchange rate differences, reorgonisation costs and the like.
So Informa want the credit for the revenue growth, but not the costs of making it happen. Mmm. As the statement points out,
"The Group's profit before taxation decreased to £60.0m (2007:£87.8m) and basic earnings per share decreased to 10.96p (2007:16.24p) as a result of higher amortisation charges arising from last year's acquisition of Datamonitor."
Ok, so what is headlined as an increase, is actually a decrease. Amortisation is simply the writing off of capital expenditure. In other words its costs incurred in a prior period not yet reported in the profit and loss account. You can't pretend they don't exist.
These are a good set of results - better than most b2b companies and more likely to be robust through the cycle than many, but they are nowhere near as marvelous as the headline implies. My worries would be;
Organic growth is very modest (4% is neutral in real terms)
The debt burden is huge (£1.2b of debt - thats twice turonover)
The downturn coming in the conference business - Informa has inside it the global behemoth conference organiser IIR). As their statement says,
"The Group is subject to high sensitivity in relation to average delegate attendance"
High sensitivity! Oh bugger and I thought if you weren't in advertising you were safe.
Labels: Informa
posted by Businessmediablogger @ 9:34 am
1 comments
The Independent and many others report the confirmed approach to Informa by a private equity club. This new apporach follows the aborted talks with UBM. Interesting to compare the heat and interest in Informa and the rather more sedate progress of the planned sale of RBI.
Notwithstanding earlier reports that Reed had put staple finance in place for £750m, The Times was saying yesterday that Reed itself was putting up some of the money, presumably having failed to find bank backing for the full amount.
This shows us that the price expecetation is going to be hard to meet for RBI. Its dependence in advertising, and recruitment which is very fickle in a downturn, means there will be lots of nervous re forecasting going on in Sutton. Howver, The Times quotes a source as saying that RBI numbers are on track,
"Trading at RBI is believed to remain in line with expectations, with no sign of an advertising downturn hitting the titlles". I believe everything I read in the papers obviously, but this does seem surprising. The implication is that forward bookings are ahead of the same period last year, yields are increasing, there has been no twitch in recruitment in any sector, sales managers are reporting confidence in their customers marketing budgets Does that sound like the picture of the economy or your business that you have been getting. RBI must be better managed than I realised.
posted by Businessmediablogger @ 11:05 am
0 comments
posted by Businessmediablogger @ 2:30 pm
0 comments
The upside of the postulated merger of UBM and Informa was that Informa got to improve its debt profile whilst UBM became part of a group with less dependence on marketing revenues. The downside, which in part explains the scuppering of the deal, is the reverse; Informa gets to be part of a group which is very exposed to marketing revenues and owns someweak mags, whilst UBM ends up part of a group with a weaker balance sheet.
No surprise then that a private equity club is now running its ruler over Informa. Don't hold your breathe. As The Guardian and others point out, the debt market is tough and the deal complicated.
Meanwhile I understand that RBI staff are now being told that a deal could get done in October (they were previously told August). Although inevitable, this increases the period of uncertainty. One hypothesis is that the deal will be a back to back to enable the new owner to immediately dispose of Total Jobs. Assume a price of £1.2b with 750m of debt. Some observers have speculated that totaljobs is worth on its own as much as £400m (thats about 10 times revenue which sounds mad - but this asset is highly attractive and will have a lot of auction heat.) The new RBI owner can trouser the proceeds from totaljobs and pay down the debt, leaving just £350m to service. I reckon thats an interest cover of around 5 times. That would leave RBI with plenty of free cash flow to buffer it from downturn, fund staff reduction costs or invest in product devlopment or further acquisition.
My only problem with this idea is that it implies a 5 multiple for the the business net of Totaljobs - which seems very low - or in a world where magzines are declining at a rapid rate perhaps that's a fair price.
This kind of back to back is complicated and time consuming to put in place. I forecast completion in December, not October.
posted by Businessmediablogger @ 8:06 am
0 comments
The Telegraph and others report that UBM and Informa are in talks about a merger, which would create a very big thing indeed. The question that needs to be answered though is whether being a very big thing indeed is enough to make it worth doing.
Post acquisition integration work is normally badly done in these deals. Senior executives love the excitemtn of the deal but get bored with the detailed implementation. Costs come out, but the strategy upside somehow never sees the light of day.
The argument is that Informa is better placed post deal because its indebted balance sheet would no longer look quite so scary whilst for UBM it would reduce its exposure to advertsing revenues. All true of course, but strategy is much more than the maths of the deal if long term value is to be created.
How can the Informa conference expertise be implanted into the UBM publishing business? What is the plan for replcing the profits from dying magazines? (Paul Conley reports on more lay offs from UBM in the US). How will the new merged entity use its bigger muscle to accelerate growth in developing markets?
Some argue that all merger talk might provoke a private equity bid for Informa. This would be bad news for the RBI sale as Informa would be seen as a more attractive business. Perhaps Informa should merge with RBI. Now theres a a thought.
Labels: Informa, Reed Business Information, UBM, United Business Media
posted by Businessmediablogger @ 8:28 am
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Business to business commentary for a 21st century media world. Analysis of business magazines and business media, the impact of search, the web and the digital economy.
