You could argue that UBM has done a lot of things right. It has invested judiciouslyin some online,it has reduced its dependence on print and has a substantial events business. Even so, Operating profit from print magazines dropped 77.9 per cent in the first of half to £3.3m, profit from events dropped 12.7 per cent to £37.8m and profit from data, services and online dropped 43.6 per cent to £16m.
According to Press Gazette, CEO David Levin thinks the world is over published and has already culled fifteen titles this year. More to come no doubt.
Oddly Levin claims that forward bookings for shows are up 5.9% but there is certainly a timing issue here. IN downturns, show sales teams get better on onsite contracting, but late sales all but dry up. It is not necessarily the case that good forward bookings now will lead to improved final bookings at show time.
This year has seen a drop in attendee revenues of 39% for UBM. I am hearing from many people that selling tables at awards evenings (another version of attendee pay events) is like selling hog roast at a Bahmitzvah. The recssion is long from over.
There is a growing realisation amongst b2b houses that sitting tight and waiting for the upturn won't cut it. What is not yet clear is whether they have yet calulated the vision for the business after the apocalypse.
Meanwhile following the collapse of the RBI sale, Reed Elsevier is raising cash through a placement. This will reduce debt but also be dilutive for shareholders. Mor importantly, with much of the Reed Elsevier business market leading and high priced, and the remainder in the same mess as the rest of them (RBI) it is not yet clear what Reed can do to provide the next generation growth. Reeds share price went backwards on news of the placing and has not really gone anywhere in some years. Its a blue chip stock. Reed Elsevier has less to worry about than many (it has manageable debt, lots of profit and stable revenues from information) but its challenge is that it won't grow fast when or if the recovery comes. So for different reasons, Reed has the same challenges as every other business media company.
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
It has been a busy week for the public companies. Centaur Media saw its' share price fall to a new low of 17p and the directors actively buying shares presumably to make it tougher for unwelcome predators to scoop up the company. UBM produced results which prove that having just 10% of the business in print is good thing which could only be bettered by having less than 10% of the business in print. Most interestingly United Business Media claimed that rebooks on next years shows are up 5%. That is not only surprising, but also encouraging. Of course a rebook is not necessarily the same thing as contract to attend, but with so little good news around this certainly put a smile on my face.
Since we last spoke Reed Elsevier posted its results too and with most of its business in online subscriptions they were good. Also announced was a £120m reorganisation of RBI. This has to mean job cuts, but as far as I am aware no news yet of a 90 day consultation in the UK (a legal requirement if 100 job cuts are proposed).
What a year it has been. We began with Emap being sold in what turned out to be the last major business media deal before the crunch. Reed announced in February the sale of RBI and then spent all year not getting it done. All the public business media companies saw their share prices collapse. No business media enterprise was exempt from redundancies. Magazine titles closed or merged. The tech sector led the way with Computing merging with IT Week. In the US PC Magazine and Techworld switched off their print editions all together to concentrate on online only.
Senior managers were ousted from Centaur, United Business Media, Wilmington and EMAP to name but a few.
What are we to expect in 2009. Is this the beginning of the end, or just the end of the beginning of the end? Can we expect a renaissance in the business media zeitgeist? It was just five years ago that city analysts were spouting the mantra that the future of media WAS business media. It was on the back of this optimism that Centaur floated at a valuation of £140m. Today the same analysts and city brokers value the same business at less than £50m.
This industry demise was not a bubble that burst, rather one that deflated rather quickly making farting and popping noises as it chaotically whizzed around the room look for somewhere to land in a flacid heap.
The tragedy is that although the crisis has been made worse by the credit crunch, so much of what has happened was avoidable. The impending crisis has been visible for a long time. I started this blog back in 2006, way before the credit crunch, and it was clear then that our model was doing its dying.
But we are where we are and it is time to turn our attention first, to what we think might happen in 2009 and then to consider what we must all do to rebuild our industry.
There will be some who say that this is all an exaggeration, that the fundamentals are good. Experienced management teams are in place, the business media has led the way in developing events and data business and looking at work flow solutions and migrating to the web. Let me remind you of the view of the CEO at Hanley Wood when he accused us back in February of "underperformance, cowardice, technophobia, inferiority, complacency, coziness, stinginess, cluelessness, disorganization and dullness."
The management teams have too often been in the same place for too long. They are mostly magazine publishers trying to adapt to the new world. Their staff are frustrated and frightened. Lemmings led by donkeys as one rather harsh observer of our industry put it to me the other day. Yet we have some hugely able leaders at the top of b2b, Jones at RBI, Heseltine at Haymarket, Gilbertson at EMAP, Levin at UBM, Weller at Incisive, Brady at Wilmington to name but a few. There is hope. There really is.
It is too easy to blame all this on the crunch or on a change in City sentiment but its more fundamental than that. Reed Elsevier worked out there was no future in the old business publishing model and tried to ditch it. EMAP lost its way and broke itself up into bits, UBM effectively fired all its global CEOs (except in Asia I think), Stirling Media Group got saved by Progressive Media unable to sustain an independent existence any longer, Centaur got rid of some its longest serving and most loyal senior executives. Haymarket said goodbye to Nick Stimpson and others. Incisive Media, perhaps the success story of the last five years, announced layoffs and ousted Rory Brown amongst others.
The tales of reflex culling are too numerous to list. But what next? When the culling is over, when the redundancies are done, when the budgets have been slashed, the overheads expunged, what if the revenue keeps falling?
A parenting guru of my acquaintance told me that it was always wrong to smack an errant child. His reason? If it doesn't work, which it often doesn't, you are left with only two choices. Smack the child harder or think of another strategy. He argued, why not deploy the other strategy, the one you will have to get to when you realise that beating your child senseless will not change his behaviour (unless you want him cowered and snivelling), before starting on the smacking.
We have been smacking the arse of business media and our businesses all year. Many of us haven't finished yet. There will be more pain to come in 2009. But let us take the advice of my parenting guru and start to deploy the strategy that will save us from nurturing a cowering, frightened and clueless industry.
As you can probably tell - I am not having a good day.
Image via Wikipedia United Business Media has issued an update ahead of its year end results. The announcement claims that UBM has had its best year for six years but leads with the explanation that much of this is due to the strengthening of the dollar against the pound. This is not quantified in the statement so we cannot judge what is really happening in the underlying business.
I am always amused that public companies will argue that unfavourable exchange rate movements should be ignored when reviewing their results, but favourable movements are always cloaked in a perverse self congratulatory smugness. Spinning, is not confined to the world of politics.
The statement notes that some print products and events are struggling. Exhange rate or not, this is a rare almost good news story, only slightly blushed by the acknowledgement that 350 jobs are to go.
UBM is doing some interesting things. Their internal Wiki (see article below) is proving a useful tool for sharing knowledge around their organisation, they have taken the lead in "delayering" of management, expansion in to developing markets and have been succesfully weaning themselves off print dependency. However their share price, like everyone elses has tumbled this year and an exposure to exhibitions is by no means an insurance against a rough period to come.
Its a Bit of a Bain, but there is only one bidder left for RBI
The Telegraph reports that only Bain Capital remains in the bid process for RBI at a bid of around £680m - around half the original price. The article also speculates that the proposed deal involves an earn out (ie deferred consideration) and a lock in for key executives.
As gifted as they are, the radical surgery and rethink needed in RBI is not best solved by managers who have been there 25 years. Earn outs are always messy and Reed Elsevier will be reluctant to tie themselves into future consideration over which they have no control.
Bain will consider that either they will have got RBI on the cheap, or by the time the earn out kicks in, the financial markets will be looser and raising funds will less of an issue.
I have no idea whether he is involved in the deal, but a Bain Consulting senior guy is one Graham Elton who was briefly CEO of Miller Freeman UK (now CMPi/United Business Media).
The odds of the deal closing are getting longer. There is every possibility of a withdraw before Christmas.
Deal or no deal, vicious cost cutting will follow rapidly in the new year.
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.
The definitive trade mag for the music industry, Music Week, is firing journalists both online and offline and, according to Press Gazette, running without a news desk - which is tough for a news weekly! The title is loss making. How the mighty has fallen.
In the late nineties Music Week spawned early online consumer music web property dotmusic. It couldn't find an economic model, refusing to play dirty by allowing downloads, and was sold by United Business Media for chips. A missed opportunity for sure.
Having tried unsuccessfuly to sell the trade mag a couple of years ago, CMPi now finds itself with no profit in the magazine and no online business either.
Is this the future for business magazines, revenue collapse, cut costs, run out of profit, fire the remaining journos and then close the magazine. Grim.
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.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=775bb38e-c094-4dd6-b240-48e9bf5873ab)
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=c3d309df-79ab-41e5-b9ec-ca30a56d5018)
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=c727bd0f-0085-4197-b0fc-73b4f7586e97)
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=2a4d1540-11f5-44ef-b52e-5a1a339497c3)
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=88f0cc69-4f22-4145-b810-113dc3229d3b)
