Thursday, May 28, 2009

Ads Melt Down In the US

Just when we thought we might be turning the corner, news from the US is that B2B ads dropped by around 30% in Q1. Trade show revenues were down 20%. Ouch ouch ouch!

Wednesday, May 27, 2009

Goldmans Signals Media Recovery

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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Thursday, May 21, 2009

Never Mind the Quality - Cut the Costs.

This obscure blog about horticulture pulls a lovely quote from the Production Director of Haymarket,

"Previously, we concentrated on quality as number one, followed by the environment and costs. Now all our energies are focused on costs." Well. It's starkly honest you would have to agree but I bet it not many of the Hayamrket sales teams will be repeating the sentiment in front of customers.

Anyway, in a memo to Chris King (the aforementioned Production Director) just because there is a recession on doesn't mean you should abandon quality - otherwise when the recession is over, although you won't have much cost, you won't have much revenue either.

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Tuesday, May 12, 2009

Digital is Half the Business Print Ever Was

Not everyone agrees with my rather gloomy view of the world, but over in the US despite the fine words of the leaders of B2B companies, the figures show a picture of continued and accelerating decline.

Although online revenues have continued to grow, even in the US the growth is half the dollars of the decline in print. The table in the link shows a decline in the last year of $103m in print based revenues and an increase of $47m in digital revenues. This confirms this bloggers view that even when the migration is complete, business media companies are going to need to be smaller and leaner beasts than they have been in the past, and by a scale factor that few if any of the bsuiness media leaders have yet owned up to or realised.

Monday, May 11, 2009

Five Reasons to Temper Cheerfulness in B2B

The general rise in business confidence filled the pages of the Sunday newspapers business sections at the weekend. Share prices have risen in the last few weeks reflecting a growing mood that the worst is over. This is no time for media owners to breath a sigh of relief however.

Even if we accept that this is the bottom of the cycle, it will be at least a year before there is any recovery in the recruitment market. If display advertising recovers at all it will be slow and never to the levels we have previously seen. The demand for online solutions has not gone away and the the revenue models for thes businesses is for most media companies unproven, and even when it is proven its scale will be smaller than the old print model.

Incisive's Tim Weller was speculating at the FIPP conference that the days of the controlled circulation model are numbered, Rupert Murdoch has postulated that his business will move to paid content model (It is often unwise to bet against Murdoch - but surely this hope over experience) Thomson Reuters are veeling confident in their future, and the events model for the likes of UBM is not yet a busted flush and Reeds high value infomation model is dull but solid. But let nobody think that all is well.

Check you business out against these simple questions,
1) Does your business have a lot of debt?
2) Does your business rely on print advertising for more than 30% of its revenue?
3) Is your online revenue less than 25% of your total revenue?
4) Is your total revenue/employee less than £100k/year
5) Do you have the same proportion of your turnover as overhead as you had last year?

If you answer yes to all more than three questions then there is considerable pain yet to be felt.

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Sunday, May 3, 2009

IDG Takes Axe To Staff

IDG, global tech information company owned by the patriarchal Pat Mcgovern cut pay for staff a few weeks ago to avoid the need for further layoffs.. Now, it has announced it is culling 8% of staff in the US. There have already been cuts in the UK and there may be more.

Oddly in this fascinating recent interview with McGovern he brags that revenues are growing. Where they have killed the print mag and focussed on the online revenues grew by 10% he says. Something doesn't add up here. Two things are really going on. The downturn is being used as an excuse to rebase costs for the new model and the downturn is hurting IDG more than McGovern cares to admit.

Nevertheless, read the article. It is one of the clearer expositions of a possible strategy for business media companies that I have read

IDG is one of the most advanced media houses in the journey from print to online and still the pain of the downturn is acute

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Friday, May 1, 2009

Informa Takes Steps to Reduce Debt

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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