Business Modern

Showing posts with label Reed Elsevier. Show all posts

Sunday, November 21, 2010

RBI and REC Under Profit Pressure

Reed Elsevier held its AGM last week. In summary, the management bragged that 80% of their profits came from the professional information business which, whilst not immune to the downturn is nevertheless pretty robust.

By contrast the marketing driven businesses, RBI and Reed Exhibitions are having a very rough time indeed. These are direct quotes from the Interim Management Statement;

Reed Exhibitions: Budget pressures on promotional expenditure are leading to reduced exhibition space sales and a decline in paying delegates at certain shows. Attendances are showing encouraging resilience. The revenue pressures, together with the net cycling out of biennial shows this year, will result in revenue decline and lower adjusted operated margin against an exceptional year in 2008. Of most significance to date are the reductions in size of events in the property and retail sectors. The cycling out of biennial shows will particularly affect first half comparisons.
Reed Business Information: Advertising markets are being significantly impacted by the global economic downturn across geographies and sectors. Subscriptions and other user revenues, which now account for over 50% of the business, remain relatively robust. In this difficult environment, the focus in RBI is on right sizing the cost base to match reduced revenue expectations. Adjusted operating margins will be lower, as the impact of the revenue decline can be mitigated only in part by the significant cost savings from restructuring and other cost actions.

The last sentence is interesting isn't it? Trading is so bad that not even the cost cuts can offset the decline. What if it turns out to be true, that this year is not the nadir of the downturn for business media, but the best year we are going to see fro some time to come. B2B blogger, Neil Thackray has argued that a new model is required if the industry is to escape from its current malaise. It looks like Reed Elsevier may be looking at hard financial evidence that he is right.

New Reed CEO Ian Smith will already be forming a view about what to do. The failed sale process means that even though the RBI business is small it will be an obvious boil on an otherwise alabaster skinned face. Until it is lanced it will ooze pus at every presentation to analysts.

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Friday, February 19, 2010

Reed Elsevier Results and the dangling question over RBI

The Reed Elsevier results presented for the first time by a slightly nervous looking CEO contain some clues not only for the future of Reed but also the future of business media in general. At RBI revenues were down 18% and profits down 34%. The revenue fall was too great to catch up the margin with cost cuts. The exhibition business, a "late cycle" business according to the CEO, revenues were down 21%and profits down 31%. There have been rumours that Reed might consider selling REC, but there is no evidence for that.

REC is decribed as " a good business, well managed. It's just cyclical". As Reed freely admits it has little clue as to when the cycle will be up.

The strategy for RBI is simple and painful. Run it for value. (I thought all businesses did this for all assets), realign the cost base to lower rvenues (so cost cutting still a work in progress), grow the data services business (I wish I had thought of that) and make more asset disposals.

Its hardly radical and its a backfoot strategy forced on the business by the failed sale process, the rocky economic climate and the collapse in print advertising.

Interstingly no questions from the floor of the briefing about RBI which means the City has written it off.

Tuesday, February 2, 2010

RBI Sells Asian Assets

The Geldof backed Tenalps, home of Kent TV and Teachers TV has acquired some magazine assets from RBI in Asia. This follows the disposal of assets in the USA and Australia. No news of the moneys involved but it won't make much of a difference to the Reed Elesevier balance sheet. What about the UK? What will the RE CEO say in March when Reed is next due to update the world on its strategy. It should be wholsesale change, or asset sales or both, but is more likely to be, holding on for the recovery - which would be a mistake wouldn't it?

Thursday, January 7, 2010

RBI Sells and Closes in the USA

RBI has told its emlpoyees in the USA that it is selling many of its controlled circulation titles and closing others. There will be job losses. I hear there were no bidders for the entire bundle of US assets that were identified for sale and most of the titles now being sold are either loss making or near to. RBI is keeping its Construction data business and Variety (both run by ex RBI UK managers).

A bloody and painful time. So what of the UK business? Nothing yet heard from new Reed Elsevier CEO but I would expect more pain there too as the full bite of the downturn grinds further into revenues

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

Saturday, March 7, 2009

Musn't Grumble

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).

Wilmington also produced respectable results and claimed they were looking for acquisition targets.

Friday, February 20, 2009

RBI Profits Collapse

The scale of the horror of traditional business media is in sharp relief today. Reed Elsevier has produced great results largely because its subs based business is so robust - but the profits from RBI across the globe have fallen to £55m. The report in the FT says this is down from £90m but at the time of the proposed sale the talk was of profits of £150m.

If we valued RBI (Reed Business Information) on the same profit multiple as Centaur who gave a profit warning today, then its market value would be less than £200m! No wonder the sale deal couldn't get done.

Also announced is a £112m restructuring programme for RBI. The current strike ballot over 35 redundancies in the UK is now in sharp relief. There is worse to come.

Let's hope the restructuring programme has some innovation in it as well as cost cutting. Reed says it has no plans to close any titles.

Monday, December 22, 2008

Informa Looks to Reduce Debt

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.

Tuesday, December 16, 2008

Smack the Dead Donkey

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.

Merry Christmas.

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Thursday, December 11, 2008

What will Reed do With RBI Now?

So that's it then. Reed Elsevier has "postponed" the sale of RBI for the "medium term". Since the disposal was announced last February the credit market has collapsed and so has the b2b media trading environment.

There has been no meaningful trade interest in RBI for months and now private equity buyers have proven to be very thin on the ground. The only deal on the table involved a deferred consideration and a low price. This would have left Reed exposed to a risk of not achieving even the depressed price the media has speculated. They wanted the cash from the sale to protect their credit rating and to pay down debt incurred following the acquisition of Choicepoint.

Reed will be kicking themselves that they did not get on with this disposal two years ago.

As the City digests the implications of this (even good international business media businesses are unsellable at almost any price) expect the pure play b2b public companies to endure a further beating on their share price.

What next for RBI? Clearly there is room for some substantial cost cutting. They should also be closing titles, downsizing the scale of the business and its overheads, re thinking how their magazine model works and run the place as if it were owned by private equity.

This will be very counter culture RBI management. They should plan that they have to exit their current shareholder in three years - just like a private equity manager would think. Exposing palpable shareholder value in such a short time period is not the same strategic approach as running a business as part of a long term position in a large corporate group.

The changes in thinking required are so fundamental that it would be wise to makes some management changes and to make them fast.

If I were Keith Jones (and for the record I am not), I would want to get such a plan written and in place before Ian Smith, the new Reed Elsevier CEO turns up. If I hadn't, I might expect a short career as global RBI CEO.

Wednesday, December 10, 2008

And then there were none

The Guardian reports that Reed Elsevier has abandoned the sale of RBI although it intends to sell in the medium term.

The consequences of this are significant for us all. I'll post tomorrow with thoughts.

Monday, December 8, 2008

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.

Tuesday, December 2, 2008

Survival or Receivership

If Lorna Tilbian, the media analysts analyst doesn't know....

"Lorna Tilbian, analyst at Numis, said: “It is Darwinian. The environment is so volatile, people are waiting for weaker players to fall into receivership. The landscape is changing so quickly, how do you value something?”

...then what hope is there for the rest of us trying to make sense of this.

The FT reports old news that the RBI deal is falling in value. It says Reed is "desperate to get the deal done". It shouldn't be. There is a future for RBI - it involves substantive delayering of management, a radical approach to business magazine publishing and inventive solutions to the conundrums that b2b publishing faces. RBI as the biggest player in this place, and as a relatively small part of its parent company can afford to be brave. Will it care to embrace "boundarylessness" as it strategy declaration says it should?

You know the answer.

Wednesday, November 12, 2008

Glass Half Full at RBI

The Telegraph reports that the RBI deal delay means that Reed Elsevier will have to rethink its financing of the Choicepoint deal which was funded by debt, in part to be paid off by the sale of RBI.

All very high finance. But the more interesting throw away in the piece is that estimates of the value of RBI have fallen to a range of £650m to £850m - the low range now being half - yes half of the original price expectation. Remember, RBI is a business that last year made around £150m of profit. It has come to something if the biggest and most succesful business publishing company in the world is only worth 4 times last years earnings.

Monday, November 10, 2008

And then there were two....

Apollo has pulled out of the RBI auction leaving just two runners in the race. The heat is fast vanishing from this auction. The double whammy of worsening trading and the difficulty of putting debt finance in place is cooling the deal rapidly.

The price will keep falling (we would be surprised if the deal gets done at more than £800m if it gets done at all.

Wednesday, November 5, 2008

Reed and Informa

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.

Tuesday, October 28, 2008

Reed Deal Falters

Apologies for the light posting, but the real world has rather got in the way of doing this. This is looking like a perfect storm. As an example, The Telegraph reports what you already know. The sale of RBI is in trouble. The staple finance is rumoured to have unravelled a bit with at least one bank pulling out, the price is falling as trading gets worse by the day and the owners, Reed Elsevier will have to provide debt and probably leave some skin in the game to get the deal done at all.

Friday, September 19, 2008

RBI Losing Value

The Times has reported that second round bids for RBI are way below the target price of £1.2b. This will come as no surprise to readers of this blog. The problem is made worse by the banking crisis which has already scuppered to putative deal for Informa. RBI is heavily exposed to the ad downturn and its high growth totaljobs business is in recruitment - and we know what happens to recruitment.

What will Reed do? We have postulated before that this deal is by no means certain to get done. Will Reed do it at any price? If they don't get it done even at a low valuation is there any real prospect that the business will be worth any more at any time in the forseeable future?

What should RBI do? I have a busy few days ahead, but I plan to offer them some advice (which I am sure they won't take) in a future post. RBI is fixable. It's blody and its painful, but wholly necessary.

Tuesday, August 26, 2008

Reed Bids Falling in Dutch Auction

It is being reported that last week,the first round bidders for RBI were given an opportunity to revise their bids, ahead of the formal second round. According to the report on Thomson Merger News bidders were given more information about trading after the first round bids had been submitted. The article claims that the revised bids are lower than those posted initially.

This is the first of several rounds of chipping. We have said all along that the price of £1.2b was always ambitious. As trading deteriorates this will run to value.

Second round bids will lilekly be lower still. Its turning into a bit of a dutch auction

RBI Deal Announced October

Dow Jones is reporting that RBI staff have been told to expect an announcement on who the buyer is during October. The article also quotes a senior Reed Elsevier source as saying that the criteria for selection of a buyer will be based on the creation of shareholder value.

I am sure this comes as no surprise, but that means the business will go to the highest bidder, not the bidder who comes up the nicest plan for the future.

Also, an announcment in October is likely to mean a completion in December - as we have said all along.