United We Fall

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.

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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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Travel Mags in Trouble?

Rumours uncomfirmed that Penny Wilson Editor in Chief of RBI's Travel Weekly has gone. Also unconfirmed that UBM's TTG is to go online only.

I guess we just have to wait for the news about how any such change reflects the continued success of the magazine rather than an admission that this would be further evidence of the urgent need for a new magazine model.

UBM Updates on Trading

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.

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UBM and RBI News

UBM reports in an interim statement that it has culled 300 jobs and revenues, in print are falling fast. Its building division will see millions wiped off its profit.

In the round thought United reckons it will meet its forecasts but as we have noted before, the trade show business is still benefiting from the forward sales made before the crunch. It is going to get much harder in the coming months I would judge

Meanwhile Gerard Van Der Aast the CEO of RBI worldwide has fallen on his sword amid falling revenues at up for sale RBI. Keith Jones gets the big job -at least until the sale process completes - or doesn't as might well be the case.

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Soft Softworld

Incisive Medias Softworld show suffered from low attendance a source tells me. This is interesting as it is one of the first big shows to take place after the chaos for the last few weeks economic news. The event took place this week at Olympia 2. There might be local reasons for a problem but we might wonder if attendance at trade shows is less of a priority for b2b buyers in a downturn. If that is true, the safe haven of exhibitions (UBM?) could be a more dangerous place than its advocates believe.

Trade Shows Start to Decline

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.

UBM Remembers The Mags It Doesn't Publish

Following my scoop yesterday that The Engineer was being published by UBM, UBM has just realised it does not publish The Engineer after all and the corporate website has been edited this morning to remove the reference. Just a coincidence I expect.

UBM Thinks it Publishes The Engineer

According to the UBM corporate website, it is the proud publisher of The Engineer.
In the age of up to the minute news, and UBM being a net savvy sort of organisation, you might have thought they would have noticed they sold The Engineer around ten years ago to Centaur. Or maybe UBM has bought Centaur and forgotten to tell anyone. Do you think there is a whole bank of empty desks somewhere in Ludgate House and everybody just thinks those guys on The Engineer are out a lot?

Anyway, here is the quote.

"UBM businesses still publish many other titles that were launched in the 19th century, including Building magazine, launched in 1843 by Joseph Hansom, as well as The Engineer and Chemist & Druggist."

United We Stand.

United Business Media released a strong set of half year results today, bucking the trend rather. UBM management must be hugely relieved that 85% of their profits come from events not magazines. With the pointed exception of Farmers Guardian, the statement makes note that magazines, in the UK at least are having a rough time as the classified downturn begins to bite.

So good news then. How did the city take it? Share price down 0.5% proving that even a good news media story can't shake off the bears.

Perhaps thay are worried that UBM might owe the tax man £80m from its sale of its regional newspapers ten years ago. Or perhaps they know that next year, even event based businesses might start to feel the pain. Or perhaps they are just wrong.

Blogger to Become Reed Elsevier CEO

The Independent business diary speculates that UBM CEO, David Levin is being spoken of as the possible successor to Reed Elsevier CEO Crispin Davies, who is to retire shortly. The source for this story is "gossip merchants". It must be true then.

His qualification for the role, according the Independent, is that he failed to merge with Informa, and that he is talented and ambitious. On that basis, I reckon I could be in the running too.

Never Mind the Strategy Lets Reorganise the Management Team

Well, it no longer matters whether Gary Hughes, the CEO of CMPi has or hasn't understood what to do next as we were postulating a couple of weeks ago. He has been fired. Well, made redundant. CEO of UBM, David Levin has split the CMPi business into four chunks, just as he did with the CMP business in the USA, with the heads of each reporting to him directly. So thats four direct reports from the US, five from the UK (I'll come back to why its five) plus his head office reports which must at least include his CFO plus the Asia business. When I went to school we were told that you should never have more than six direct reports. I reckon Levin must have north of ten direct reports. That's a tough and some would say disfunctional structure.

But does this make any real sense? Go back a hundred years and Morgan Grampian/Miller Freeman, the precursor to CMPi, used to believe in "market focus". In his recent interview with Press Gazette, Hughes said,

"We like markets rather than media formats. We like to be in markets and then work out how to make money in that market rather than say here are magazines and websites, [now] make money even though you have no face-to-face assets.” A bit of a bugger than he hadn't understood the implications of his boss's change to the structure of the US business.

Serve the market. Customer first, product second is the mantra of the market focus advocate. There is a bit of this left with all the Built Environment assets grouped together under Jonathan Newby. Then there is a conference division, which is mostly events and some publishing; the Live Media Division, which is mostly events, and then there is the rest of the publishing stuff which includes Music Week and Daltons Weekly run by the CMPi CFO. No mention is made of Publican or TTG, which seems odd.

So what if Music Week wants to run a conference, where would that fit? What if an exhibiton idea evolves from a conference? Where is the focus on digital and who will make that happen? Remember my turkey analogy?

There has also been speculation that UBM, flushed away from the proposed merger with Informa, is a candidate to buy ITE and/or Centaur. Now that is interesting in that ITE is an events business with most of its activity in Eastern Europe, so it fits. Centaur has seen its market value collapse despite growing profits. It is now worth less than 5 times its EBITDA. No doubt Centaur execs think this is unfair, but there has been little revenue growth of late, they are very exposed to the advertising cycle and if they have a strategy it is hard to discern.

An irony in the history would be that Graham Sherren, founder of Centaur, was the MD of Morgan Grampian, which became Miller Freeman, which became CMPi. In fact so was his Dad. Also Centaur owns The Engineer which was sold to Centaur by CMPi (then Miller Freeman) some ten years ago.

Don't Worry Be happy

UBM has given the City a trading update which in terms says,

"Its alright. No really its all fine. Don't worrry, everythings great. Well not everything, we are a bit worried about PR Newswire, recruitment, conference revenue, next years shows, this years advertising, next years advertising; but don't worry. Well we to be honest we worry a bit. We're not worried too much though and where the crunch has started to hurt we fired some managers - so that'll fix it. So please don't worry. Really. We mean it."

The City heard all this and wiped 30p off the share price or about £70m in value.

Informa and RBI

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.

UBM and Informa flirt with Each Other

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.

Easy Money for Private Equity in Business Media

The Times has been reporting that private equity is circling Informa. As a result the share price jumped. The speculation is that Informa could be merged with UBM. No doubt somone in hedge funds made some money today but an interesting trend is developing. Emap Business is now in private equity hands, so is TES, so is Incisive, so will be Reed Business Information. Now we are told that the same could happen for UBM and Informa. What is it that private equity investors see in business media companies that the City doesn't in the same companies on the public market?

Two theories. Either the PEs are mad or they see lumbering companies with heavy management costs and too little innovation. Running a PE backed company is a very focussed job. The CEO and the management know they have to drive shareholder value in a predicatable time period (3 to 7 years). In a public company most executives are working to not be fired, not take too many risks, not make a mistake, never see the consequences of their mistakes. PE is oft criticised for their slash and burn approach, but there are few media PE deals that have gone horribly wrong in business media.

Get the right management (not necesarily the incumbent) and there is still value to be extracted. Incumbent management take note, as the man from Hanley Wood said, you risk as being, perceived, perhaps rightly, as not competent to take our industry forward.

It's over for Business Magazines

Press Gazette conducts an analysis of UBMs results here. Print advertising is now in terminal decline, down 10% this year. This blog has been warning of the death of print for nearly two years and suddenly the combination of a shift in advertiser behaviour, the impact of several years of cost cutting on editorial quality, the impact of the Internet and the economic squeeze has tipped magazine publishers into near meltdown.

Lets summarise where we have got to. EMAP, one of the biggest and most successful business media companies has been sold off and has yet to emerge with a transparent strategy. Reed Elsevier, the sleeping giant of business media, has announced the sell off of all its business magazines. UBM, containing the remnants of the once great Miller Freeman and the darling of the eighties in business media, Morgan Grampian, is focussed on "data" and "events", Centaur trades on a share price 20% below is float value four years ago, has fired (made redundant) many of its most senior managers and has not demonstrated underlying revenue growth for at least three years., Nexus - once the fastest growing business media company in the UK has sold all but a handful of its magazines to concentrate on digital development.

Watch out for more magazine closures, falling enterprise values of magazine dependent companies, swathes of redundancies amongst magazine sales staff and journalists. The era of the business magazine began 150 years ago. Its all but over.

United Business Media and the Honda Strategy

UBM are a bit like Honda. When Honda wanted to crack the Indian market they decided to break in not with their latest products but with an old version of their 50cc motorcycle. If the economy is new, give them them old products until it is sophisticated enough and wealthy enough to afford the new.

David Levin, the UBM CEO is using his PR Newswire brand and his events business model to break into both China and India. He may be doing some online too, but the clear thrust of his interview with Livemint is that the old model is the main core of activity. Levin is known for being clever and he went to business school, so he will have read the Honda case study. Hard to fault the approach I suppose.

Thinking though that the future of business media might be something to do with digital I was struck by this quote;

"We build professional communities through 258 (trade) shows, 225 trade magazines and 300-400 websites catering to different niches." It just seemed a bit strange for the CEO to know to the precise unit the number of trade shows and magazines that he owns, but to only be able to guess the number of websites with a 33% uncertainty. If digital was at the heart of UBM strategy as you might sometimes think if you read all the hyperbole about Searchmedica, you'd think he'd know wouldn't you?