Bubble Bubble Toil and Trouble

We have known for a long time that business media companies are in trouble. But it is only just now that the chickens are coming home to roost. The failed sale of RBI will be seen as a watershed moment, after which the reality of the horrors we face began to be faced up to.

Investors in Emap have written down the value of their investment. Investors in Incisive (which overlap) are coming to terms with the news that their equity is all but worthless and the banks will end up owning the business.

William Reed has culled at at least 20% of its headcount. Centaur has been doing the same as it struggles on with reduced profits and little cash (but luckily for them little debt) Most other business media companies are reducing their headcount progressively, chasing the revenue downwards and hoping that things will get better.

Every week sees more magazine closures. There is no end in sight to the ad gloom. Recruitment has gone for ever and display is mortally wounded.

The hope in online is often countered by the grim reality of poor ad revenues there too. Emap announced last week that it is putting much of its content behind a subs wall, having discovered that giving it all away is hurting paid copy sales and the extra ad revenue doesn't cover the gap. This flip flop in strategy won't work not least until they stop worrying about print cannibalisation

Everywhere we look the strategies are defensive. Where is the new model? Where is the creativity that will turn the old magazine publishing businesses into growth businesses for the future? Yes there are pockets of interesting things happening in all the business media enterprises, but none of them have a whole business vision.

Meanwhile in idle tittle tattle I hear a rumour that Les Kelly, the Wilmington exec who presided over the closure then sale of Press Gazette is leaving the business.

Zombie Publishing as Lightening Strikes Press Gazette

Zombie publishing is alive and well. Press Gazette has raised itself from its grave and now stalks the media world again. Five years ago Quantum Business Media sold PG to messrs Morgan and Freud for a rumoured sub £1m sum, who within a short space of time found that the press would not support the awards in their ownership and the title could not afford the costs of Morgans publishing model.

The company fell into administration and the closure of PG was inevitable - until Wilmington, pressed by the enthusiasm of a former PG exec Tony Loynes, bought the title for a rumoured £100,000. Before long, Tony Loynes had gone, the title had gone weekly and staff cut to the bone. Wilmington could take it no longer and a nano second after trousering the profits from this years Press Awards announced the closure of the title. Then along comes the Frankenstein of publishing, Mike Danson. He is making a specialism of buying titles that others have struggled with and breathing some life into them. It is not clear how the Press Awards will work. Wilmington appear to be keeping some involvement. Danson may succeed where others have failed if he focusses on the digital delivery of a solution. Although the PG website is attracting reasonable traffic it has hitherto been a very Web 1.0 offering.

The magazine is a cueship. To turn the Zombie into a living breathing thing requires a complete focus on building a digital solution. Danson should not plan on making any meaningful profit from his dead tree.

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.

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• Reed Business Information to cut 35 UK staff (guardian.co.uk)
• RBI staff vote against further industrial action (blogs.journalism.co.uk)

Wilmington Signals No Deal.

The Times is reporting that the long rumoured acquisition of Wilmington by HG Capital won't happen. Apparently it did not porve possible to put the deal finance in place. Ouch! Apart from the immediate downward impact on Wilmington shares, what does this say for othe quoted companies and the RBI deal? ITE, Centaur and SPG would all be happier in the private world, but if Wilmington can't get done, it is hard to see how any of them can escape from dull valuations of their businesses or the lack of liquidity in their stocks. Shareholders may have to be very patient indeed and hope that the businesses survive the curent economic malaise.

Wilmington Could get Sold to HG Capital

The Telegraph reports that Wilmington is poised to receive bid interest from private equity firm HG Capital. Other mid market players, such as Centaur, could generate interest too says the Telegraph.



Like all media stocks, Wilmingtons share price has suffered of late, despite turning in profit growth. Wilmington has also reduced its dependency on magazine advertising by selling off mags. There is still much to do though to turn Wilmington into a powerhouse media company. I have no doubt that CEO Charles Brady looks enviously at the privacy enjoyed by APAX owned, Incisive Media as it wrestles with the new paradigm.



This kind of public to private transaction will likely only happen with the support of management. If Brady and his Board want this to happen and a believable plan can be constructed then it will. If Brady is hostile to HGC it won't.



Interestingly Centaur is more of a bargain than Wilmington. About the same size as each other Wilmington trades on a p/e of 16; Centaur trades on half that. Put another way the market value of Wilmington is considered to be 8 times its 2007 profit. Centaur is today valued at just 4 times last years profits. This reflects the work that Centaur has yet to do, and Wilimington has already started, to move the business from magazine dependency to professional information solutions.



Heres a thought. Buy Wilmington and then buy Centaur, strip out all the duplicate costs (perhaps £10m) and replicate the events/training expertise of Wilmington in the Centaur business. Both businesses have useful positions in the legal sector too.



Assuming you share the benefits of the cost saving between the two valuations the implied value of Centaur, based on todays share price is just 2.6 times post merger profits.



So pay a 30% premium on todays price for Wilmington and twice todays price for Centaur and what do you have? A combined business with a turnover of £170m, profit of £47m acquired for a blended price of 7 times earnings.



I am not sayng these are the right prices to bid, but it does illustrate that something is do-able if all the parties are willing.



Oh and one more unconnected thing - a little bird tells me that a big announcement is about to go down tomorrow - Tuesday - at a major b2b media house. My bet is on a swathe of redundancies at.......