MediaWeek (Vol 5, No 31) Financial Results: Informa, WoltersKluwer, Pearson, Reed Elsevier, Cengage, McGraw-Hill

Informa post half year results (Press Release)

• Resilient profit performance – adjusted operating profit growth of 0.6% to £160.1m; 0.3% on an organic basis
• Improved margin – adjusted operating margin 25.8% (H1 2011: 25.1%)
• Strong cash flow – cash conversion rate increased to 76% (H1 2011: 56%)
• Revenue decline of 2.4% (organic decline of 1.2%) – proactive reduction in marginal product.
• Statutory loss before tax of £27.4m (H1 2011: £66.5m profit) – reflecting impairment charge of £80.0m and losses on disposal of £24.4m relating to European Conference businesses. 
• Earnings increased – adjusted diluted earnings per share growth of 3.4% to 18.3p (H1 2011: 17.7p)
• Dividend increased – interim dividend increased to 6.0p (H1 2011: 5.0p)
• Net debt/EBITDA ratio of 2.3 times (H1 2011: 2.5 times)

Operational

• Academic division continues to trade well – organic revenue growth of 3.7%
• Total cost savings delivered at PCI of £12m
• 9 new large events run in H1
• Forward bookings on leading events remains strong
• Restructure of conference portfolio to reflect prevailing market conditions in Europe
• 20% of revenue from emerging markets (H1 2011: 19%)
• Acquisition of market leading exhibition and conference business in Canada

Wolters Kluwer reports half year results (Press Release)

• Full-year 2012 guidance confirmed. 
• Revenues up 3% in constant currencies and up 1% organically.
• Deterioration in Europe offset by improved organic growth in North America.
• Recurring revenues up 2% organically (76% of total revenues).
• Online, software and services revenues up 4% organically (75% of total revenues).
• Health and Financial & Compliance Services grew organically 5% and 6%, respectively.
• Ordinary EBITA €346 million; Ordinary EBITA margin of 19.9%. 
• Leverage ratio net-debt-to-EBITDA improves to 2.9x (2011 year-end: 3.1x).
• Expect to approach target of 2.5x by year-end.
• Healthcare Analytics disposal completed in May as part of pharma divestiture program.
• €100 million share buy-back completed on July 9; program will be expanded by up to €35 million under new policy to offset dilution from stock dividend and performance shares.

Pearson report half year results (Press Release):

Sales up 6% to £2.6bn*

• Strong growth in Education (up 9%) and the FT Group (up 7%).
• Penguin sales 4% lower on phasing of publishing schedule and continued industry change.

First-half operating profit lower, as expected, at £188m (2011: £208m)

• Education profits up 6% on growth in North America (up 30%) and International (up 17%).
• Professional profits £17m lower. New funding criteria for 16-18 year old apprenticeships result in sharp decline in volumes; UK training business reshaped.
• Sale of FTSE International reduces first-half operating profit by £10m; excluding FTSE, FT Group profits level in spite of increased restructuring charge.
• Penguin profits lower at £22m (H1 2011: £42m) on drop-through from lower first-half sales; stronger publishing schedule in H2.

Rapid growth in digital and services businesses and developing markets

• Sales up approximately 20% in developing markets (headline growth)
• Education digital platform registrations up 30%; FT digital subscriptions up 31% and now exceed print circulation; Penguin ebook revenues up 33% and now almost 20% of Penguin’s revenues.
• Revenues from digital and services to exceed traditional publishing businesses in 2012.

Full year outlook reiterated

• At this early stage, Pearson sees good trading momentum in North America, International and the FT Group offsetting weakness in Professional Education and Penguin.
• Pearson reiterates full year outlook of growth in sales and operating profits at constant exchange rates, with margins reflecting acquisition integration costs and the FTSE sale. 

Reed Elsevier report half year results (Press Release):

Financial highlights

• Underlying revenue growth +5% (+3% excluding biennial exhibition cycling)
• Underlying adjusted operating profit growth +7%; overall growth +8% at constant currencies
• Adjusted EPS +11% to 24.7p for Reed Elsevier PLC; +18% to €0.47 for Reed Elsevier NV
• Reported EPS growth +52% to 24.0p for Reed Elsevier PLC; +57% to €0.47 for Reed Elsevier NV
• Interim dividend growth +6% to 6.00p for Reed Elsevier PLC; +18% to €0.130 for Reed Elsevier NV
• Net debt of £3.3bn; 2.3 times adjusted 12 month trailing EBITDA (pensions and lease adjusted)

Operational highlights

• Underlying revenue and operating profit growth in all five business areas
• Growth driven by usage volume, new product development and expansion in high growth markets
• Further improvement in format mix; good growth in online and face to face
• Profitability gains driven by on-going process efficiencies
• Continued portfolio development improving revenue growth and profitability profile 

Selective divestitures

• Process accelerated in H1. Disposals of Totaljobs, MarketCast, and other small publishing and services assets completed. Planned disposals of Variety and RBI Australia announced. We expect completed and planned disposals to be mildly dilutive to EPS in the short term. However, we intend to use gross divestment proceeds to buy back shares this year, mitigating this impact. In H1 gross cash proceeds from disposals were £158m/€193m.

Cengage presents full year estimates (Press Release):

• Revenue for the fourth quarter of fiscal 2012 is estimated to be between $499 million and $505 million as compared to $473 million for the same period in the prior year. Excluding National Geographic School Publishing (“NGSP”), acquired on August 1, 2011, revenue for the fourth quarter of fiscal 2012 is estimated to be between $482 million and $488 million, driven primarily by growth in Domestic Learning.
• Adjusted EBITDA for the fourth quarter of fiscal 2012 is estimated to be between $187 million and $193million. NGSP’s contribution to Adjusted EBITDA during the fourth quarter is estimated to be between $2million and $3 million. The prior year fourth quarter Adjusted EBITDA of $202 million included a minimal expense for domestic incentive compensation. On a comparable basis to include this year’s fourth quarter domestic incentive expense, Adjusted EBITDA for the fourth quarter of the prior year would have been approximately $185 million.
• Revenue for the full year ended June 30, 2012 is estimated to be between $1,985 million and $1,991 million as compared to $1,876 million in the prior year. Excluding NGSP, revenue for the full year ended June 30, 2012 is estimated to be between $1,910 million and $1,915 million.
• Adjusted EBITDA for the full year ended June 30, 2012 is estimated to be between $781 million and $787million. NGSP’s contribution to Adjusted EBITDA during the fiscal year is estimated to be between $12million and $15 million. Similar to the fourth quarter, the prior year Adjusted EBITDA of $780 million included a minimal expense for domestic incentive compensation. On a comparable basis to include this fiscal year’s domestic incentive expense, Adjusted EBITDA for fiscal 2011 would have been approximately $737 million.
• For the last twelve months ended June 30, 2012, Bank EBITDA is estimated to be between $817 million and $823 million.
• Full year investor call August 8th (Link)

McGraw-Hill reports second quarter results (Press Release):

• Key management for McGraw-Hill Education is now in place, including Lloyd G. "Buzz" Waterhouse as president and chief executive officer and Patrick Milano as chief financial officer and chief administrative officer.
• The Form 10 SEC registration statement was filed on July 11, 2012.
• Cost reductions are accelerating towards the goal to achieve at least $100 million in cost savings, on a run-rate basis, by year-end.
• Key workstreams are well underway to drive the separation of numerous finance & accounting, human resource, information technology, and other support services.
• The S&P Dow Jones Indices, the world's largest provider of financial market indices, was launched on June 29, 2012.

Education

• Revenue for the segment declined 12% to $474 million while operating profit improved by 36% to $57 million in the second quarter, compared to the same period last year. The improvement in operating income was primarily the result of restructuring actions and ongoing tight expense management.
• Higher Education, Professional and International Group (HPI): Revenue decreased 2% to $241 million in the second quarter compared to the same period last year. Higher Education revenue growth was offset by declines in International revenue, predominately related to the strong U.S. dollar. Higher Education's digital and customized products are being well received in the marketplace. In particular, sales of homework management product Connect, which is sold with LearnSmart, an adaptive learning system, grew by 65%. LearnSmart, designed to help college students learn faster, study more efficiently, and retain more knowledge, is available for approximately 150 different college course titles. 
• School Education Group (SEG): McGraw-Hill Professional continues to lead the transition to digital materials with 34% of revenue in the quarter derived from digital products and services. Of particular note was the 33% growth of digital subscription platforms, which include AccessMedicine, a product suite of subscription-based Websites that feature regularly updated medical content and access to more than 65 medical titles.Revenue decreased 20% to $233 million for the quarter. The elementary-high school market continues to be impacted by the economic issues facing the states and local school districts. In addition, the state new adoption schedule for 2012 offers the lowest revenue potential for publishers in many years. As a result, the School Education Group anticipates an overall reduction of 10% in the K–12 market this year, which represents the lowest spending level in over a decade. Despite the difficult environment, SEG continues to provide innovative products including new testing materials and programs in reading and mathematics that meet the new Common Core standards. All of its major new programs include digital components, and increasingly many products are wholly digital.

Informa Bid Disappoints

The Private Equity bidders looking to grab Informa have been told in no uncertain terms to sharpen their pencils. On the basis of initial interest that pegged the value of the company over £2.obillion, the formal offer made today is significantly lower. The Times reports that the Blackstone, Carlyle and Providence Equity bid of £1.87Billion is much lower than what management expected when they allowed prospective bidders to look at their books:

The source said: “Nothing at all has changed since July to make the company believe its worth has fallen so by so much. The board agreed to open its books at an offer of 506p and that is what they think it’s worth.”

Derek Mapp, Informa’s chairman, said: “The board believes that the revised offer significantly undervalues Informa. Informa has attractive future prospects and is continuing to deliver growth across the business even in the face of a weaker economic environment.” The company confirmed that it had continued to trade in line with its expectations. Shares in Informa closed down by almost 8 per cent at 414½p yesterday.

If a deal is to be done, then this consortium looks most likely to complete it; however, it is likely that negotiations will result in only a slightly higher price if the deal goes down. There doesn't appear to be any other bidders although having said that perhaps others on the sidelines will be encouraged by a slightly lesser price.

Informa Bid Likely to Go Ahead

Reuters is reporting that Carlyle has secured financing for the acqusition of Informa. From the report:

Carlyle and Providence have now assembled a group of around twelve banks to provide a leveraged loan of around 1.5 billion pounds that will finance the purchase, along with a large equity contribution, several senior bankers said. "On the Carlyle side the financing is in place. The financing is already largely done," a senior leveraged banker said.

The report goes on to suggest that a competing bid/financing package might be unlikely given that some of Informa's existing banks are included in the financial team Carlyle has organized and the general difficulty in getting financing for any deals is problematic at this time.

Informa Bid Tops $4.3Billion

Informa announced this morning (via Reuters) they are considering a $4.3Bill private equity bid for the company from a consortium led by Providence Equity partners, The Carlyle Group and Hellman & Friedman. The bid is established at 506 pence per share and the Informa share price rose by 12% its largest gain in two years, however the current price (423 pence) is still far below the offer price. The company stressed that discussions are at an early stage and that there can be no certainty of a bid being accepted.

If this bid is successful it will be the largest PE play since the markets froze earlier this year. Analysts have suggested this deal has more likelihood of being completed because the company can be broken into its constituent parts and sold off relatively easily. This mitigates some of the inherent risk in the deal.

Informa and UBM - Update

Informa and UBM are in discussions about a possible merger. It is anticipated that a financial player may enter the ring and compete and currently Apax is the likely contender (Independent).

Meanwhile the TimesOnline has a profile of Peter Rigby Informa's CEO:

No wonder colleagues say Rigby is different. “Peter’s an Alka-Seltzer dropped into water,” says Derek Mapp, Informa’s senior non-executive director. “You can’t imagine him ever sitting still.” You can’t imagine him ever sacking anyone, either. He’s too nice. The smile is handsome, the eyes twinkle, he cracks jokes with flat, near-Manchester vowels. “Born in Southport, now part of Merseyside, but proud to call myself a Lancastrian,” he laughs. Beneath, there must be a flintier core. The son of a painter and decorator, Rigby has built Informa into one of the biggest conference organisers in the world, and a leading technical publisher with titles including Lloyd’s List among its jewels.

Informa and UBM in Take-Over Discussions

Several UK newspapers (Telegraph) are reporting that United Business Media has initiated discussions on a £3billion take over of Informa. UBM has not been as active as other media companies over the past several years in expanding their business offerings, on the contrary the company has deleveraged the business and is now a company with relatively low debt. In the US, UBM owns PRNewswire and runs conferences, trade magazines and data and information products through the CMP and Commonwealth Business Media brands. From The Telegraph:

The Sunday Telegraph has learned that United Business Media (UBM), which has a market value of £1.5bn, has approached £1.6bn Informa about a merger that would establish a powerhouse in the increasingly competitive world of business-to-business media. Discussions between the two companies are at a very early stage and are not yet thought to have progressed as far as substantive negotiations about the structure or price of a potential combination. UBM and Informa may come under pressure to confirm the talks to the London Stock Exchange as early as tomorrow morning.

Informa has been considered a buyout candidate over the past several months since their long time CEO David Gilbertson left to run PE led Emap Communications. Business media and conferencing companies have become hot properties because their subscription based business models mitigate much of the variability in advertising based businesses. Steady cash flow is highly desirable.

More Informa

In the ebb and flow of big media deals it is interesting to note that having spent the last several years on the sidelines unable to compete with the very large multiples that PE players were prepared to pay, some operators like UBM may be well positioned to make significant strategic acquisitions as those same PE companies become skittish in the current market. Last week we saw CQ Press acquired by SAGE and an effort by Reed Elsevier to sweeten the pot for potential acquirers of Reed Business. Analysts are now suggesting that RE may be unable to sell the RBI unit in one piece which would have been unheard of only 18mths ago.

Update Monday: Telegraph confirms discussions and notes share price jump


Other reports:
Forbes picks Candover but not until summer.
Earlier report from The Telegraph proposes other bidders including Axel Springer.
TimesOnline: Informa Garners Attention

Informa In Play?

The Times is reporting that private equity groups including Carlyle and Apax are looking closely at Informa although no official bid has been made for the public company. From the article:

Carlyle and Apax are among those considering a bid for the group, which has a arket capitalisation of £1.64billion. No approaches are understood to have been made. Informa's shares have fallen almost 40 per cent since it announced the acquisition of Datamonitor for £502million in May last year amid widespread de-rating of Media stocks amid fears of an economic slowdown. Some analysts have raised concerns about Informa being hit by its high debt levels after the Datamonitor acquisition and partial dependence on the financial services sector.

Earlier this year, Informa has announced that David Gilbertson would resign as chief executive and from the board to take up the role of CEO at EMAP. EMAP has itself been purchased by a private equity group and the move by Gilbertson was a surprise. Together with now current CEO Peter Rigby they had built Informa into a the largest provider of Trade Shows in the world and a significant professional publishing company.

Informa Posts Strong Results

Chairman Peter Rigby has ruled out bidding for the trade magazine division of Reed Elsevier (Reed Business Information) saying the advertising business is not one they are in. The company did however post strong financial results that were in line with the expectations set in mid-December. The acquisition of Datamonitor which at the time seemed an expensive deal looks to have been integrated well and already producing impressive results. From their press release here are their highlights:

• Revenue £1.13 billion – 9% pro forma growth
• Adjusted operating profit £261.0m – 19% pro forma growth
• Adjusted operating margin rises above 23%
• Strong trading across all three divisions (Academic & Scientific, Professional and Commercial) and all three business streams (Publishing, Performance Improvement and Events)
• Datamonitor delivers 22% pro forma revenue growth for the full year
• Adjusted cash conversion 110% of adjusted operating profit
• Total dividend increases 39%
• Confident of 2008 outlook
• Academic and Scientific division grows adjusted operating profit by 25% to achieve a 29% margin
• Strong yield increases and drop through from electronic delivery
• Professional division benefits from Performance Improvement extending global reach
• Non-US revenues increase by 29%
• Commercial division growth fuelled by extension of Large Scale Events portfolio and 38% increase in Dubai revenues

Chairman Rigby: "We have transformed Informa in recent years. We have built a business based on recurring revenue streams which provides strong defensive qualities, but not at the expense of continuing good growth. We are of course aware of the current uncertainty in the financial markets, but at this point the board sees no signs in our trading to alter its expectations that Informa will deliver another strong performance in 2008. Our confidence in the future of the business is reflected by a 39% increase in the dividend over 2006."

Informa: Buy Rating

Following the apparent sale of Emap's businesses over the past month, analysts have cast a look over the rest of the industry for potential upside (Reuters). Analysts at Bear Sterns and Panmure Gordon have rated Informa as 'out perform' and 'buy' respectively. Informa's share price surged 7% in trading following the recommendations. In mid December, Informa gave the following trading update:

The Board is confident that the 2007 performance will be in line with our significant growth expectations. Organic revenue on a constant currency basis* is projected to increase by 9%. All three of Informa's divisions: Academic & Scientific, Professional and Commercial, are contributing well to the year on year increase. Commercial is having a particularly strong 2007 of double digit growth. Trading within each of the divisions is good across all of Informa's business activities: events, performance improvement and publishing.

Shares in Informa have under performed the UK market by 22% and are currently trading at 466p. Panmure is targeting a price between 530 and 550p. Over the past six months the stock has traded over 550 but has fallen recently.

Informa Post Strong Results

The Telegraph reports that Informa has raised its half year dividend by 70% as the company consolidates its purchase of Datamonitor. The company said underlying profits rose 24% and revenues grew 10% adjusted for currency movements. In their press release the company said their efforts to establish a stable revenue platform that wasn't subject to economic variables is succeeding with more than 3/4 of their revenues 'visible and renewing' from subscriptions and book sales.

Earlier in the year, analysts suggested that the company had over paid for Datamonitor however management were convinced that price was right and that better management of the company would improve results. Informa noted that Datamonitor revenues were up 62% (with organic growth up 22%) and operating income up 51%. Furthermore, growth on the top line and bottom line is expected to improve further as product sales are integrated further and final cost cutting programs are put in place.

Informa Buys Datamonitor

According to sources, Informa approached Datamonitor several months ago about acquiring the company and discussions resulted in the sale of the company. Datamonitor CEO Mike Danson is expected to receive over £60million as his share of Datamonitor. The total purchase price is £502million which is close to the current market cap but represents over 27x next years expected income. A high multiple indeed; however it should be expected that this company will fit well with the current Informa products and that some significant economies are anticipated once the product lines are combined. From The Telegraph,

According to Informa, the purchase represents an "attractive opportunity" that fits with its strategy of supplying specialist content to a business audience. David Gilbertson, managing director of Informa, said: "Datamonitor is a model example of a company that slots neatly into the Informa group. Both companies provide business customers with data and analysis that is essential and unique - information they cannot do without."

Informa Post Big Gain

Informa plc the event and publishing company which is the result of the Taylor and Francis and Informa merger several years ago posted a 50% gain in 2006 profit. The company also announced that Chairman Richard Hooper would retire and his position taken by current CEO Peter Rigby. Informa produces over 10,000 events, 40,000 book titles and 2,000 subscription products.

The company purchased a large events business in 2005 and 2006 was the first year revenues both included the full year impact of all recent acquisitions and did not include any material partial year acquisition revenue. In 2006 full year revenue was up over 40%. The company also said they are off to a fast start for 2007 but have ruled out any immediate additional acqusitions.

Here are their bullet point headlines:

• Revenue up 42% to over £1 billion
• Adjusted operating profit3 49% higher at £219 million
• Total dividend increases 40%
• Strong trading across all three divisions (Academic & Scientific, Professional and Commercial) and all three business streams (Publishing, Performance Improvement (PI) and Events)
• Return on IIR acquisition exceeds cost of capital
• Adjusted operating margin rises above 21%
• Cash conversion more than 100% of adjusted operating profit
• Confident of 2007 outlook

Here is the link to the Management discussion of the results and outlook for 2007.