Metropolis International is one of the UK-based companies which have grown rapidly by acquiring legacy brands from B2B publishers who have turned off print. It was launched 25 years ago by fund manager Jonathan Mills and has clearly been able to capitalise on the low acquisition prices of magazines and even lower interest rates.
It has acquired B2B magazines variously from Ascential, RBI, Centaur, Euromoney, Wilmington, and UBM. Metropolis now employs some 450 people on 40 brands including: Local Government Chronicle, Architects Journal, Drapers Record, Property Week, Duty Free News International, Money Marketing, and Construction News.
CEO Robert Marr (a chartered accountant and formerly COO of William Reed Business Media) makes no secret of his focus on acquisitions; the web site even lists its M&A criteria and invites would-be sellers to get in touch. Up to 10 deals have pushed EBITDA up from £4.9m in 2014 in £7.4m last year. But there are signs that the company, which in 2017 paid Ascential £23.5m for 11 B2B magazines, is finding it hard to sustain the profit growth.
In 2018, Metropolis increased revenue by 21% (£9m) to £52.7m, wholly due to the Ascential acquisition. And (even after adding back £800k for restructuring costs) EBITDA increased by just 7%, giving a profit margin of 15% (down from 17% in 2017).
Given the emphasis on acquisitions, it seems reasonable to question whether Metropolis’s growth is slowing because of what appears to be relatively limited organic development. The assertion that 58% of revenues now come from “events and digital” compared with 26% in 2013 can’t disguise the fact that it has little paid-for content and no exhibitions, which are the activities mostly likely to produce consistent growth in B2B. A portfolio of conferences and awards is just not the same. But with Metropolis consistently bidding prices of 4-5 x EBITDA, it seems clear that the only way it can become an organiser of B2B exhibitions is by launching its own.
It is tempting to compare Metropolis, a company owned by an investment fund, with a UK rival, the Mark Allen Group (MAG) launched 32 years ago by a former journalist.
In the year ended 31 March 2018, MAG generated £7.2m EBITDA from £43.3m revenue ( a 17% margin). This year, it is expected to reach almost £60m revenue, perhaps with £12m of EBITDA. It’s a similar scale of business to Metropolis, albeit that MAG has higher margins and is now growing faster. But the real distinction is in the composition of the revenue. Some 40% of MAG revenues are now derived from events including no fewer than 12 exhibitions (three launched, six acquired and three managed on behalf of trade associations); a further 20% of revenue comes from subscriptions. In spite of having some 20% fewer people than Metropolis, MAG has a consistent record of creating new publications, digital services and events.
It helps to make the point that – in the business of transforming legacy media – new product development is essential in order to achieve consistent growth and counter the inevitable erosion of print. Metropolis is a good company but it’s tempting to contrast its rigid investment criteria with the instincts of MAG founder-chairman Mark Allen who wows the teams of target companies with talk of magazines he’s launched and what they themselves may want to create under his ownership. Metropolis v Mark Allen Group is a contest with a long way still to run. And both companies are this month bidding for RBI’s Farmers Weekly. Let’s watch.
