The investors of Bonhill Group Plc may be a bit worried. The UK-based financial B2B media company, which has made acquisitions totalling more than £30 million in the past two years, now has a market cap of only £7 million and a share price that has lost 90% in 12 months. In September, its first-half results are expected to lead to forecasts that 2020 revenue will be at least 20% down on 2019 – and scarcely breakeven in profit.
It’s a substantial setback for a company which, in 2019, made £2.3 million of EBITDA on of revenue £24.4 million – a big leap after successive years of lossmaking and minimal revenue. It even paid its first-ever dividend as a sign to shareholders of the good times ahead.
The company (listed on London’s secondary AIM market) was known as Vitesse Media until the 2018 acquisition of Investment News, in the US, by incoming CEO Simon Stillwell, a longtime investment banker and latterly founding-CEO of Liberum Capital.
The $27 million acquisition gave Bonhill a market-leading B2B brand with:
- $18 million revenue, almost 50% in print
- 560,000 monthly uniques
- $1.4 million of revenue from events and $700,000 from research
- EBITDA of $5 million (+25% margin)
Investment News was acquired from the privately-owned Crain Communications (publisher of Advertising Age and Automotive News). The divestment reportedly enabled Crain to pay-down debt incurred as a result of an intra-family buy-out. That may explain some vendor finance. But insiders noted that the 23-year-old weekly had first been offered for sale a whole year before Bonhill/Vitesse agreed to acquire it for 7 x EBITDA two years ago.
There hadn’t seemed to be a long line of prospective buyers but Bonhill hailed Investment News as “a highly attractive” acquisition because it had lacked investment but had the potential for “accelerated organic growth”.
It always seemed like a high-risk ‘parachute drop’ into the US domestic market by a UK minnow. Some shareholders might have preferred a transformational deal in the UK to strengthen the core business rather than leaping across the Atlantic. They might also have rather splashed out on a brand that was not quite so print-centric. But Simon Stilwell was confident: “Since I joined Vitesse last year, we have overhauled the board and management team as well as the strategy, and this is the first major step in executing on our growth plan.”
The ambitious UK company enjoyed sharing with investors Crain’s projections that Investment News EBITDA would grow by 30% to almost $7 million by 2021 – even though 2017 revenue was down by 12% to $16.8 million from $19.1 million in 2015.
It claimed more than 150,000 weekly print “readers”, although the average circulation was around 61,000 copies per issue, with only about 2,000 paying subscribers.
The deal was hailed as a “transformational milestone” in Bonhill’s 2018 annual report which trumpeted the group’s global reach.
Eight months later, it acquired the UK-based Last Word Media for up to £10 million (9 x EBITDA). The fact that its 2018 profits were almost four times those of the previous year compounded the feeling that this might be another pricey deal. And then the virus struck.
In 2020, Bonhill has had a £2.5 million rights issue and also raised soft business loans from the US and UK governments to fight the impact of Covid-19.
In that sense, it was curious that the company’s 2019 annual report, distributed at end-May this year, forecast it would increase from 40% to 44% the proportion of its revenues generated by events over the next two years. Any such target was rendered all but impossible (even undesirable) by Covid, which was well underway by the report’s 6 May date, let alone when it actually reached investors.
But the rest of the report made good reading for a company whose products and services spanned financial services, diversity and technology. In addition to Investment News, Bonhill’s major brands include: DiversityQ, Information Age, What Investment, and Growth Company Investor.
The trouble is that the portfolio generates the overwhelming majority of its revenue from advertising (much of it in print) and from sponsorship of awards events and conferences.
So, unlike most B2B high-fliers, Bonhill has almost no readership revenue, paid-for data, or exhibitions. That’s the reality behind what seems like a neat story of “publishing, digital and events”, the familiar claim of so many fledgling companies. Arguably, real longterm B2B value lies only in information for which readers will pay and access for which exhibitors will pay. Advertising and events sponsorship can be highly profitable but are difficult to sustain and grow.
We must assume that the Bonhill strategy would have been to acquire some paid-for digital and print products and exhibitions alongside its conferences and awards events. But Covid has killed it.
The company’s successful early attempts to accelerate the launch of new events, especially with Investment News, might yet be revived – perhaps, initially, with virtual events which are now being developed. But any recovery may take longer than Bonhill’s investors will give it.
Next month’s results will probably show a 30% drop in US revenue, largely through lost print advertising. For all its dominance among US financial advisers, Investment News is beginning to look like just another declining print brand unable to monetise an admittedly large digital readership.
Even the loyal club of investors in Bonhill and its CEO will be getting restless about the performance of this seriously sub-scale listed company; and the gloomy outlook for cross-border events, advertising and print. They might also worry about the fact that Bonhill is now searching for its fourth Finance Director in four years.
This year’s fundraising and government aid gave Bonhill net cash of £3.8m (enough to keep it safe for 12 months, even though some will have been eaten by the 20% of redundancies). But things may only get worse in the medium-term. So, what’s next?
Could Incisive Media, the cashed-up privately-owned vehicle of B2B veteran Tim Weller, reverse into Bonhill as a low-cost IPO? The £20 million-revenue Incisive has been onto the stockmarket and back. It publishes Investment Week in the UK and will have lost some revenue this year. But it has profited by acquiring the £2.5 million-revenue Trusted Reviews for which it received a £500k “dowry” after Future Plc was forced to divest by the UK competitions regulator.
Future itself, which is digesting its £140 million acquisition of the former Time Inc UK, may still be hungry. Might it be interested in acquiring Bonhill, not least given its own strong US operations? Going cheap. Perhaps.
Additional reporting by Alex DeGroote
