The Covid Accelerator can be expected to shake up media ownership, presumably starting with those companies which were already vulnerable.
One such company is Centaur Media Plc, the 40-year-old UK B2B publisher which this week said its “overall performance has been resilient, despite the severe impact of Covid-19”. Its revenue in the three months ending Sept. 30 was down 16%, but this neatly excluded a telemarketing company which it had closed just three years after buying it for more than £13m (equivalent to 40% of Centaur’s current market cap).
The acquisition had pre-dated Centaur’s current CEO, Swag Mukerji, who was appointed a year ago with a brief to settle things down after a long over-due but disruptive sell-off of non-core magazines and events.
The objective had been to re-focus just on the marketing-centric activities which have been the cornerstone of the company since its pace-setting launch of Marketing Week four decades ago. But Centaur also retained The Lawyer after reportedly being disappointed by offers which fell far short of the £40m it had expected.
Most insiders (including Centaur’s last CEO) had not wanted to sell The Lawyer anyway which, with operating profit of some £3m, had increased its digital revenue five times in three years. It was good to keep despite the messy optics.
The disposal saga reinforced the longtime limitations of Centaur Media itself. Its stretch across multiple markets had long prevented it from serious diversification either internationally or digitally. It was a classic case of a once-glittering traditional media company being too slow to change and unable to replicate its 20th century success as the UK’s most prolific creator of weekly B2B magazines – stuffed with recruitment classified ads. Two decades of low-cost magazine launches and high-margin print advertising had made it complacent. You know the story.
You can feel the aching of the current CEO whose company has net cash of £9m and will have revenues this year roughly equal to its £32m market cap, and a profit margin of 10%. He told investors he was “confident that we will emerge from 2020 a more resilient and agile business.” But he knows how hollow that sounds, despite the company’s success in more than halving its headcount to 290 in 16 months. Investors were under-whelmed but, then, most have lost interest in the company whose IPO 15 years ago had valued it at £140m.
Mukerji has not been short of advice from advisers on how Centaur “should” become a private company and recent hedge-fund share buying has stoked expectations.
Analysts had been hoping for a transformational deal, perhaps a “merger” with the UK listed media-marketing consultancy Ebiquity, which would combine two sub-scale listed companies with complementary skills and revenue, and unlock global growth prospects. Talks have taken place in the past but Ebiquity is now almost as vulnerable as Centaur.
Perhaps Haymarket, publisher of Campaign and longtime marketing sector rival (and now debt-free), will pitch some kind of “merger” like it is known to have done before. If you assume The Lawyer might still fetch £30m (9 x EBITDA), the net price for Centaur might be just £10-15m even after stockmarket investors extract their premium. Other interested marketing services “neighbours” might include the privately-owned £120m-revenue Mintel International, in the UK, and also media-marketing publishers in Continental Europe. The drum beat is getting louder.