Media Fortune Fame & Folly

Why Centaur +Wilmington is inevitable

Centaur Media, the UK owner of eConsultancy, Influencer Intelligence, The Lawyer, and Marketing Week, has had many more disappointments than thrills in the 17 years since it IPOd at a value of £140m. It had some rare good news this week. In 2020, the company has made an expected £3.5m EBITDA on revenue of £32.2m. The modest result (16% down on 2019), £5m of annual cost savings, and some signs of stability in a year of cancelled events sent the share price up almost to a 12-month high, giving a market cap of £50m.

It is just 18 months since Centaur completed its sell-off of non-core B2B magazines and events. The auction had generated proceeds of £20m (probably half of what had once been expected) and said it was keeping The Lawyer as a result. It was just the latest disappointment from Centaur which had sprung from the 1978 launch of Marketing Week magazine. It had been founded by Graham Sherren, a UK doyen of B2B publishing who had pioneered “controlled circulation” free magazines at Morgan Grampian (which successively became Miller Freeman and United Business Media).

Sherren built a formidable B2B group of brands like The Lawyer, Design Week, Money Marketing, Creative Review, Employee Benefits, New Media Age, and Marketing Week. It was a sparkling company which built strong magazine brands and exploited the booming 20th century market for jobs advertising and events. Centaur launched more B2B weeklies than anyone else in the UK during a quarter-century when classified-stuffed magazines accounted for 100% of all B2B profit. In the pre-internet age, Sherren had the magic touch, even with successive private equity investors who backed the company and left him to get on with it.

His ultimate coup was the March 2004 “accelerated IPO” in which Centaur’s broker Numis acquired the company from then majority shareholder Veronis Suhler Stevenson and immediately IPOd it. Centaur’s £140m IPO value reflected EBITDA of £9.6m and a margin of 14%. The company had 24 magazines, 20 exhibitions and 100 conferences. Investors liked the lengthy portfolio.

But, six years later, profit had fallen to £6.6m and the share price was 50% of its IPO level. By then, Sherren had retired. With its classified advertising ripped away by online platforms, Centaur went on a spree acquiring B2B digital niche players as it sought to diversify beyond magazines. But it continued to spread itself thinly across multiple B2B sectors in a way which limited investment possibilities beyond the UK markets it had once been able to dominate.

Centaur’s self-confidence was almost embarrassing: “From our digital media and iconic print brands to our award-winning events and cutting-edge data products, we enable and inspire the very best performance in a range of selected markets. We have the information that people want and need. We create products and services that make content valuable, combining the deepest knowledge with the best user experience. Centaur Media is – at heart – a content business. But we are continually redefining what content means in the 21st Century and seeking new ways of communicating that content to our customers.”

The truth was it depended still on advertising-funded print and had a long tail of magazines and events in at least eight separate UK markets which was how it stayed, despite some pricey digital investments, until 2019. It had been slow, to say the least, to seize the opportunity of subscriptions and online media.

That was a contrast with its larger London neighbour, the £145m Wilmington Plc.

Wilmington had been created in 1993 by UK publishing entrepreneur Brian Gilbert (ex Haymarket, United Trade Press, and Maxwell Communications Corp). It started life by almost continually buying and selling magazines, books, conferences, exhibitions, and databases. It was good at striking deals and cranking out profits. But its formation – from business directories bought from the bankrupt estate of the late Robert Maxwell – gave the early impetus to get into paid-for digital media and, eventually, to sell-off trade magazines. It also encouraged the company to expand internationally.

In 2019-20, EBITDA was £14m on revenue of £122m and, despite suspending its dividend to shareholders, the company’s cash generation was 133% of profit. Operating what are stretchingly described as four verticals (Risk & Compliance, Healthcare, and Professional) it claims to be “100% digital” and is 58% revenue-dependant on the UK, with 16% coming from the US.

In a sense, Wilmington has been shaped by the deals it has not done. Some 15 years ago, it lost out to Euromoney on the gilded Metal Bulletin, then on UK business and legal training firm BPP. But, arguably, no deal would have been more transformative than Wilmington’s proposed 2016 acquisition of the Miami-based Association of Certified Anti-Money Laundering Specialists (ACAMS), described as “the largest international membership organisation dedicated to enhancing the knowledge and skills of anti-money laundering and financial crime prevention professionals”.

Warburg Pincus had hatched the deal to bring together its US company and Wilmington’s 14,000-member International Compliance Association (ICA). The combination would have become a global leader in the fast-growing market for information, training and technology on corporate ethics, financial crime prevention and compliance. It is a hot sector. The UN estimates that some 2-5% of global GDP (or $1.6-$4 trillion) is laundered through corruption, drug trafficking, tax evasion and cybercrime. Compliance information companies like Wilmington and ACAMS provide the data, training, networking, and certification to enable financial institutions, insurers, asset managers, lawyers, law enforcement and credit institutions to combat the practice of generating income through illegal activity. In the event, ACAMS was acquired for $330m by what is now the $2bn-revenue Adtalem Education Group; Wilmington is believed to have offered two-thirds of the winning bid.

The deal would have enabled Wilmington to become an international compliance specialist and to offload its other business. While it is nothing like the sprawling mini-conglomerate that was Centaur Media pre-2019, neat presentations cannot disguise the facts that: Risk & Compliance last year accounted for two-thirds of Wilmington’s operating profit; 50% of all healthcare revenue is a single US event; and just 51% of revenue was accounted for by the “data and information” with which Wilmington wants to be identified.

This is where Covid comes in.

The pandemic seems likely to disrupt B2B events for maybe 2-3 years which may, of course, be enough to permanently change the way many businesses spend their time and money on information, marketing and education. The recent explosion of relatively low-cost digital events creates a clear opportunity for existing conferences and exhibitions but also a threat to those which do not adapt to a new world where ‘remote access’ will be part of what audiences expect.

It is important, however, not to judge the potential of digital events by what has happened in a frantic “do-something” 2020. Instead, we should contemplate the development of 365-day networking platforms in key industry sectors. B2B media companies and others may increasingly develop smart proprietary systems bringing together information services, exhibitions, conferences, remote learning, lead gen, and corporate networking. It’s a real opportunity that companies like Informa, the Financial Times, Ascential, and others are working hard to exploit.

That vision may also bring together Wilmington and Centaur which have spent almost two decades flirting with each other. They both now need to become experts in digital events and education. In 2019, the two UK companies generated 49% and 27% of revenue respectively from training, events and networking. The combination could create a re-rated company worth perhaps £250m. It could be focused on:

  • Corporate risk, compliance, law, and marketing – internationally
  • Innovative digital information, education and events
  • Subscriptions and membership revenues

Wilmington’s £40m of healthcare revenues in the US and France might be divested for almost 50% of Wilmington’s current £165m market cap.

The idea of bringing together the two sub-scale listed companies is not new to shareholders, four of which together own 48.7% of Centaur and 35.8% of Wilmington; a single shareholder owns some 20% of both.

At a time when even the best media companies are struggling with post-Covid strategy, investors may be appetised by the possibility of cost savings and a larger, more attractive listed company which can concentrate on international paid-for information growth. A Centaur-Wilmington ‘merger’ might save some £4m from the costs of group management, listing and investor relations, which would almost double the £4.9m EBITDA forecast for Centaur in 2021.

You might assume that Wilmington could acquire Centaur for £60m, a 20% premium to the current share price, ie £52m plus the company’s £8m of net cash. With £4m of corporate cost savings, that would be less than 6 x EBITDA, a low price for a business which generates 41% of its revenue from subscriptions and 16% from its ‘mini-MBA’ – and is in better shape than it’s been for years.

Negotiations get tricky when it comes to discussing the choice of management – and previous talks have foundered as a result. But Wilmington+Centaur may finally have become a no-brainer for shareholders.

Centaur Media Plc Wilmington Plc