Is Future Plc, the UK-US specialist media platform, set to acquire the troubled financial services B2B publisher Bonhill Group Plc which this week put itself up for sale? The price could be £8-12m, equivalent to 4-6x EBITA post-acquisition, 0.75x revenue – and a fraction of the c£40m invested in the struggling UK business over the past five years.
It is believed a deal could be agreed in 4-6 weeks, although the financials – being made available to prospective buyers next week – may prompt interest from other publishers including: Morningstar, With Intelligence (formerly Pageant Media), the Financial Times, and Incisive Media (now owned by Arc / EagleTree Capital).
The financials are expected to confirm a forecast EBITDA loss for 2022 of £350k, compared with a previously expected profit of some £300k. Bonhill had reported breakeven EBITDA in 2021 on revenue of £16.4m. But our own estimates for the continuing business show how the Bonhill portfolio could add £2.2m of incremental profit (2022 basis) if integrated into an existing business:
| £m | Pro forma 2022** | 2022 | 2021 |
| Revenue | 15.2 | 15.2 | 14.0 |
| Direct costs | (12.5) | (12.6) | (11.1) |
| Central | (0.5) | (3.0) | (3.7) |
| EBITDA | 2.2 | (0.35) | (0.8) |
| Headcount | 85 | 95 | 110 |
** Assumes reduced central overhead and headcount, de-listing and integration within an existing business
That pro forma profit for 2022 mostly reflects reduction in overheads, primarily as a result of the recent sale of Bonhill’s Business Solutions & Governance division for £723k. It is estimated that a further £700k of cost could saved by de-listing the company. Other stand-out items include: an over-sized, leased New York office occupied by 10 people and costing some £500k pa; and estimated tax losses of £15m.
Some Bonhill directors are thought to believe that the company may fetch £16-17 (4x the current market cap). In practice, they may be lucky to get £10m and would probably be content with total consideration of £12m – even if it included some shares from a listed company like Future.
The planned sell-off comes just months after Bonhill raised £1.1m through an equity placing (for working capital) and replaced CEO Simon Stilwell, the former investment banker who had led the London-based B2B for five years. He was succeeded by managing director Patrick Ponsford (ex Centaur Media).
Bonhill, had been successively reducing its forecast for 2021 and its £16.4m revenue was 8% down on 2020 and 20% down on the £24.4m in 2019. It’s been a dismal performance from a company which had made acquisitions totalling some £40m in the past few years. It now has a market cap of less than £5m and a share price that has lost more than 95% of its value since 2017.
It’s a striking contrast to Stilwell’s bullish announcement of 2019 EBITDA of £2.3m on revenue of £24.4m – 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 supposedly good times ahead.
The company (listed on London’s secondary AIM market) had been known as Vitesse Media until the 2018 acquisition of Investment News, in the US, by the incoming CEO, a longtime investment banker and founding-CEO of Liberum Capital. A former army officer, Stilwell was fond of telling journalists about his peculiar British hobby known as “wild swimming” which involves plunging into “random lakes and rivers”. It wasn’t long before reporters drew the comparison with Stilwell’s plunge into the US market – at a time when Investment News had seen an erosion in revenues and profits over the previous three years. But the $27m acquisition was said to give Bonhill a market-leading B2B brand with:
- $18m revenue, 50% from print
- 560k monthly uniques
- $1.4m of revenue from events and $700k from research
- EBITDA of $5m (+25% margin)
It was acquired from the privately-owned, Chicago-based 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 then 23-year-old weekly had first been offered for sale a whole year before Bonhill/ Vitesse agreed to acquire it for 7x EBITDA. There wasn’t a long line of rival buyers but Bonhill hailed Investment News as “a highly attractive acquisition” because the B2B news brand had reportedly lacked investment but had the potential for “accelerated organic growth”. Insiders were, to say the least, surprised by the claims.
It always seemed like a high-risk ‘parachute drop’ into the US domestic market by a UK minnow. Shareholders would have preferred a transformational deal in the UK to strengthen the core business rather than leaping across the Atlantic into a US publishing market in which neither the company nor CEO had any prior experience. They might also have rather invested in a brand that was not quite so print-centric. But Stilwell was bullish: “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.”
He enjoyed sharing with investors Crain’s projections that Investment News’ EBITDA would grow by 30% to almost $7m by 2021 – even though 2017 revenue was down by 12% to $16.8m from $19.1m 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 newly-established “global reach”.
Eight months later, Bonhill acquired the UK-based Last Word Media (LWM) for £7m (7x EBITDA). The fact that LWM’s 2018 profits were almost four times those of the previous year fuelled the suspicion that this was another pricey deal. And then the virus struck. In 2020, Bonhill had a £2.5m rights issue and also raised soft business loans from the US and UK governments to fight the impact of Covid-19.
By then, Insurance News was suffering even more, from the loss of many of its longtime managers.
But Bonhill’s 2019 annual report – distributed in pandemic peaktime at end-May 2020 – comically forecast it would increase from 40% to 44% the proportion of its revenues generated by events over the next two years. Any such target had, of course, been rendered all but impossible by Covid, which was well underway by the report’s May 6 date, let alone when it actually reached investors.
But the rest of the report seemingly 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: ESG Clarity, Expert Investor, International Adviser, Fund Selector Asia, and Portfolio Advisor.
The trouble is that – even when its prospects had seemed more promising – Bonhill was generating most of its revenue from advertising (including in print) and from sponsorship of awards events and conferences. To ensure its longterm success, the next owner will need to use its brands to build information for which readers will pay.
For Future – which owns the Kiplinger personal finance newsletters in the US, and Money Week and GoCompare, in the UK – Bonhill could be a useful low-cost addition to the portfolio and to its ambitions for complementary B2B information brands.
