Newsletter Issue 3 : March 2014

INTERVIEW | NEWS | MOVERS & SHAKERS | JOB BOARD | GCN EVENTS

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INTERVIEW with Investec’s Media Analyst, Steve Liechti

How the City Evaluates Event Companies

Apart from the obvious perceptions and track record of management, there are five key financial areas of focus for analysts - Growth, Profitability, Visibility of Revenues, Cash Flow and Return on Invested Capital.  The key is Profitable Growth.  Analysts are looking at like for like/organic growth within an events company – how well are existing events performing on an underlying basis and how are new launches performing against events that have been or need to be axed?   

In theory, given current tough global macros, a reasonable underlying growth rate would be 2-3% but this is more or less in line with inflation so not particularly exciting.  A good rate is 5% and anything around 10% or more is excellent.  Steve explains “We look at what drives this organic growth and where the companies are positioned both strategically and geographically.  We want to see them in growth verticals”.  These success stories are not always hot-topic related but may just be an industry seeing change which drives exhibitor interest - Steve gives a good example of Tarsus’ Label Expo, which has seen good growth due to the industry’s shift to digital labelling.  

From a geographical angle, Investec looks at which emerging markets the company is operating in and which events therefore are more likely to have better prospects.  Emerging markets are generally attractive though there is a near term caveat given slowing growth in China and political upheaval.  Developed countries in Western Europe are still weaker than the UK but strategically the US is going to be even stronger as it is a bigger and more dynamic market.  Analysts will be watching for acquisitions to drive growth further and fill gaps - typically smaller entrepreneurial-run companies to bolt on to their portfolios. “We like to see events that are market leaders in their field internationally. This implies strong industry relationships with both clients and trade bodies. This should allow growth and less volatility in any downturn as customers will want to stay current and remain part of a dominant show”

WHAT ANALYSTS MONITOR WHEN ADVISING ON “BUY” OR “SELL”
Analysts try to differentiate between growing companies that could surprise on the upside and below average companies where things may get worse.  In terms of profitability, are companies outperforming the industry on margin or underperforming?  Is margin expanding?  They look at reasons for performance and try to project where they can they see the business in three to five years.

WHAT IS THE CITY PERSPECTIVE ON MEDIA/EVENT COMPANIES?
“This is a difficult question as there are so many subsectors to media.  A decade ago we counted 26 separate media subsectors and now that is more”.  Steve explains that the biggest divide is probably between B2C and B2B and big listed companies focus more on  B2B events rather than B2C as they have better visibility of revenues, larger expos and margins are better.

WHY DO EXHIBITION COMPANIES HAVE A HIGHER PE VALUE THAN CONFERENCE COMPANIES?
Steve explains that the nature of the revenue sources of B2B exhibition companies makes them a more attractive investment.  “Delegate revenue is by nature attendance/ticket sale  based, therefore more cyclical and volatile than exhibition revenue as customers can take a view if things are tough and not send staff.  In contrast, Exhibition revenues are driven by space sales - the key is that exhibitors want to come to sell product at an expo - there is real ROI that is justified even in a downturn.  Exhibitions are therefore generally seen as a more interesting and attractive long term investments.” 

Visibility of revenues is also key - stand space is often booked up a year in advance with stage payments pre event.  “The City likes the advance booking model - a high rebook rate provides us with good visibility and visibility helps prevent negative shocks”.   Cash flow is also an important ingredient for analysts when looking at events companies.  Events score well here given advance bookings and stage payments which help working capital, generally good margins and they tend to be asset light so capex requirements are limited.  Finally, return on invested capital is important - what profit do you get out for your capital investment compared to a risk free bank deposit?  Well positioned events are usually very profitable and have limited capital tied up in the business therefore look attractive in the financial world. 

WHAT ARE ANALYSTS MONITORING CLOSELY IN EVENTS COMPANIES?
“Apart from industry trading newsflow and macro trends, an interesting topic for analysts at present is consolidation.  For example with UBM and Informa having new CEOs, what will the new management want to do, where will they divest assets?”  Another area to be looked at is emerging markets.  “Is it currently a good thing to be in emerging markets or bad?”  Steve explains that we have seen much growth in recent years in less developed markets.  Will this slow down as the world economy recovers and governments step back from printing money to boost global liquidity?  Emerging markets have benefited from this excess liquidity in recent years and therefore they may not continue to grow as fast.  

We asked Steve about some of the more popular markets for events companies – China being extremely profitable for many.  He explained that China has obviously been a big market for international events companies and continues to be, but growth is slowing with a particular risk for operators serving heavy industries given reduction in infrastructure spend. 

However c. +7% GDP growth is still relatively attractive in global terms.   Russia, with its political situation and Ukraine incursion is one to watch at the moment, as has Turkey been recently.  The City feels Brazil’s growth as not been as high as investors had hoped, perhaps expectations were too high following their being named host to the World Cup and Olympics.  India is always perceived as attractive given a huge population that is getting richer.  However GDP growth is also slowing and the currency is weak right now.  The key issue for the territory is lack of good sized venues to house the demand for large global expos. However, while everyone is concerned, emerging markets are still seen as structurally attractive - “we feel that emerging market growth slowdown is a short term problem and analysts continue to see these territories as important for growth aspirations of event operators”.


INDUSTRY NEWS

Coaltrans drop in delegates
Coaltrans Conferences, owned by Daily Mail and DMTG saw a 4% drop in revenue in 2013 which was largely due to less delegates attending during the course of the year.  The company holds large annual events in Europe, Asia and South America.  Directors plan to discontinue the lesser performing events and introduce new events for the coal sector for this year.

UBM results and strategy
UBM’s H2 results showed a positive outcome of the company’s strategic restructure showing an organic growth of 3.7% in 2013.  The company has turned its focus to marketing services for its events sector and the communities those events support.  Notable success was made from new events in China.  Other interesting factors in the report showed that over 90% of the company’s revenue is from non sterling sources and many of their events are bi-annual.  The events occurring in “odd” years being stronger than those in “even” years.  UBM plans to continue focus of geo-adapted shows and invest in the exhibitor and visitor experience.  However venue constraints worldwide are a problem at their top expanding Shows. 

Reed Elsevier
Reed Elsevier reports continued underlying growth in revenue of 2% (3% excluding biennial exhibition cycling), operating profit and earnings in 2013. Organic investment is largely responsible for the increase along with some targeted acquisitions and terminating alliances with several businesses that are not part of their growth strategy. 

Informa year end results: 
Year end results for 2013 announced “Solid Earnings And Cash Performance” and 2014 is projected to be a “Year of Operational Focus and Management Transition”.  Organic growth was at 1.5% and operational highlights included acquisition in China of majority stake in Baiwen – owner of China Beauty Expo; the disposal of non-core Corporate Training business; over 275 large events held throughout the year and academic publishing and Global Events performing well. Global Events is Informa’s third main arm and saw a revenue growth of 0.2% to £414.7 million and adjusted operating profit of 14.1% to £95.5 million. Their operational anatomy for events include a strong exhibition business and fragmented market; quick speed to launch in new geographic markets and a need for product innovation on conferences.

Euromoney Director change announcements
Daniel Cohen, Euromoney Executive Director and MD of Institutional Investor training division, is stepping down at the end of September. He will be replaced by Jane Wilkinson, currently based in New York as Group Marketing Director and CEO of Institutional Investor's publishing activities.  Jane will be replaced in New York by David Antin, currently MD of Institutional Investor magazine.

MOVERS & SHAKERS

Tim Cobbold will join UBM as New CEO on 6th May.  Tim was previously CEO of De La Rue and prior to that held a variety of senior roles at Chloride Group, Smith Group and Drax

 

Ruth Carter has taken up the position of Chief Executive, Events at Aspermont Ltd

 

Steve Morris  is now Managing Partner – Content & Global Production, at The Eventful Group

Sarah Harvey is now Marketing Director, RBI Conferences and Communitiy Care at Reed Business Information


JOB BOARD

Incisive Media - Conference Producer, Financial Risk Management & Alternative Investments

IQPC - Portfolio Sales Director

IQPC - New Business Development Manager

i2i Events Group - Senior Brand marketing manager

London Business Conferences Group - Conference Marketing Manager

FC Business Intelligence - Senior Conference Producer


GCN EVENTS

GCN hosts drinks reception for Conference Managing Directors
On Thursday 20th March a select group on Managing Directors from Conference Companies gathered for drinks at the Waldorf Hotel in London

As ever this was an extremely civilised setting in which to catch up on recent industry changes, of which there have been so many in recent months. Generally speaking there was a buoyant mood with most commenting on expanding portfolios and better than expected results to date this year. The Global Conference Network would like to extend our thanks to the Waldorf Hotel for hosting us in such fine style.

Global Conference Network runs its first Roundtable for Conference Operations Directors
The discussion theme for the evening was “The Challenge of Operating Overseas” was supported by the Hong Kong Tourist Board at the Mandarin Oriental Hotel in Knightsbridge. Key issues raised were the difficulties of negotiating in a different language with different cultures; problem with finding a venue with large room bookings; the value of sharing personal contacts within the group and using a DMC for stronger negotiating power with venues and suppliers.

Dates for Upcoming Roundtables

Event Content Director’s Roundtable
3.30 – 5.30 pm,  27 March, The Capital Club

Event Marketing Director’s Roundtable
5.45 – 7.30pm, 7 May, The Mermaid

Event Operations Directors Roundtable
5.45 – 7.30pm, 15 May,  Intercontinental London Park Lane

For full list of 2014 listings click here http://www.globalconferencenetwork.co.uk/roundtables.html

Date for your Diary

Conference Awards
Friday 13th June 2014, Battersea Evolution
See: www.conferenceawards.co.uk