UBM Unveils Events-Driven Strategy for Coming Years

HIL ANDERSON, SENIOR EDITOR
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London, UK –  Global giant UBM plc views the events industry as a highly attractive, growing global industry  and Chief Executive Tim Cobbold plans to focus the company’s resources on its most productive trade shows in the coming years with the goal of keeping the British company in the forefront of global show organizers. Cobbold, who was named chief executive of UBM in February, laid out a plan today for the next three to five years dubbed “Events First.” The strategy relies on the top 100 shows of the UBM portfolio to both firm up its position in the worldwide exhibitions market and also generate a higher return for the company’s stockholders. Those shows, Cobbold said, were responsible for more than 96% of the UBM events’ EBITA in 2013.

“We will focus on our clear priorities:  applying our resources to grow our largest and most profitable shows; effecting a step change in the efficiency and effectiveness of our operational performance; and investing in customer insight to enhance their event experience,” he said.

Cobbold said the strategy will enable UBM to grow event revenues ahead of global GDP and provide a basis for margin expansion over the medium term.

The planned acquisition of Advanstar Communications, Inc. was still on track to close at the end of the year and Cobbold said UBM will look to invest between £25m and £50m annually (about U.S. $40 to $50 million ) in acquisitions in the events sector.

Here is a recap of  UBM’s announcement:

Market Context
“The Events market is a large, attractive global market which is forecast to grow at around 5% per annum. UBM is a leading operator in a highly fragmented market, strongly positioned for growth given its geographic weighting towards emerging markets and its diversification across attractive industry verticals. Innovation in social media, data capture and analysis, and in content delivery has the capacity to make UBM’s events even more effective for customers, increasing their engagement and driving strong returns on their marketing spend.

Driving Growth
“UBM’s top 100 shows by revenue generated more than 96% of events EBITA in 2013. UBM will focus its resources on growing these higher-margin shows through the sharing of operational best practices and application of common tools for marketing and customer-relationship management. In the future, UBM will more actively manage the balance of more than 200 shows while investing in those shows with greater growth opportunity.

“UBM will look to invest between £25m and £50m per annum in acquisitions of events businesses, subject to strict criteria, including return on investment greater than UBM’s weighted average cost of capital in the first full year of ownership.

Driving Efficiency and Effectiveness
“UBM will deploy standardized systems and processes consistently across the business to better leverage UBM’s scale advantage, drive efficiency and effectiveness, and to further enhance UBM’s capability as a consolidator in the industry.

Enhancing Value for UBM’s Customers
“UBM will invest in data acquisition and analysis to improve insight into customers’ needs. This will enable UBM to innovate using digital technologies to both enhance customers’ experience at events and return on their investment. As part of this, UBM will continue to more closely align its ‘Other Marketing Services (OMS)’ segment with the Events segment, and will rationalize and exit OMS activities that are not well aligned.

PR Newswire
“PR Newswire continues to enjoy brand and market leadership, notably in premium wire services in the U.S.  The business has demonstrated consistent revenue growth and strong operating profit due to its diverse product set and its diversified and high quality revenue base. Reflecting UBM’s focus on shareholder value, the strategy for PR Newswire concentrates on its core strengths in distribution while also leveraging PR Newswire’s global distribution network to support further international expansion. Overall PR Newswire’s revenues are expected to grow in line with GDP and margins to be stable with modest upside potential.

Financial Impact and Policy
“To implement the strategy outlined above, UBM expects to make capital investments of approximately £15m in the period 2015 to 2017 in the development and roll-out of standardized systems. UBM also anticipates associated implementation and rationalization costs of between £15m and £20m over the period 2015 to 2017 expected to be taken as operating expense. These investments are expected to give rise to annualized cost savings beginning in 2016 which will build to £10m per annum.

“Revenue growth in 2015 is expected to reflect the decision to rationalize UBM’s smaller events and to exit over time from certain activities in the OMS segment. Underlying margins in events and OMS are expected to be stable before the additional implementation costs referred to above, with upside potential over the medium term.

“Going forward, UBM intends to target a leverage ratio of between 1.5 to 2.0 times net debt / EBITDA which is consistent with investment grade metrics, will provide flexibility for biennial cycles, and will provide capacity to invest in the business.

“The Board will maintain its progressive dividend policy, targeting a dividend covered 2x by adjusted earnings through the cycle.

Update on Advanstar
“The proposed acquisition has received Hart-Scott-Rodino antitrust clearance, satisfying the only regulatory condition to closing. In addition, UBM expects to publish its shareholder circular and prospectus in the coming days, with a general meeting expected to be convened for the end of November. The proposed acquisition is expected to close around the year end.”

Reach Tim Cobbold at +44 (0) 20 7921 5000 or tim.cobbold@ubm.com