International marketing services and events group UBM is growing profits and reach - but like its B2B peers, the company is rapidly shrinking its reliance on advertising-funded traditional print-based publishing.
UBM is deep into a long process of growing its conference/expo business in emerging markets and building a nexus around content and communities to drive events, which account for than three quarters of operating profit.
Announcing the company's 2012 results today, CEO David Levin doesn't see events as a separate operation siloed-off from the rest of the company: "We are very clear we are an events-led marketing services and communications group. It's a very tight definition and a very related definition."
How does that actually work? Levin points to the building of communities to support events - a key focus for UBM's head of content Adrian Barrick whom we interviewed in January.
"The sort of things are how we create communities 365 days a year," says Levin. "It’s notable we’ve just launched a new site called PharmaEvolution.com.
"It’s the first of the really new generation of community-based sites that effectively address a show - in this case CPHI. The goal is to create an active engaged environment for all the attendees and participants for that huge show of ours which can run 365 days a year which can promote engagement."
It's an approach which is paying off for the events part of the business.
-- Revenue: Including acquisitions up 18.1 to £437.6m - up 11.8 percent organically. 85 percent of revenue comes from 100 events generating more than £1 million apiece.
-- Profits: Up 6.8 percent to £142.4 million. Operating margin is down slightly by 1.5 percentage points but still stands at an impressive 32.5 percent.
Levin also expects the PRNewswire to contribute to the events side of the business, but the division is doing well in its own right. Revenues are up 4.6 percent to £196.4 million and profits are up 6.1 percent to £43.5 million. Profit margin is at a very healthy 22.1 percent.
More BRICS in the wall
As you'd expect, Levin is enthusiastic about emerging markets - especially China, where UBM has 1,000 staff: "In the last eight years we’ve made a concerted effort to build our emerging markets business.
"We’ve invested in India, in Brazil, in Turkey, but most of all we’ve developed and built our business in China so it’s as large and significant as it is. China is really important to us and it’s really exciting to us."
And you can see why he is so enthusiastic:
-- The now: Emerging markets account for 41 percent of events revenue and China alone accounts for 31 percent.
-- The near-term: Underlying revenue in the US, continental Europe and the UK all grew around 10 percent - the actual revenues in Europe dropped 6.6 percent due to the transfer of a major show from Berlin to Abu Dhabi. Contrast that to emerging markets which were up 15 percent.
-- The long-term: CFO Robert Gray points to the wider context that makes emerging markets so appealing: "If you look at where world economic growth is going to take place over the next five to ten years the vast bulk is going to be in markets outside the G7.
"Those are markets we have to be in and it is as risky not to be in them as it is to be in those markets."
Away from trade media
It's stating the obvious to say UBM's future is not about controlled circulation print titles - but Levin admits it's a sector that's proving difficult to retreat from.
As Levin puts it: "Of course in business the hardest thing to do is manage our retreat. Our legacy there of having controlled circulation print titles means structurally those businesses are having a very tough time.
"The margin doesn’t tell us we’ve got a sustainable long-term business nor indeed does revenue growth. We have a shrinking business with a low margin."
And when you compare the performance of print to online in the marketing services division (which include the remnants of UBM's print empire), you could see his frustration:
-- Print vs online: Online revenues were £116.7 million - down 3.6 percent but actually up on an underlying basis. Print revenues were 51.3 - down 40 percent actual and almost 20 percent underlying.
-- Total marketing services revenues were down almost 20 percent to £163.8 million. Much of the drop was down to the disposal of 27 print titles - however even without those sell-offs underlying revenue was down 4.6 percent.
-- Profits: Operating profit was down by more than half to 6.8 million and profit margin for the business fell 2.8 percentage points to just 4.2 percent.
Levin says parts of the print business do have a future with UBM - but only as part of the broader strategy of building communities that support the events business and other marketing activities rather than the traditional trade titles UBM used to be built on.