Corporate Profile: Disunited news & media?

Clive Hollick's enthusiasm for buying (and sometimes selling) businesses puzzles the City. Critics say his company is a collection of disparate parts, its worth dragged down by lack of cohesion. Rubbish, the hype says, we're a `wired-up brain company'. So what's that, then?
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Fact File

Market Capitalisation: pounds 3.2bn

Turnover in 1998: pounds 2.2bn

Pretax profits: pounds 400.8m (includes pounds 270m gain on sale of regional newspapers)

Main Businesses: United News & Media is an international media and business services group. The Miller Freeman unit is the world's biggest producer of trade shows and exhibitions, and also publishes a wide array of specialised business magazines.

Services to media include the PR Newswire and stock photography. Broadcasting interests include three ITV franchises, stakes in Channel 5 and ITN, and TV programme production operations. It also has a stake in Line One, an Internet service provider.

National newspapers include The Express titles and the Daily Star, including the Megastar web site. United also produce advertising periodicals throughout the US and Britain.

Key Executives: Ronald Hampel, chairman; Lord Hollick of Nottinghill, chief executive; Charles Stern, finance director.

Number of employees: 18,200.

TO THE casual onlooker, United News & Media presents a puzzling picture. It is as if Lord Hollick, its famously Labour chief executive, has deliberately plugged his ears to avoid hearing the management mantra of the 1990s that business is all about focus and growing core operations.

Rather than follow the MBA text books, Clive Hollick exhibits a meticulous opportunism in acquiring, building and sometimes selling businesses. The trait, if not exactly rare among top corporate executives, is still rather more characteristic of the investment banker, which, of course, Lord Hollick was a quarter of a century ago with the City firm Hambros.

United's far-flung interests stretch from trade shows and business publications around the world, to consumer publishing, including the Express newspaper group, media service companies, three ITV franchises and TV programme making. "We have far fewer positions than we did three years ago," Lord Hollick says, in United's South Bank headquarters perched above Blackfriars Bridge. "Importantly, in those businesses where we are, we're a fairly serious player."

But some media industry watchers still feel United is too diverse and spread too thin, making the whole worth less than its many different bits. A report by the American investment bank Goldman Sachs, perhaps uncharitably, called this the "conglomerate discount". That is the criticism Lord Hollick must endure, despite having engineered in 1996 one of the decade's most surprising deals when his MAI, a financial services and budding ITV player, joined Lord Stevens of Ludgate's United News in a pounds 3bn merger.

That brought together Labour and Conservative peers, and gave Lord Hollick the eventual opportunity to change the traditional Tory political orientation of The Daily Express. At the time, Lord Hollick jokingly called his new partner's political affiliation a "shame", but with Lord Stevens happy to wind down his career in relative obscurity overseeing the Express, it was clear that the wilful Labour peer would be doing all the running.

Nowadays the Express titles, including the Daily Star, account for just 4 per cent of United's profits. Advertising-oriented multi-edition publications such as Exchange & Mart and Daltons in Britain and For Rent magazine, which operates in more than 40 US metropolitan markets, are substantially bigger earners. The conglomerate tag reflects a City view that these publishing interests draw little benefit from being combined with a wide range of business services which, in turn, seem to have little synergy with television broadcasting or wildlife programme production.

Yet it is the business services group - combining business to business publisher and trade show producer Miller Freeman, the PR Newswire and market research firm NOP, and spanning more than 800 exhibitions and publications - that provides 60 per cent of United's earnings. The next biggest chunk, about one-fifth of company profits, comes from United's ITV franchises - Anglia, Meridian and HTV - and programme-making.

In all, United has spent pounds 2bn on acquisitions since the 1996 merger, while raising pounds 1.1bn from disposals, including the pounds 450m sale last year of its regional newspapers. It also spun off its money-broking group Garban into a separate stock market listing. Lord Hollick says: "There's been a lot of portfolio changes, but they've been aimed at reducing the range of activities and concentrating on those areas where we have a strong market position and building a strong international base."

He is obviously not the only chief executive in Britain trying to wed global scale with tight market focus through an opportunistic combination of pruning and acquisitions. But unlike his counterpart at Pearson, Texas- born Marjorie Scardino, Lord Hollick has yet to make a gutsy, potentially company-transforming move, like the former's $4.6bn acquisition of Simon & Schuster's educational publishing interests.

This accounts, in some measure, for a lingering feeling in the City - reflected in the lacklustre performance of United's share price - that the company has yet to arrive. As United's business areas have slowly narrowed, British-based revenues have been reduced amid a build-up of its US operations. The latter is now the group's biggest geographical market, accounting for 45 per cent of total sales and profit.

The US expansion took another turn in April when Lord Hollick made his biggest post-merger deal with the $920m buyout of CMP Media, an American publisher of trade magazines and websites catering to the corporate information technology sector. Like his restructuring of MAI, undertaken in the mid- 1970s, the CMP buyout gives Lord Hollick an opportunity, to use one of his favourite expressions, to "add value".

CMP includes several market leading titles including Information Week and Computer Reseller News, but has seen profitability squeezed. United is taking a pounds 40m post-tax reorganisation charge this year and is budgeting cost savings of pounds 25m a year in an attempt to triple print operating profit margins there to 20 per cent by 2001. What could really excite investors is CMPNet, the firm's web business, which is to be spun off through an initial public offering as a separate tracker stock later this year. What CMPNet is worth is more in the realm of plain guesswork than in the domain of applied investment analysis.

For Lord Hollick, who counsels "pick a number" when probed about CMPNet's value, the company's real worth is as a "web currency" to make it easier for United to make expensive acquisitions in the Internet sector and to attract top Internet staff with the customary share options. CMPNet should also up United's game in the increasingly important Internet world. Miller Freeman, for example, operates trade publications for narrow, but growing, specialist IT areas such as embedded chips and computer telephony as well as fielding a stable of other non-IT industry titles covering everything from the Chinese travel industry to building.

"What we're doing is using the array of media we have to push aggressively, creatively and opportunistically to seize online opportunities," says Lord Hollick. "As an online company we can create value."

One example is Epulse, an Intranet that provides pharmaceuticals research and product news to 8,000 British physicians. Another is .dotmusic, an online site for the retail music trade that tabulates the pop charts and other industry news. A further 200 websites in different countries are linked in a global web template that permits businesses to engage in electronic commerce, access customers and provide product and market information.

"What we have is a knowledge base in (many) industries," Lord Hollicks says. "We publish magazines and newsletters, we run trade shows and conferences, continuing education and training. We want to use this new channel to extend our services. The great advantage of the Internet is the increased functionality, the one-to-one relationship, that enables us to go up the value chain, and get commission on deals."

An avalanche of businesses are trying to tap the business potential of the Internet. But the sums United is spending - by the company's estimate 2.5 per cent of total revenue, or about pounds 50m per year - will not be enough to put clear water between it and a host of competitors, ranging from CNET and International Data Group of the US to Germany's Bertelsmann or Dutch business-to-business publisher VNU. Lord Hollick acknowledges this. "There are no guarantees," he says.

What is hard to escape is the notion that Lord Hollick is still a few deals short of transforming United into what its 1998 annual review describes as a "wired-up brain company" with continually accelerating annual revenue growth.

One anomaly is the Express. Despite a flicker of circulation and demographic improvement, the national newspapers are not likely to provide growth. Indeed, it is widely presumed the titles will be sold; and current City thinking has it that United won't accept a penny less than pounds 300m.

On this score, Lord Hollick becomes testy, referring to the Express price estimate by a City analyst, who requested anonymity, as "completely bogus rumour-mongering". He adds, emphatically: "The Express is doing rather well. We are pleased with the progress." Perhaps that is why DJ Chris Evans was linked with an attempt in February to buy the Daily Star, and the Barclay brothers, publishers of The Scotsman and Sunday Business, are thought to remain keen to acquire the Express papers.

Still, it remains hard to square the group's ambitious growth targets with continued ownership of slow-growing national newspapers or its mature ITV franchises. United's ambitious plans to expand its 29 per cent interest in Channel 5 and join a third-generation mobile phone joint venture could also spur disposals, since group debt, without asset sales, will exceed pounds 1.2bn into 2001. Or United could fund further expansion via a rights issue, an eventuality not ruled out by analysts.

Either way, Lord Hollick's grand design for United remains a work in progress.

From Beaverbrook to Hollick: The Creation of United News & Media

1900: The Daily Express was founded by C Arthur Pearson.

1916: William Maxwell Aitken, who later became Lord Beaverbrook, bought control for pounds 17,500, launching a media dynasty. Circulation was 277,000 at a halfpenny a copy.

1918: United Newspapers, owned by David Lloyd George, was incorporated to manage the Daily Chronicle. A decade later, ownership was transferred.

1929: United set up Provincial Newspapers to control its growing stable of regional newspapers.

1930: The Daily Chronicle was merged with Daily News, but six years later United sold its stake in the News Chronicle.

1960: United starts a steady stream of acquisitions, including Sheffield and Blackpool newspapers, and Punch magazine.

1964: Lord Beaverbrook dies on June 9 and is succeeded by his son Sir Max Aitken as proprietor.

1974: Clive Hollick, an investment banker with Hambros, joins MAI, begins to sell its property assets, but retains media and broking operations.

1977: Beaverbrook Newspapers taken over by Trafalgar House Investments and renamed Express Newspapers.

1978: The Daily Star is launched in Manchester by Express Newspapers.

1979: The Daily Star extends into London and the South, and later into Scotland.

1981: Lord Stevens, who joined board in 1974, becomes United chairman.

Early 1980s: The decade starts with more acquisitions, including PR Newswire and Exchange & Mart, as United expanded into business information and consumer advertising.

1985: United acquires Fleet Holdings, which by then owned Express Newspapers, Morgan-Grampian and Daltons Weekly. Disposal of United Printing Services.

1987: United acquires financial information supplier Extel for pounds 45m.

Late 1980s and early 1990s: United and MAI acquire niche publishing companies and business service operations, including trade show and exhibition interests.

1993: United raises pounds 190m in a one-for-five rights issue.

1993: United sells Extel Financial for pounds 72m to Pearson.

1994: United buys US advertising publications group Harmon Homes for pounds 60m.

1996: Lord Hollick completes pounds 3bn merger of his MAI financial services and budding ITV interests with Lord Stevens' United News.

1998: Sale of the regional newspaper interests of pounds 450m.

1999: Buys CMP, a US information technology publisher, for pounds 607m.