BPN 1065 The first post-Apax annual report of PCM

Last year was an annum horribilis for the Dutch newspaper and book conglomerate PCM. The private equity company Apax had left PCM in 2007, taking 140 million euro in profits along in its exit after four years and leaving the conglomerate with a negative own capital. This year the figures of PCM look rosier, but the future of the conglomerate is still uncertain.

The situation has changed this year by using a set of tricks. By converting the deferred loans into shares the own capital of the conglomerate is now 271 million euro and positive again. And the debt has been halved to 316 million euro; a sum which has to decrease in the coming year. The turn-over slightly rose last year to 644 million euro and the company result grew almost twenty percent to 45 million euro.

The main share of the revenues still comes from newspaper sales and subscriptions as well as advertisements. Deducting the turn-over of the book division (96 million euro) and of the educational division (64,5 million euro), the turn-over from newspapers and newspaper related activities is 483,5 million euro. Volkskrant and NRC Handelsblad are the money makers, while AD, a joint venture with Wegener, is positive. For the newspapers PCM is afraid of the paper prices and the price for newspaper distribution; it does not expect any re-organisation in the newspaper sector. PCM expects the free newspaper Dag, a joint venture of KPN and PCM, to cost another 10 million euro in the coming year, before it shows black figures. Dag recently underwent a restyling and gets now editorial input from De Volkskrant; it is no longer a red rag.

PCM is taking some accountancy measures. After the Apax exit, the company was forced to an investigation by the Enterprise Chamber of the Amsterdam Court. Now PCM has announced that it will report its annual figures according to the international accountancy method IFRS. It will be done for transparency and for comparison with competitors.

PCM has no plans for mergers or acquisitions. Last year the merger with NDC/VBK was called off. The coming year will be used to consolidate business. PCM does not aim at a broadening of its base any longer to decrease the dependence on newspaper. For the time being it will remain a newspaper and book conglomerate. As mentioned in yesterday’s posting the educational division ThiemeMeulenhoff will sold off and the money received will be used to relieve the debt.

Blog Posting Number: 1065

Tags: newspaper

Dutch newspaper conglomerate PCM investigated

At the request of the trade unions, amongst other the Journalists’ Trade Union (NVJ), an investigation about mismanagement will be started against the Dutch newspaper conglomerate PCM, owner of NRC Handelsblad, Volkskrant, Trouw, NRC Next and DAG as well as house-to-house broadsheets, . In 2004 The Dutch newspaper conglomerate invited the British private equity company Apax to move ahead faster, but the investment company left with 140 million euro in profits in 2007. The judge ordering the investigation did not mince his words criticising Apax.

The newspaper group PCM was owned by separate foundations, of which SDM was the moist influential one. These shareholders invited Apax to reorganise the company and move it to the front. First thing Apax did was reorganising the total financial structure of PCM Publishers. First action was to found a holding company, PCM Holding, capitalised at 1 million euro. Apax transferred 475.000 euro, while the other stakeholders (foundations) paid also 475.000 euro. Management contributed 50.000 euro. As the voting rights were lodged with Apax, the company dominated the board with 52,5 per cent of the votes.

PCM Holding bought PCM Publishers with 300 million euro foreign capital from banks. Also Apax puts in 139 million euro and the foundations offer 200 million euro. All the loans have an interest rate of 12 per cent. In 2006 Apax refinances PCM and asks PCM to return 130 million euro. Apax is then major stakeholder, dominating the votes for 40 million euro, while PCM has debt of 170 euro due to the high interest on the 139 million euro. In 2007 Apax is bought out by the foundations for a profit of 140 million euro. During the Apax management PCM lost more than 240 million euro.

Now the corporate chamber of the court has appointed to investigators. The investigation will cost 150.000 euro and has to be paid by PCM. Depending on the conclusions of the investigators the judge can concluded that PCM has been mismanaged under the Apax regime.

Such a conclusion would be disgrace for Apax, especially as private equity companies have already a bad name as locusts in The Netherlands. Theoretically the conclusion could lead to dismissal of the governors and return of premiums of the governors and managers. Yet these measures would have hardly any effect on PCM. Most of the governors and managers involved have been dismissed and some of the managers have not accepted their premium. Mr Groenewegen, who started as cfo in 2005, is the only manager left from this period, while Strengers is the only governor left from that period.

Yet the judicial conclusion of bad management would mean justice to the PCM employees, who could not prevent that their company was financially drained during an economic upturn.

Blog Posting Number: 977

Tags: newspapers, private equity

Never a dull moment at PCM

It took a while, but now PCM knows the height of the claim by Mr Marcel Boekhoorn, the proprietor of free daily De Pers. Instead of 96 million euro, the claim has been lowered to 10 million euro. PCM disputes the claim and refuses to pay.

The claim is part of talks to collaborate in the free daily project. PCM’s CEO Ton aan de Stegge together with an Apex partner started these talks with Mr Boekhoorn. PCM would provide the printing and the distribution; Boekhoorn would provide the editorial staff. The PCM national newspapers were against the plan as they wanted to have their own free daily or protect their own baby like NRC.next. The Board of Directors/Shareholders stepped in and called off the talks.

Boekhoorn immediately let the company know that he was going to put down a claim and estimated the disaster on 96 million euro. In the meantime Apex and the Board of Directors/Shareholders were in talks for Apax stepping out. Besides the height of the transfer sum, the claim was hanging above the talks. Despite the fact that the Apax representative is said to have made promises to Boekhoorn, the Board of Directors/Shareholders took the claim, if it would come to a court case or a settlement. As the claim has been lowered from 96 million to 10 million, a settlement around 5 million euro will be most likely (and PCM has already 1 million for this claim as the CFO return his bonus of 1 million euro).

In the meantime the PCM project of a free daily DAG has started up. And the former CEO Ton aan de Stegge has been named a commissioner of the PCM love baby. No date for publication has been set yet.

De Pers has not failed one day of publication so far. As with every new paper advertisers still are hesitant. Distribution of De Pers is done at the railway stations. But now the management has also plans to have the free daily be delivered from door-to-door and eventually to convert to paid subscriptions. Eventually the distribution will consist of 30 percent through stations and buses, 30 percent in office blocks and through bookshops and 30 percent from door-to-door; the rest will handed out at gas stations. In the coming weeks De Pers will be distributed from door-to-door. The publisher Cornelius Van den Berg has 50 areas selected where De Pers will be delivered daily. The areas are mainly new developments and new towns. That is where the young families are; they are interesting for advertisers.

The publisher is very optimistic. Besides the mix of distribution channels, he wants to convert from a free daily to a paid subscription in a mid-term view. Having established one arm of the publishing empire, the publisher also announced that the company will be publishing books. Next month the first book will appear. You would think that a publisher would be able to tell the title, but he has not decided which book it will be.

By not getting involved in De Pers, PCM allows a competitor, not hindered by money, to grow.

Blog Posting Number: 723

Tags: newspapers

Never a dull moment at PCM

PCM is many illusions poorer as well as a lot money. Yet it improves its revenue flow due to a financial reconstruction and despite the hefty bonuses for the top management (of course the results could have been better if the bonuses had been added to the final results).

It is unbelievable that after so much mismanagement and turmoil there is still a reasonable financial result. The newspaper and book publishing company had a turn-over in 2006 of plus 3,4 percent from 653 to 675 million euro. The netto loss went down from 51 million euro in 2005 to 31 million euro in 2006.

The positive results were mainly made in the newspaper sector and the educational division. In the newspaper sector the job advertisements brought in more money as the Dutch economy is in full swing. And extra revenues at 50 million euro came from the sale of the book publisher Bohn Stafleu Van Loghum to Springer.

But what is the real status. The newspaper companies keep on working and still have to realise heavy cuts in their budgets. This while the managers of Apax leave with a fat profit and the top management cashes, while it is still possible. Two top managers have left in the meantime, each taking 2 million euro for less than two years of work. The CFO, who stays on, has returned his bonus of 1 million euro. Also two members of the shareholders’ board have left (of course without a bonus). So there is a CFO and a chairman of the shareholders’ board left.

In order to pimp up the picture of the company, PCM expects for the future:
• It has a fine starting position to profit from the economic upswing and new developments in newspaper and book publishing;
• The advertisement sector is picking up again, but the newspaper will have to look to get into the competitive game of television and internet (in The Netherlands newspaper publishers are not allowed yet to possess television stations);
• The company will invest in new products such as the free paper DAG; it aims to develop a cross-media news platform to reach younger target groups and invest in a multimedia strategy for the present quality titles (read established audience; mind you: cross-media for youngsters and multimedia for the elderly!)
• The newspaper and book divisions need to work on improving the results (of course after handing out bonuses so generously);
• The book publishing division will remain part of PCM and no longer be put up for sale.

So what is happening today?
- PCM is still negotiating in silence with the newspaper an book publishing company NDC/VBK. Mr Jan de Roos of NDC/VBK is rumoured to be the new CEO of the merger.
- Mr Marcel Boekhoorn, proprietor of the free paper De Pers has put a claim on the desk of PCM for 10 million euro. This claim represents the damage caused by PCM when the company was talking to Mr Boekhoorn about collaborating in De Pers project, but broke off talks and left promises unfulfilled..

Tomorrow there will be more on the 10 million euro claim and the project De Pers.

Blog Posting Number: 723

Tags: newspapers, cross-media, multimedia

Never a dull moment at PCM

Hardly has the private equity company Apax closed the door to the premises of the publishing company PCM and made off with their financial spoils or the new owner, who was the owner before Apax, let the world know that they are in charge again.

Apax is out now. And the other shareholders, foundations, are in charge again just like they were before Apax was invited in. Those shareholders will look back at the Apax era and most likely shake their heads. What did it do for the newspaper and book publishing company?
- NRC.next is only tangible product, which just celebrated its first anniversary;
- One board member went out during the Apax regime: Mr Theo Bouwman;
- Two new board members came in during the Apax regime: Ton aan de Stegge and Philip Alberdingk Thijm;
- A free daily was announced in cooperation with a free daily which has been published in the meantime; PCM is now working on its own free publication;
- For the rest, Apax has financially reshaped PCM, but the company will have to pay off the loans for a long time.

So now the foundations are in charge again and they let it know to the world. They sent off Mr Alberdingk Thijm immediately. He had successfully operated at the Dutch financial daily Het Financieele Dagblad, where he shaped a cross-media operation, with print, radio and internet. According to the foundations he was unable to pull off the same trick for PCM. But he walks off at least 2 million euro richer, but of course his name in tatters. And also Mr Aan de Stegge will be slaughtered. He has been asked to stay on for another half year until a new chairman has been found.

All this turmoil normally leads to a period with no strategy or a strategy recalled. Mr Aan de Stegge had already announced that newspapers and education were the spearpoints of the strategy. The book division, except the educational section, could be sold, he said. But surprise, surprise PCM (read the foundations) are negotiating a merger with NDC/VBK, a newspaper and book publisher. Their profiles are quite similar. Both are in the newspaper and book business. PCM is in the national newspapers, while NDC/VBK is in the business of regional newspapers. Both companies have a book publishing division. PCM is heavily mortgaged, while NDC/VBK is well financed. The company have been in talks already for months and are already talking about board members. Rumour has it that the chairman of NDC/VBK, Jan de Roos, will be named the new chairman.

But these merger talks could take some time. Discussions about the cross-ownership in the media are certainly coming up. The competition watchdog will have look into the matter. It might be that the watchdog will ask to sell particular parts. In this way the company would become a conglomerate of national newspapers, with regional newspapers in the North of the Netherlands. But the book divisions would be a problem. Putting the two book divisions together would produce the largest book publishing conglomerate in The Netherlands. There will be two reactions to this. The competition watchdog might ask to sell some companies or some book publishers might step out of the conglomerate and start their own company, as happened with the PCM book publishing companies.

For the immediate future there are two operational projects. PCM will finally launch their own free newspaper, named Dag (translated Day or Goodbye). There are high expectations about the project as PCM is working together with the incumbent telco KPN. PCM will produce the paper and be involved in the internet site; KPN will be involved in the internet site, but mainly work on the exploitation of the mobile/PDA and interactive television side. Another project will be the digital paper project by de Volkskrant and by NRC Handelsblad. As I remarked in the flash item of yesterday: this has been on the drawing boards for long. But now it seems to become reality. I personally would have combined it with the launch of the free newspaper Dag and experimented with day-parting. We will wait and see. I am eager to hear the price PCM is going to ask for the e-Reader and the subscription to the newspaper. Besides, with the merger of PCM and NDC/VBK, an expert company on e-Books and digital paper would be included: Pinion.

For the next half year there will not be a dull moment at PCM.

Blog Posting Number 709

Tags: newspapers, digital paper, e-Reader