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