The Blog
Walking Backwards into the Future
Posted: 04 March 2013
The reporting season for the 2012 year end is finally done, so here?s a summary of the headlines:
Reed Elsevier:
2012 turnover up 2%; claimed +4% "underlying"; but the legal division was -1% (claimed +1% underlying).
Operating profit up 5%, margin improved from 27.1% to 28%; legal division +2% (underlying +4%), but 14.5% profit margin.
80% of revenues in electronic and "face to face" preferred services.
Performance in Europe is "subdued"; 2013 will be all about "process efficiencies".
The rhetoric is all about blaming the customer market conditions. Profitability is running at roughly half what it should be on group norms. Rationalising some roles within Matthew Bender is typical.
Thomson Reuters: Revenues +3%; ongoing businesses +2%; Legal division +1% organic; Elite +12% (inc acquisition growth); research related -2%;
Profitability 27.4%; cashflow +4% (1: 1.02); margins 29.3%.
The publishing based businesses make +12-13% more profit than their bigger cousin in trading/Reuters brands and in underlying profitability is almost twice as profitable. This is still very much a legal information service business.
For 2013 expectations are low single digit growth (ie 2-4% still); sustained margins.
?Simplify and focus on free cash flow.? Strategy to counter declining print core (-2%) is to build the $0.4bn software and services (+12%); global services of $0.7bn +8% and Corporate/Government services $0.8bn +3%.
Wolters Kluwer 2012 headlines: turnover +2%; +1% organic growth;
Online, software and services revenue is now 74% of the total and grew at 4% organically; finance and compliance services up 5%;
Profit/ebita margin up 0.1% to 21.8%; free cash flow up 8% at e507m.
European operations remain a concern.
Beerkens, the CFO is being replaced by Kevin Entricken, an internal promotion, from May.
Basically the "big three" are still seeing print declines cancelling out online growth in legal information services even with major investments in new technologies. For 2013 net overall growth below +3.5-4.0% equates to a loss of market share this year and only Thomson is explicit in saying they can manage this, or close. Typically big group headlines overall are matching the market growth, but some legal divisions are struggling to meet both group and market norms.
Blaming performance on market conditions is unhelpful. It simply raises the question of why is the market hurting you and not others? To global strategists when you say "market conditions"; they hear "we?re stuck with rubbish clients". It?s unfair, as these guys think 3 months is a long time whereas strategies count client life-cycles in decades, but it explains why some large investors remain sceptical and wonder how long large groups will see "legal" as core.
Some of the neighbouring gardens are rosy - some, not so much, but they are instructive all the same:
IHS: 15.4% growth (EMEA 15%: 7% organic growth;76% subscription based);
21.1% profitability; cash conversion 1:1.5.
Wilmington: 2012 - 1.8% growth; profitability 10.5%; cash converting: 1:1.09
6 months ended December 2012: Sales -1.7% profits up to 17.3%;
"Legal" is now 23% of revenues and only 8% of profits;
Exited Ark in Australia and revenues overall down 9% largely through exiting company formations business.
Informa 2012 revenue "broadly flat", ie down 4%, but amid some divestments (2%);
Group operating profit 28.4%; PCI (professional &commercial info) division 33.8% profitability.
74% digitised revenues; subscription revenues 67% of publishing revenues (90% in PCI).
FTI Consulting?s litigation division
Revenues dropped to $82.6m in Q4 2012 (-8.2% on previous Q4). (Year end group 2012 sales rose 0.6%.)
Operating profit 11.9% due to increased hiring at the same time as revenues dropped.
Huron Consulting: Q4
Sales up 10.9%; profitability 22.7%, FTE headcount up 7.2%; expects to see $655-685m sales in 2013.
Reed Elsevier:
2012 turnover up 2%; claimed +4% "underlying"; but the legal division was -1% (claimed +1% underlying).
Operating profit up 5%, margin improved from 27.1% to 28%; legal division +2% (underlying +4%), but 14.5% profit margin.
80% of revenues in electronic and "face to face" preferred services.
Performance in Europe is "subdued"; 2013 will be all about "process efficiencies".
The rhetoric is all about blaming the customer market conditions. Profitability is running at roughly half what it should be on group norms. Rationalising some roles within Matthew Bender is typical.
Thomson Reuters: Revenues +3%; ongoing businesses +2%; Legal division +1% organic; Elite +12% (inc acquisition growth); research related -2%;
Profitability 27.4%; cashflow +4% (1: 1.02); margins 29.3%.
The publishing based businesses make +12-13% more profit than their bigger cousin in trading/Reuters brands and in underlying profitability is almost twice as profitable. This is still very much a legal information service business.
For 2013 expectations are low single digit growth (ie 2-4% still); sustained margins.
?Simplify and focus on free cash flow.? Strategy to counter declining print core (-2%) is to build the $0.4bn software and services (+12%); global services of $0.7bn +8% and Corporate/Government services $0.8bn +3%.
Wolters Kluwer 2012 headlines: turnover +2%; +1% organic growth;
Online, software and services revenue is now 74% of the total and grew at 4% organically; finance and compliance services up 5%;
Profit/ebita margin up 0.1% to 21.8%; free cash flow up 8% at e507m.
European operations remain a concern.
Beerkens, the CFO is being replaced by Kevin Entricken, an internal promotion, from May.
Basically the "big three" are still seeing print declines cancelling out online growth in legal information services even with major investments in new technologies. For 2013 net overall growth below +3.5-4.0% equates to a loss of market share this year and only Thomson is explicit in saying they can manage this, or close. Typically big group headlines overall are matching the market growth, but some legal divisions are struggling to meet both group and market norms.
Blaming performance on market conditions is unhelpful. It simply raises the question of why is the market hurting you and not others? To global strategists when you say "market conditions"; they hear "we?re stuck with rubbish clients". It?s unfair, as these guys think 3 months is a long time whereas strategies count client life-cycles in decades, but it explains why some large investors remain sceptical and wonder how long large groups will see "legal" as core.
Some of the neighbouring gardens are rosy - some, not so much, but they are instructive all the same:
IHS: 15.4% growth (EMEA 15%: 7% organic growth;76% subscription based);
21.1% profitability; cash conversion 1:1.5.
Wilmington: 2012 - 1.8% growth; profitability 10.5%; cash converting: 1:1.09
6 months ended December 2012: Sales -1.7% profits up to 17.3%;
"Legal" is now 23% of revenues and only 8% of profits;
Exited Ark in Australia and revenues overall down 9% largely through exiting company formations business.
Informa 2012 revenue "broadly flat", ie down 4%, but amid some divestments (2%);
Group operating profit 28.4%; PCI (professional &commercial info) division 33.8% profitability.
74% digitised revenues; subscription revenues 67% of publishing revenues (90% in PCI).
FTI Consulting?s litigation division
Revenues dropped to $82.6m in Q4 2012 (-8.2% on previous Q4). (Year end group 2012 sales rose 0.6%.)
Operating profit 11.9% due to increased hiring at the same time as revenues dropped.
Huron Consulting: Q4
Sales up 10.9%; profitability 22.7%, FTE headcount up 7.2%; expects to see $655-685m sales in 2013.
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The "big blue" of UK legal information services, historically mainly in publishing services, but with a presence in all sectors notably legal IT and tax publishing.
Legal Information Suppliers 1995-2015
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