Our story begins on 5th March, 2007 when business to business (b2b) media group Huveaux announced preliminary results for the year to 31 December 2006. Turnover rose 62% to £45 million, normalised profit before tax rose 43% to £6 million, organic earnings before interest, tax, depreciation and amortisation (EBITDA) rose 14% and the dividend payment was increased by 10% to 1.21 pence. This was arguably the peak of what was a good run of growth, both organic and through acquisitions for the company. So much so, that the results were titled ?Fifth consecutive year of significant growth?.
Acquisitions in the year included Letts Educational and Leckie & Leckie, which helped the Group consolidate a leading position in the UK study aid and revision guide market. This was part of a desire to build around its newly learning and education divisions. Huveaux also acquired Political Wizard to expand its political monitoring business, and there was continued growth from its events business and medical education business in France. All in all, the title of the prelims seemed fairly suitable; the company had quite effectively grown over a five year period.
In the weeks after the interim results, Huveaux crept higher, peaking at approximately 53 pence in June 2007. Unfortunately for investors, it is a well known fact that what can take years to build up can be torn away in a much shorter time frame. In June a trading update for the Group painted a less rosy picture. The French Healthcare Division saw a ?significant? drop in sales, blamed on pharmaceutical companies slashing their marketing budgets in response to a surge in generic drugs. Meanwhile the Learning Division was hit by training budget cuts in Government Departments. More positive developments at the Education Division and Politics Division were not enough to offset the shortfall. All was laid bare a few weeks later in the interim results for the six months to 30 June 2007. Group turnover rose slightly to £21.6 million (2006: £20 million), EBITDA fell sharply to £0.963 million (2006: £1.78 million) and the group barely posted positive normalised earnings per share of 0.02p (2006: 0.68p). The bulk of Huveaux?s revenues are generated in the second half of the year, due to the beginning of a new school year and new parliamentary term so while the shares did take a hammering, there was still hope for the full year results.
In response to the disappointing first half results, Huveaux initiated a ?profit improvement program? and predicted it would return to growth in 2008. Guidance for full year EBITDA was slashed to £6-7 million. John van Kuffeler (Chairman), Gerry Murray (CEO) and Dan O?Brien (FD), Richard Faye (Non-exec) showed their confidence in the company, acquiring a total 985,000 shares between 32 and 32.5 pence taking their cumulative holdings to around 3.58 million shares. It took more than director buys to buoy the share price however; in October Huveaux found itself an admirer in the form of August Equity, a private equity group which entered into preliminary discussions with the company about a possible offer. Alas, this week take over talks for the Company ended, and now shareholders have to ask: where from here?
Along with the confirmation of the end of takeover talks, Huveaux added that EBITA for the year end was now expected to be at the lower end of its previous guidance ? around £6 million ? but trading is ?satisfactory? in the final quarter of the year. From a share price perspective, the company is back to where it was in 2003, though the market cap is considerably larger due to multiple acquisitions. Net Debt as of 30 June 2007 stood at £18.5 million, and the company does pay a dividend. The key to 2008 for Huveaux will be damage limitation at its Healthcare Division while driving growth in its education, learning and political divisions. The company does have a solid track record of integrating acquisitions and despite the set backs, the debt is manageable and cash flow is still strong. The big risk appears to be further deteriorations in the French business, which could drag on the whole company and demand considerable management time and effort to turnaround.
Shareholder confidence has taken a knock; Huveaux will have to work hard to earn it again.