UK Parent Bonhill PLC tersely announced Stilwell’s departure ‘with immediate effect’ and stalled its latest earnings report, causing shares to plummet.
Brooke’s Note: I still think InvestmentNews is positioned to be the WalMart of advised retail investing news but its owners seem to still be determined to do too much from too far a distance — namely one Atlantic Ocean’s worth of remote control. Perhaps the new CEO should be a full-time New Yorker willing to rethink the focus on events, which really are not all that compatible with journalism.
Simon Stilwell, the hard-charging CEO with big plans for InvestmentNews, saw the COVID-19 pandemic stall his prized 2018 acquisition and trigger a headlong slide the led to his abrupt resignation today (Apr. 7), amid a slew of loose ends.
InvestmentNews parent, Bonhill Group Plc, announced the management change in a terse statement, saying Stilwell was leavng “with immediate effect to pursue other business opportunities.”
It turned IN over to Patrick Ponsford, the UK company’s managing director, while an executive search is underway.
Stilwell’s departure was, “long overdue,” says a former staffer familiar with the publication and the ex-CEO.
InvestmentNews has been struggling to revive its events business, which had become the heart of operation following Bonhill’s takeover. But COVID restrictions all but killed its chief money-maker, live events, in 2020.
More than 100 financial industry events were wiped off the RIA calendar as COVID lockdowns and other restrictions took hold early in 2020.
As a result, 2021 profits fell farther than expected, leaving IN at about break-even, despite a $2.4 million injection of federal COVID relief funds. See: The British parent of InvestmentNews got a $2.4 million federal taxpayer bailout to weather the pandemic crash and has been freed from paying back the money under a COVID relief program
Meanwhile, its stock (BONH.L), which trades on the London Stock Exchange, fell dramatically today to a new 52-week low of GBP £5.30, or US $6.93, in intraday trading. It closed at £6 pounds even, a decline of 11.1%. That’s about 66% off its 52-week high of GBP £18.50, or US $24.19.
Wild swimmer
Stilwell, 53, made his first foray into the U.S. financial media industry with the InvestmentNews acquisition. See: How InvestmentNews may become nucleus of U.S.-based roll-up if UK investment banker succeeds with ‘wild swim’ across Atlantic to purchase it
He was previously an investment banker after serving as a hard-charging officer in the British Army’s prestigious Gloucestershire Regiment. He served in Northern Ireland, Bosnia, Kuwait and other hot spots, before going into business.
He’s fond of a peculiar British hobby, known as “wild swimming.” It involves plunging into “random lakes and tarns” according to UK media reports.
His plunge into the U.S. market came at a time when InvestmentNews has seen an erosion in revenues and profits over the past three years, according to first-ever reveal of financial figures released as part of the deal.
Revenue fell to $16.75 million in fiscal year 2017, ended Dec. 31, from $19.13 million in fiscal year 2015, a 12.5% decline.
Strange Environment
To shore up its ledger, Bonhill announced plans to raise an estimated GBP £1.1 million for working capital through the issue of new, ordinary shares in the company at 5.5 pence per share.
The company ‘s myriad challenges include filling two key executive vacancies–publisher and editor-in-chief.
John French, a well known industry consultant and turn-around specialist, joined InvestmentNews last October as chairman of the board, shortly after Publisher Christine Shaw and top editor George Moriarity resigned.
French, who is also known for positioning companies to sell, did not reply to an email seeking comment. He’s previously said a sale is off the table. See: InvestmentNews Publisher Christine Shaw departs on heels of top editor, leaving turn-around ace John French to pick up the pieces, but sale off the table, he says
Rather, French said replacing Moriarty was a top priority, but cautioned that it could “take a while.”
“It’s a strange environment. I don’t know how long it’s going to be, but it’s a priority… The content position is completely crucial.”
That was 20 weeks ago.
The lack of key executive talent may be weighing on its performance. The company announced a tepid 5% increase in live event bookings this year over last year.
Earnings report delayed
Bonhill stated that it expects its 2021 earnings before interest, taxes, depreciation and amortization (ebitda) to break-even, down from previous expectations for GBP £200,000, or US $217,000, in profits.
Company guidance in January a year ago called for expected 2021 ebitda revenue to slightly miss market expectations after the Omicron coronavirus variant exploded. It had projected ebitda revenue of GB £800,000 (US $1.08 million).
During the pandemic, Bonhill shored up its balance sheet with a loan from the U.S. Small Business Administration (SBA) Paycheck Protection Program (PPP).
The company borrowed $1.1 million in 2020, and the loan has since been forgiven. The company also borrowed $1.3 million in March 2021 and has stated publicly that it expects that loan to be forgiven as well.
The company’s cash balance as of June 30, 2021 was GB £1.3 million (US $1.8 million) compared to a year earlier when it was at GB £3.4 million (US $4.6 million), according to a financial statement.
Bonhill was slated to release its earnings, Mar. 24, but has delayed the report until Apr. 21.
Financial struggles
The company’s U.S. subsidiary, with InvestmentNews as its sole asset, lost GB £1.3 million (US $1.8 million) before taxes in the first six months of 2021 compared with a GB £1.9 million (US $2.6 million) loss in the first six months of 2020, it reports.
On top of its “forgivable” SBA loans, the company also reported negotiating six-months of free rent for its New York City offices, saving $200,000.
For the full year 2020, Bonhill reported GB £17.8 million (US $24.1 million) in revenue, and a loss (Lbitda) of GB £1.6 million (US $2.2 million).
The company reported a 2020 gross profit of GB £14.3 million (US $19.4 million), but an adjusted operating loss of GB £8.3 million and a statutory operating loss of £10.6 million (US $14.4 million).
Challenging year
Bonhill set up a separate U.S-based company when it bought InvestmentNews from Crain Communication of Chicago in 2018 for $27.1 million.
Bonhill blamed its larger struggles on broader political and economic concerns like “a shift in market messaging by customers following the election of President Biden.”
It also said U.S financial advice firms reduced advertising budgets to rebuild profitability, “while there was some disruption from M&A activity.”
The COVID-19 pandemic has continued to force cancellations of in-person events, Bonhill’s chief source of revenue. Digital sales also slowed, according to its earnings report.
The company said 2020 was the most challenging year in its history and 2021 was not far behind.
Bonhill cited last-minute margin reductions in both the United Kingdom and the United States and reduced bookings compared to the prior year.
The company also is taking a hit from unexpected order cancellations and reductions in customer spending, it stated.
“The in-person event market in the US. continues to be impacted by COVID-19 and the rise of the delta variant in country,” Stilwell said in the latest earnings report.
“This backdrop has necessitated some recent event changes from in-person back to virtual and we are constantly assessing the situation on a state-by-state basis.”
“InvestmentNews had a weaker first half where digital sales have been slower than in the comparable period in 2020,” Stilwell added in the report.
Top Client Poached
Bonhill also suffered a setback when former InvestmentNews digital and event guru Mark Bruno reportedly lured a top client away from the company.
Informa Connect, where Bruno now works as managing director of wealth management, announced it was launching Retirement Plan Advisor (RPA) Edge, through its site, wealthmanagement.com.
The event, called an “omnichannel initiative,” targets the financial advice industry to bring advisors up to speed on “defined contribution retirement plans and their participants.”
Significally, Fred Barstein, founder and CEO of the Retirement Advisor University, cut ties to InvestmentNews after a five-year partnership hosting a similar event. See: Mark Bruno, the ‘glue’ behind InvestmentNews, and sales strategist Julie Parten make it a clean sweep, ending the Crain era with their departures
One source told RIABiz the program brought in more than $1 million in annual revenues for InvestmentNews.
Editor’s note: Principal Brooke Southall, Managing Editor Keith Girard and reporter Lisa Shidler all worked at InvestmentNews at various points in their careers.
