A show of caution as Blenheim falls short: Exhibition group pays price for failing to meet expectations

AS A writer of books on football, including one with the worthy but uninspiring title of Arsenal 1886-1986, Phillip Soar surely needs no reminding that in some fields a manager can expect little sympathy when results do not meet expectations.

Last week, Mr Soar stepped aside as chief executive of Blenheim, the acquisitive international exhibition organiser, paying the penalty for being at the helm of the group as its results failed to meet expectations. This year, the shares have fallen more than 40 per cent, upsetting many investors, some in France, who have in the past been persuaded by a charming and fluent French-speaking chairman, Neville Buch, to subscribe for shares.

In the City, Mr Soar, who assumes a new role within the fiercely competitive group as director of planning and strategy, had been closely associated with Blenheim's database and forecasting models, which for a long while helped convince professional investors that the exhibitions business was less vulnerable to the swings and vicissitudes normally associated with other forms of marketing and media.

One argument was that the exhibition business behaves differently because so much space had to be booked and paid for well in advance. That may be true, but all it seems to have done is put off the evil day of reckoning. Now that the day has arrived, it has aroused suspicion in the City that the company could be set for a serious fall.

When Mr Soar's model appeared to fail, he had little alternative but to move aside, to be replaced as chief executive by Staffan Svenby, who joined the group in 1991, when Blenheim bought out his company, Sydexpo.

Blenheim's problems with the City date back, say some, to September 1992 when a fine set of interim results was accompanied by an article in the Financial Times which questioned whether the steady profits growth was sustainable.

The group's directors were visiting Scottish institutions at the time, and they put on a confident performance, refusing to address the doubts expressed in the newspaper article. Already one or two cannier institutions had taken the hint and cashed in their chips.

By December last year, worries were growing in the industry about the effect of a downturn in France on the group's profits. 'People were beginning to see real consequences of the recession in France, but the company remained optimistic until around March this year,' said one source.

Blenheim has customarily bought in growing profits by acquiring exhibitions and exhibition companies. And in June this year, the company launched a pounds 76m share issue with a view to buying more than a dozen exhibition properties.

At the time of the issue, Mr Buch, if he had any suspicions about a possible downturn, did not voice them. He was quoted as saying: 'The group has performed well despite the recession.' Others were more sceptical. Guy Lamming, an analyst at James Capel, said the company could have waited a little longer before going to the shareholders. 'They're asking institutions to take a lot on trust,' he said at the time.

Then the company's brokers voiced their first concerns about the group's problems in France and Germany and put out reduced profits forecasts.

On 28 June, the shares fell 23p to 425p after it became clear that there had been a poor response to the pounds 75.8m convertible preference share issue. Only half the shares available had been taken up.

A few weeks later, first-half profits showed a rise of 18 per cent to pounds 15m, but this failed to support the shares which fell 17p to 398p after BZW, the joint house broker, cut its profits forecast for the second time in three months. Some shareholders, who had subscribed to the recent issue, were fuming that the warnings had not come earlier.

BZW said it expected Blenheim to make profits of pounds 45m this year, compared with an earlier estimate of pounds 48m, and it predicted next year's profits would come in at pounds 43m. Years of continuous growth were at an end.

The group maintains that it runs market-leading exhibitions throughout the world, including Batimat, a leading French exhibition for the building industry which takes place every other year, and that it is only a matter of time before investor confidence returns.

'We are feeling very battered and bruised at the moment,' Christopher Crowcroft, the group's finance director, said. 'Now we would like the time to demonstrate that we can produce the results and make the transition to being a more stable company.'

Others consider that now the sparkle has been lost, the company, which has limited tangible assets - buying exhibition companies is about buying the goodwill that goes with them, the title and the visitor lists rather than hard assets - will find it hard to recover its former glory.

One competitor says that Blenheim, which is known throughout the industry for its aggressive marketing and pricing, will struggle because it has paid premium prices for many of its exhibitions, some of which are not the leaders in their field.

Critics point to the pounds 6m Blenheim paid for a series of exhibitions under the Exclusively trademark. One exhibition in the series, Exclusively Tools, was postponed the last time it came around and is now being moved to January 1995, and there is industry speculation that it may be forced to postpone another, the Exclusively Houseware exhibition, in next September.

Furthermore, say critics, the company is not yet represented in the Far East, which provides the best growth markets in the industry. Mr Svenby has promised to get closer to consumers but he needs to get closer to the investment community, too.

'The trouble at the moment is that if Blenheim say that they have a large number of launches in hand, analysts grow fearful about the start-up costs and the effect on the bottom-line. They wouldn't think the same if it was somebody like Emap talking about the same thing,' one analyst said.

(Photograph omitted and graph)