UBM Plc (UBM), the publisher of InformationWeek, fell the most in 18 months after it sold most of its data services unit for less than analysts expected.
The shares (UBM:US) fell 5.6 percent, the biggest decline since August 2011, to 740.5 pence, paring its gain this year to 2.9 percent. It was the fifth-worst performer in the FTSE All-Share Index. The volume of UBM shares traded was almost six times the three-month daily average.
UBM agreed to sell most of the division to Electra Partners LLP for 160 million pounds ($252 million), including a vendor loan of 40 million pounds from the Dublin-based company. That’s less than analysts Gareth Davies at Numis Securities and Roddy Davidson at Westhouse Securities expected, even as they praised the company’s effort to get rid of underperforming assets.
While it’s positive that the vast majority of the data services division has been sold, “the price is a little disappointing to the 200 million pounds we had hoped for,” . Davies, who had a hold recommendation on the stock, said in a note to clients.
UBM said in July it might sell its data services business to focus on more profitable activities. The disposal is a “significant strategic step forward,” Chief Executive Officer David Levin said in a statement today.
UBM’s adjusted earnings per share last year were about 58 pence, the company said in the statement. Lower-than-expected earnings at the data services unit were offset by corporate costs and tax charges that were less than predicted, it said.
The company is selling its health, paper, technology, trade and transport units to Electra. Revenue in those businesses fell 5.6 percent last year to 179.3 million pounds and their adjusted operating profit dropped 1.1 percent to 27.4 million pounds, UBM said.
“The exit multiple on this disposal is lower than we had hoped,” Westhouse’s Davidson, who has an add recommendation on the stock, said in a note to clients. “This will have been influenced by the disappointing performance of the assets involved.”
The disposal of the businesses would improve earnings quality, emphasize the group’s focus on events, emerging markets and digital disciplines and provide additional firepower for acquisitions in these areas, Davidson said.
Net proceeds on the disposal will probably be 100 million pounds and are likely to be used to reduce debt in the short term, Numis’s Davies said. He cut his 12-month price target to 766 pence from 780 pence.
Electra is “excited” by the opportunities to develop the businesses and deliver value growth, Chief Investment Partner Alex Fortescue said in an e-mailed statement.
The transaction is subject to regulatory approval and consultation with the works council in France.
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