Record sales and record loss at MCH

Now the fix is in. "The analog exhibition business (note: in Switzerland) does not offer any sustained successful development potential." CEO ad interim, Hans-Kristian Hoejsgaard said at the March 22 press conference that the MCH Group's necessary restructuring process primarily concerns the "profound transformation" of business:to:business exhibitions such as Baselworld. "This is where we have to reinvent ourselves. We believe in live events, but in the form of necessary hybrid platforms."

Is the glass half full or half empty?

Is the glass now half full or half empty? How can the MCH Group generate an operating and special expenses loss of CHF 190.4 million with a record turnover of CHF 522.8 million? When asked about the 2018 business year, CEO ad interim Hans-Kristian Hoejsgaard spoke openly of a "crisis year".

The bad news: it was noticeable at the MCH Group press conference that virtually all exhibitions in the Swiss exhibition center are either making losses, like Baselworld, or are at least no business at all, like the glittering Swiss Moto or Giardina. The exhibition business in Switzerland is in a downward spiral. It will probably take years before the restructuring process that is now necessary bears (financial) fruit. Hans-Kristian Hoejsgaard did not want to give any details about the corresponding time horizon. Nevertheless, thanks to the first-time consolidation of the American live communications giant MC2, the participation in the successful Masterpiece London and the flourishing Art Basel and Swissbau, the MCH Group has generated record sales.

Digitalization is to blame

The MCH Group speaks of the "major changes" in the exhibition and event industry. CEO ad interim Hans-Kristian Hoejsgaard cites digitization as leading the exhibition business into a fatal downward spiral. It is true that digitization must always be seen in the context of a new target group behavior, the famous Millennials generation. This generation has great expectations of a world-leading trade fair like Baselworld, not least in terms of digital expansion. It is wrong to say that digitalization alone is to blame for the decline of trade fairs. In Switzerland, there are simply fewer and fewer companies that have the exorbitant trade show budgets of the past, which is due to the small, shrinking supplier market in Switzerland. Exhibitors at trade shows can only find buyers with limited purchasing power who are not already on the existing customer list. This is a completely different situation to that of Germany, for example, as an exhibition venue, which the whole (exhibitor) world is rushing to because of the economic power of the FRG. The conclusion is that, with the exception of the world's leading exhibitions Baselworld and Art Basel, the MCH Group must continue to be successful abroad.

Exhibition centers before the sale?

As explained in the press conference on March 22, this means that the relatively young exhibition centers in Zurich and Basel, with their high maintenance costs, will have to be sold and Hans-Kristian Hoejsgaard made it clear that only the cantons of Zurich and Basel would be considered for this because there were no talks with private property owners.

Switzerland as an exhibition venue is no longer what it once was. But credit must be given to the MCH Group for working intelligently and at full speed on new exhibition and event formats. In addition to the exhibitions mentioned, Habitat et Jardin in Lausanne is apparently also a business. As far as the aforementioned "changes in the exhibition and event industry" are concerned, MCH already set up the "festival" Criterion (in German: Massstab) last year, Grand Basel (to be held at the IAA Frankfurt in 2019) and the Smart Suisse conference exhibition the year before last. Hans-Kristian Hoejsgaard expressed what is new about it as follows: "We have to understand that we can no longer be fixated on the square meter, we have to think anew in platforms".

At the press conference, he said that the first important steps in a strategic reorientation had been taken. Now a corporate strategy for the digital world must follow. However, he did not want to give a time forecast for the upward trend mentioned. Could mean: It may take years, if ever, before the MCH Group's business within Switzerland's borders is profitable again.

And the share price?

With 2018 sales of CHF 522.8 million, the MCH Group ranks fifth among all exhibition organizers worldwide, behind giants such as Reed but ahead of players such as Messe Düsseldorf, KölnMesse, Deutsche Messe in Hanover and Messe München. But the hope of the shareholders is based on the future prospects in profit or loss. Here, once the exhibition properties have been spun off from the MCH Group, Hans-Kristian Hoejsgaard's declared aim is to see the income statement improve again. Naturally, this also depends on the success of the exhibitions and events in Basel and Zurich, and this time horizon is difficult to estimate, should a corresponding turnaround be possible at all.

The MCH Group's share price has now plummeted to CHF 18.15, and it is unlikely to recover substantially, even if a turnaround in Swiss business becomes possible. The only glimmer of hope lies in the takeover of the exhibition centers in Basel and in Zurich by the respective cantons. This would relieve the income statement decisively, but also not groundbreakingly. To put it bluntly, the cantons have no choice but to take a stake in the real estate, because the corresponding process is the only contribution in the short term to the MCH Group's shares rising again, and the cantons have a stake of just under 50 percent in the MCH Group.