In the hot seat by Marc Barber

Over-indulgence and excess is as applicable to a company as it is to a rock star. For Media Square, it’s been a case of ‘back to rehab’ after a glut of over 30 acquisitions during a two-year frenzy made it a very sickly creature.

Roger Parry, who revived the fortunes of Jazz FM and media-buying group Aegis, has been charged with nursing Media Square to good health. It’s an eyebrow raising choice, given that he had the pick of taking the hotseat at any number of less testing concerns.

‘I was attracted by this company because it reeked of opportunity. It was in very significant trouble and I’ve always liked turnaround situations; they give you the greatest capital upside,’ he says.

On joining Media Square, Parry, who is chairman of YouGov, Johnston Press, Future and Mobile Streams, was dropped smack bang into the eye of the storm. The company released its interim results soon after his arrival and the numbers showed how badly wrong a ‘bolt-and-build’ strategy can go.

Group sales were 14 per cent lower at £85.3 million, while profits of £2.7 million slipped to operating losses of £100,000. After exceptional items, the operating loss was £17.4 million (2006: operating profit £1.3 million). During 2007, group chief executive Jeremy Middleton stepped down, as did the executive chairman, ex-editor of The Sun Kelvin MacKenzie.

Eleven businesses have been closed or sold and this rebuilding will continue for the next few months. ‘All you can see and hear at the moment is the dust and noise and not the actual work being done behind the hoardings,’ says Parry.

Parry is confident that, once the reconstruction work is complete, Media Square will start delivering results: ‘It’s great fun as it’s a lovely little business. I spent time with one of our PR agencies the other day, learning how they work and it is absolutely fascinating.’

It’s a sign of the larger organisations Parry deals with that he can describe Media Square, which has revenues of £200 million and over 1,400 employees across seven countries as ‘little’. Before taking the role as non-executive chairman, he had been working with private equity firms, looking at financing the buy-outs of HMV and ITV. Fortuitously, he saw the economic writing on the wall concerning leveraged buy-outs, ‘taking the view it was going to be hard to finance these larger private equity deals and that the opportunity was with smaller, AIM businesses’.

AIM shake-up
While Parry is a fan of AIM, he expects a shake up over the next few years: ‘Some of the best businesses are as good as anything on the FTSE 100 in terms of management, business model and all-round professionalism; by equal measure, some of the weaker businesses on AIM are absolutely, scandalously shocking. It’s extraordinary that some of these companies are public.’

Parry suggests the sheer scale of the market is a major reason for the often heard refrain from chief executives about a company being undervalued. After speaking to institutions he knew from his time with bigger organisations, he says the pressure is on to merge.

‘There are too many small businesses on AIM,’ he says, primarily referring to the media sector. ‘Too many chief executives, chairmen, big expense accounts and company cars; what we need is for the same group of businesses to be run by a much smaller number of central teams.’

Once consolidation has occurred, the resulting liquidity should lead to more interest from institutions, as happened on NASDAQ. ‘AIM will grow up,’ comments Parry. ‘Most
of the people running these little AIM companies like the fact they are a chief executive running a little business.’