Swets & Zeitlinger financial trouble could be the rumblings of another Faxon/divine debacle.
Swets & Zeitlinger is the parent company of Swets Information Services, a company which mainly handles print and electronic subscriptions for libraries. My current place of work uses Swets to manage about 95% of our print subscriptions, so I was (and still am) quite unnerved to read the following news report on Tuesday (posted to SERIALST and other places, but nowhere to be found online in my Googling):
Swets at brink of ruin after accounting fault banks demand capital injection
by Gerben Van Der Marel
Amsterdam – Swets & Zeitlinger, Dutch distributors of scientific information, are in trouble. The business needs refinancing after it was found that it made losses in the past years.
As a consequence of the problems Swets no longer meets the credit conditions of the bank. On Friday, shareholders will decide on a capital injection of € 45 million.
This is confirmed by Jan-Willem Baud, chairman of the board of supervisory directors. Baud is the director of NPM Capital, which holds 26% of the shares of Swets. Other shareholders are the Swets family (29%) , Nesbic (23%), Paribas (15%), and Alpinvest (7%). The business has approx. 1400 employees in 23 offices.
NPM has promised new money. Baud: “We believe that Swets can go on for another hundred years in spite of the problems.” Other shareholders are still hesitant about whether or not they should jump to the rescue, says Baud.
Already in May it became public that Swets had found ‘errors’ in their books. And that hundreds of jobs will be scrapped.
Just last year Swets was still being offered for sale to international high-risk venture capitalists with a price tag of hundreds of millions. One buyer, Candover, pulled out in the last minute.
Swets is an intermediary between scientific publishers and major users such as universities. The company suffers from the increasing distribution of information through the Internet. Attempts to become more electronically active themselves have not panned out as predicted by the management.
The last figures published by Swets pertain to 2002, when – according to the information – a turnover of € 1.2 billion and a net profit of € 30.8 million were achieved. Swets now has to review the figures over 2001, 2002, and 2003.
According to Baud, transactions between parent companies and subsidiaries were processed incorrectly for years. Swets presently cannot give insight into the adjusted results. As a consequence of debit transfers, which Baud does not want to specify, Swets ends up in the red. “But non-recurring items do not get us into loss. Profits do have to increase though.”
Fraud, says Baud, was not discovered. Finance director Eelco de Boer is said to have stumbled across errors of his predecessor after taking up office last year. Whether these events will have consequences for director Eric van Amerongen or other managers, Baud does not want to disclose ahead of the shareholders’ meeting next Friday.
Shortly after this message was passed on, Arjen Oudheusden, Chief Executive Officer for Swets Infomation Services replied to the list:
As a brief comment to the article that appeared in the Dutch press I would like to inform you that Swets is operationally sound and that management is confident that the issues will be resolved at the shareholders meeting this Friday.
We are unable to comment further until after this meeting and we will issue a press release at that point.
Today, Dr. John R. Martin, the Director of Business Development and Marketing for Swets Information Services sent the following message, in part:
Resulting from the high level of confidence of the shareholders and management in the future of the company, we shortly expect to announce a significant strengthening of our share capital through the provision of new investment funds by our shareholders. These new funds will be used to accelerate our investments in e-services which will thereby further improve our services to our clients. Moreover, we will use part of the new funds to re-structure our organisation in order to further improve service and efficiency for the longer term.
I do not find either of these messages particularly reassuring. I am concerned that Swets may crash and burn, resulting in the same kinds of financial headaches former Faxon/divine customers experienced in 2002/03. While I have had great experiences with Ebsco Information Services in the past, I have also been aware of recent problems with the Los Angeles office that have resulted in poor service for West/Pacific Islands customers. Also, I’m not sure they have the infrastructure to handle the additional customers effectively. All in all, this is bad news for libraries and publishers everywhere. I hope Swets & Zeitlinger get their act together and pull through.