US unit is dragging down Emap's earnings
By Peter McCready Concerns about the lack of fundamental top-line growth in Emap's core mag...
By Peter McCready
Concerns about the lack of fundamental top-line growth in Emap's core magazine businesses have prompted broker Commerzbank to put a reduce recommendation on the publisher.
The group is reviewing its strategic options, particularly the future of Petersen, the troubled US magazine arm acquired three years ago where profit expectations have halved.
The broker said the US unit has been a significant drag on the company's earnings, missing all nine of the market's forecasts and has also been a major drain on the management's time.
As a consequence, and in tandem with slowing markets, growth in Emap's core UK consumer magazine operations has ground to a halt.
Magazine circulation represents 41% of group revenues, which is on a declining long-term trend, and advertising prospects 45% of the group's revenues are uncertain.
The outlook for magazine advertising in its core UK and French markets is for the lowest growth compared with the television, radio and newspaper markets. The business is mature and with the group's margins at industry leader levels it is difficult to see how much scope there is to expand these further.
To generate growth and take advantage of an eventual recovery in the advertising markets, the group will have to restructure. But this will take a long time and in the meantime there is likely to be more poor newsflow.
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