Bottom Line: Emap results look good on paper

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The Independent Online
APART from an embarrassing backfire from Carweek, its biggest launch to date, and a dismal performance on the printing side, Emap's full-year results looked distinctly perky.

Pre-tax profits rose 8 per cent to pounds 45.7m on turnover up 14 per cent to pounds 362.4m in the year to June.

But what caught the City's attention were bullish noises about advertising revenue.

Consumer magazines and newspapers are both showing that a recovery is firmly under way, while business publishing has recently begun to show signs of life as well.

About 50 per cent of Emap's revenues come from advertising and its unexpectedly cheerful stance led a number of brokers to raise modestly their profit expectations for this year.

The fastest earnings growth was in the business division, where profits rose 33 per cent to pounds 14.6m. But that included about pounds 2m of profits derived from the acquisition late in the 1992/3 financial year of a substantial chunk of Thomson Publishing, plus an undistinguished contribution from exhibitions.

Underlying business publishing growth, achieved without any overall improvement in advertising, was an eye-opening 70 per cent thanks to a sparkling performance from titles such as Plastics and Rubber Weekly and publishing margins up from 9.1 to 11.4 per cent as the Thomson titles were made to work harder.

Consumer magazine profits were flat at pounds 24.1m, but that was largely the result of heavy investment in new launches - of pounds 9.7m of group launch investment, pounds 8.7m was in the consumer division, most of it in Carweek.

The magazine has achieved a market share of about 29 per cent, but remains an expensive loss-making gamble; it needs to overtake the number two title, which has a market share of about 35 per cent, to break even.

Without launches and acquisitions, consumer division profits would have risen 19 per cent.

Local newspapers profits were strong, up 30 per cent at pounds 6.9m, partly thanks to healthy job advertising (up by a quarter, year on year).

But printing profits collapsed from pounds 2.2m to pounds 1.2m due to the loss of several large contracts, including the Sunday Sport, and this has led to a large-scale pounds 2m rationalisation programme.

The 9 per cent dividend rise to 8.65p (final dividend is 6.4p) is unlikely to be repeated this year. But the shares - up 18p at 397p - have fallen a little too far from their January peak of 475p. Worth buying.