First, the good news, though. Underlying half-time profits up 70 per cent served to confirm the benefits of Emap's continuing focus on specialist niche publishing, the timing of its diversifications into France and commercial radio, and the skill of its handling of spiralling newsprint costs.
Specialist magazines such as Motor Cycle News, Angling Times and Empire are actually among the last expenditures to go when consumers are cutting back. Even in bad times, circulations stay high, cover prices can be increased and advertising yields pushed higher. In the good times, profits and cash flood in, so the division's higher operating margins were no surprise.
Moving into radio, with last year's TransWorld acquisition and the more recent Metro Radio buy, could not have been better timed: just as the industry was increasing its share of the overall advertising cake. While ad revenue growth has slowed in the past six months it is still way ahead of Emap's other divisions and rates were pushed a useful 16 per cent higher.
Elsewhere, good management helped create an 8 per cent margin in France, compared with nothing at all a year ago, and wiped out the negative impact of a 30 per cent increase in paper costs for the newspaper division. Overall costs in regional papers were held steady, which meant a 3 per cent rise in revenues was translated into a 22 per cent rise in operating profits.
Share prices, however, look into the future and, although analysts were yesterday nudging their forecasts slightly higher to about pounds 82m for the full year, investors are more likely to focus on the company's downbeat comments about the slowing rate of growth in advertising revenues across its activities.
Having risen more than threefold over the past five years, the shares trade on a prospective price/earnings ratio of 20 to next April and a still heady rating in the high teens in the year to 1997. Even for a ship this tight, the advertising cycle will determine the share price and that is high enough.
Filofax rise could falter
Filofax has made plenty of money for those who backed new management to pull the personal organiser maker out of the mire. From 13p in 1990, the shares now stand at 269p, down 6p yesterday.
But the rise in the shares has slowed in the last two years and at some stage it is inevitable that doubts will start to creep in about the ability of the chief executive, Robin Field, and his team to maintain the faultless momentum built up through the recovery phase. Yesterday's half-way figures certainly showed no let-up in the recent heady expansion. Pre-tax profits shot ahead 37 per cent to pounds 2.91m in the six months to September, with management demonstrating its own confidence in the future with a 29 per cent rise in the interim dividend to 1.35p.
The UK market, the most mature for the original Filofax organiser, is still clocking up growth of between 10 and 15 per cent. But having picked up its nearest rival, Topps of England, in a pounds 6.6m deal earlier this year, the group now controls a commanding 85 per cent of its domestic market, limiting future market share gains.
That puts the onus on the rest of the world and diversifications into greetings cards, pens and office notepads. Filofax itself still has plenty to go for on the Continent, with the four subsidiaries there reporting growth in excess of 50 per cent in the half year and spending on organisers in France and Germany way below that in the UK.
The test for management will be handling that level of growth in the core operation, while also juggling with developing businesses. A full- year result of pounds 6.8m would put the shares on a forward p/e of 17. Holders should perhaps follow the example of some of the management yesterday and take some profits.
Two profits warnings later, Rexam, Britain's biggest packaging group, has underperformed the rest of the stock market by nearly 36 per cent since it reported in May that trading conditions continued "by and large" to be helpful.
To be fair, the difficulties that prompted yesterday's warning of profits one-fifth below the 1994 figure of pounds 231m have been experienced across the market. And Rexam was not alone in thinking the destocking that followed the levelling-off in raw material prices earlier this year was a temporary phenomenon. It wasn't, and the weak demand that prompted Rexam to announce in August that it expected flat profits this year has continued into the fourth quarter.
On top of an expected pounds 25m hit to profits, falling plastic resin prices and the threat of lower paper prices is likely to lead to some write-downs of stock values at the year-end. Profits of pounds 185m this year would put the shares, down 37p at 335p, on a prospective multiple of 15. But the real question is how Rexam fares in 1996. Even if profits bounce back to pounds 200m next year, the shares will still be on a price/earnings ratio of 13. Avoid for now.