Investment: Emap the genuine article

HOW WELL will Emap weather a downturn? In theory, the magazines to radio outfit should be highly vulnerable to an economic slowdown.

This is not just because hormonally-charged teenagers will have less pocket money to spend on glossy magazines such as FHM or Elle. Emap is mainly vulnerable because advertising will account for about 40 per cent of revenues this year. Given its high fixed cost base, any decline in spending would quickly feed through into lower profits.

However, Kevin Hand believes the gloom is overdone. Presenting his first set of interim results yesterday, Emap's new chief executive sounded upbeat. True, advertising spending in the UK is showing signs of slowing. But revenues in France - 27 per cent of the total in the half to September - are strong. And advertising on radio, a more mature medium than during the last recession, should also hold up.

Indeed, Mr Hand thinks a slowdown could create opportunities by forcing some of the weaker titles to sell out or close down. Expansion plans are also on track: Project J, a new high-frequency entertainment title, is due for launch in the UK in the spring. And Emap promises at least one launch in France - possibly a local version of FHM - in the next six months.

Further out, there is the possibility of transferring some of Emap's more successful titles into the US. The group's radio division, which is straining against ownership rules in the UK, could expand into France. The embryonic Internet ventures should start covering their costs in the next year or so. And with relatively low gearing, Emap could always spend pounds 500m or so on an acquisition.

Emap shares dipped 29p to 1,081p yesterday on profit-taking, but analysts are largely sticking with full-year profit forecasts - before a goodwill write-off and the proceeds of the sale of Red Dragon FM - of pounds 161m. Given its solid record and prospects, Emap fully deserves its forward earnings multiple of 21. A quality hold.