Media group on a natural high

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The Independent Online
SHARES in the magazine publisher to regional radio group Emap have gone through the roof in the past six months, writes Richard Phillips.

This may partly be down to good prospects for organic growth, but that hardly seems sufficient to have propelled the shares 68 per cent higher in the last year. Other factors are vague bid rumours, with United News & Media a name touted - except that UNM says it has no interest in returning to magazines.

Earnings should rise 12 per cent this year, and possibly higher thereafter if it squeezes better margins from its recently acquired French business.

Still, Emap is an attractive morsel for one of the larger US or continental publishers seeking a strong UK base in a mainly consumer-led house. Emap's attractive portfolio has a broad spread, with overseas expansion on the menu. Last year it made its first foray into Australia, and spent pounds 102m on a clutch of medical titles from Macmillan.

Its successes in the UK have included teenybopper bible Smash Hits, Slimming and Mother and Baby. FHM, the lads' magazine, has seen sales soar to around 500,000 copies.

With the exception of a testy boardroom fracas in 1996, Emap has enjoyed exceptional management: for that alone it deserves a premium rating. But, trading on 27 times current year earnings, the shares look stretched. Although Emap is increasingly diversified, in the end it remains at the mercy of the advertising cycle. That may not have peaked yet in the UK, but a consumer downturn cannot be that far behind the manufacturing recession now upon us. The shares are probably a safe long-term hold, but recent outperformance makes profit taking a sensible option.