The Investment Column: Hodder books a 24% rise in profits yes

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The Independent Online
HERE'S an ironic story. Thrusting chief executive of a publishing company leads campaign to break price-fixing in stuffy industry. Despite vociferous opposition his efforts succeed, and three years on industry experts estimate the move has expanded the market by as much as 11 per cent. However, the spoils go elsewhere, the company stumbles and is forced to issue a profit warning and, over the same three-year period, the company's shares lose a quarter of their value.

That's the story of Tim Hely-Hutchison, chief executive of Hodder Headline, who is still trying to convince the City that the 1995 warning was just a blip. Yesterday's solid 1997 results, showing pre-tax profits rising 24 per cent to pounds 8.2m on a 6 per cent rise in comparable sales, will have offered some reassurance.

Although the number of new titles published slipped slightly, operating margins widened by more than a percentage point to 9.2 per cent as Hodder improved what Mr Hely-Hutchison calls the "batting average" - the amount of revenue Hodder can squeeze from each book.

Prospects are good, too. The autumn list, led by Edward Heath's memoirs and Will Carling's autobiography, looks strong. Mr Hely-Hutchison is also upbeat about the proliferation of book retailers and internet booksellers, which he reckons are reinvigorating the market. However, educational publishing continues to suffer from schools' lack of funding while progress in the overseas operations is slow.

Of course, Hodder's fortunes are ultimately linked to the number of books people want to buy. But, as long as the company can continue to pick large sellers and avoid any cock-ups, it should prosper in what remains a growing market. Brokers yesterday edged up their profit forecasts for the current year to pounds 8.9m putting the shares, up 14p to 239p, on a forward earnings multiple of 14. Worth a look.

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