It's been a bumpy few years for The Economist Group as the internet impacted its traditional publishing operations, but things seem to be righting themselves now, as the results for the year to 31 March 2006 suggest.
The mood of optimism comes as turnover hit £218m in 2006 - an increase of 11% (£21m) over 2005, but still below the turnover figures enjoyed during earlier years in the decade. For the last four years turnover has been level-pegging in the £190-£200m range, so if this upturn can be sustained, changes within the group over recent years may start reaping benefits.
Profits were down on last year - £22m compared to £27m - but the previous figure was boosted by a one-off tax benefit. The overall trend in the last five years, as chairman Robert Wilson pointed out, is profits increasing, costs being cut back and shareholders enjoying higher dividends.
It's all so upbeat that there's even talk of more acquisitions along the lines of the January takeover of EuroFinance Conferences. Chief executive Helen Alexander said: "I would like to continue with further acquisitions of high-quality businesses that improve our market position". Adds Wilson: "We now intend to manage with a more or less cash-neutral policy, which may result in some debt if material acquisition opportunities arise."
The optimism comes after an extended period of restructuring and rationalisation, and the Economist Intelligence Unit (EIU) bore its fair share of the pain involved. The merger of the country/industry intelligence business with the conference business may have had theoretical "synergies" from a management perspective - two sales teams effectively selling to the same customer base was clearly a wasteful duplication - but on the ground it was tough for all involved.
In the UK, a move of 300 staff from expensive offices in Regent Street to premises in Red Lion Square, Holborn was conducted last year, according to ceo Alexander "with the seamless professionalism I expect, but continue to be grateful for". Does anyone smell the whiff of staff unhappiness in that statement?
What I find truly significant is the ongoing strength of circulation growth at The Economist, which has doubled over the last 12 years and now stands at 1,096,154 (ABC, Jul-Dec 2005). A serious tiff with retailers WH Smith over stocking policies this year, where the title has been withdrawn from many of its stores, may dent those figures next year, but the title seems to have weathered the storm engulfing the wider publishing industry.
Why? Well, maybe the internet is having an unexpected benefit for business magazines. A statement from the Economist Group says the circulation growth demonstrates "its increasing relevance, despite, or even perhaps because of, the vast information resources available on the internet". I read this as saying there's simply so much noise on the net that older business readers are returning to traditional brands and older certainties. Younger readers may be continuing to enjoy the advantages the chaos of the web brings.
Staff turnover has been a major factor at the group too - there is a new publisher and editor at The Economist, and a new group Finance Director. The FT's owner, Pearson, continues to have a 50% non-controlling stake in the group. So with management strong, and profitability on the up, it should be a happy investor.
I hear that the number of copies sold through WHS high street stores is tiny and that the loss has nearly been made up by targetting nearby outlets.
ReplyDeleteWHS branches at airports and stations are not affected and sell far more copies.