Tough U.S. Market Hurts Emap Profits

LONDON-Emap PLC, hurt by a difficult U.S. market and reduced consumer magazine advertising in the United Kingdom, posted flat first-half pretax profit before items on slim revenue growth.

The publishing and radio group, which launched its racy men’s magazine FHM in the U.S. earlier this year, said pretax profit before digital investments and other items came to 92 million pounds ($131.3 million), unchanged from the year-earlier period. Earnings per share before items edged up 1.1 percent to 26.8 pence from 26.5 pence.

Results surpassed analysts’ expectations of between 88 million pounds and 89.5 million pounds.

The company’s operating profit edged up 1.8 percent to 113 million pounds. Total revenue rose 3.3 percent to 567 million pounds from 549 million pounds.

For the first half, Emap’s digital investments soared to 20 million pounds from two million pounds a year earlier.

In addition to FHM, Emap’s publishing stable includes music magazines Smash Hits and Q. The company also has Internet operations and radio stations, including the Magic Network and Kiss 100. The company also has subsidiaries in France and the U.S.

“Overall, the group has started the second half in line with expectations and the boards feels confident of achieving its full-year targets,” Emap said in a prepared statement.

Emap said setbacks in the U.S. and U.K. were offset by good consumer circulation revenue in the U.K., solid advertising growth in France, the accelerated rollout of its flagship FHM magazine to 14 editions world-wide, and new partnerships and alliances in its digital operations.

“It has been a challenging six months for Emap with some disappointments but many positive achievements,” said Emap Chief Executive Officer Kevin Hand.

Emap said it has focused on implementing customer facing networks, improving margins in France, establishing firm control of its U.S. operations and building the foundations of its digital enterprises.

In digital operations, the company said it is concentrating on eight key markets, reducing its forecasts for digital investment until March 2003 to 120 million pounds, compared with a previous estimate of about 250 million pounds. The company said about 50 million pounds of the new forecast will be incurred in the current year, including the 20 million pounds in digital investments posted in the first half.

The music network, Emap Performance, posted a 25 percent surge in revenue and 55 percent increase in operating profit. Magazine circulation revenue rose 24 percent, while Kiss 100’s 15-to-24-year-old listening share is now ahead of Capital Radio in London, Emap said. Emap’s share of the radio advertising market grew 2 percent.

In France, Emap’s underlying operating profit rose 15 percent, while margins rose 3 percent to a market-leading 19 percent, the company said.

But in the U.S., subscription revenue fell 13 percent, primarily because of a policy introduced last year in which revenue per subscriber is discounted in an effort to hold the subscriber base for a longer period.

In the U.K., Emap’s consumer magazine advertising underperformed the market because of the reorganization of the group’s internal sales house. These problems have been addressed and the current performance is more encouraging, the company said.