More on Emap
Emap: 2005/6 results
There was little organic growth over the year apart from the successful new launches that the UK consumer magazine business reliably produces. There is no news on the sale of Emap France which continues to decline as expected.
UK consumer magazines (39% of operating profit excluding Emap France) produced good organic growth from the launch of new titles (Grazia in particular) but this was offset by the closure of a number of less successful titles, including Smash Hits. Circulation revenues rose 4% and ad revenues rose 6%.
Strong cyclical growth in the events (e.g. conferences and exhibitions) and trade magazine sales was partly offset by declines in recruitment advertising. Acquisitions during the the year lead to 12% revenue growth and adding 20% to operating profit. Business to business operations now generate 40% of Emap ’s operating profit.
Radio (16% of operating profit) revenues jumped 44% because of the acquisition of SRH but organic growth was just 1% - but even this near flat performance is a significant out performance of the industry (as shown by GCap Media’s decline over the year). Although we are not keen on the radio subsector Emap’s radio operation seem to us to be better businesses than the others we cover.
At 831p Emap is trading on a prospective PE of 12× with a 3.6% yield. EPS growth was 12% and should remain double digit this year. Given the stated dividend policy the yield should rise above 4% this year. In our view:
- this is cheap for the UK consumer magazines (which produce reliable good growth)
- it is also cheap for the radio stations (Emap is cheaper than peers and is outperforming them)
- it is in line for the business to business operations (but these still look better to us than Euromoney).
Overall Emap looks like good value against the media sector.
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