UK Publishing Sector

·  Newspapers

·  Books

·  Periodicals, ranging from high-brow academic journals to magazines tracking the lifestyles of the rich and famous

Current Market Factors

This sector is undergoing a period of radical change as technical innovation and shifting consumer behaviour are making themselves felt. 

1.        The rise of the Internet. The Internet and the mobile phone are becoming increasingly important as advertising media. This poses a number of new challenges for UK publishers:

·    Migration of advertisers. Paid advertising is increasingly migrating to the Net, causing a loss of revenue for publishers of print newspapers and magazines.  

Internet advertising spend totalled £917.2 million In the first half of 2006, an increase of more than 40% over the same period in 2005. Online advertising revenues are now within striking distance of the national papers - accounting for 10.5% market share, as against the 11.4% achieved by the papers.

The largest UK publishers of local and regional newspapers, Daily Mail & General Trust (DMGT), Trinity Mirror and Johnston Press (JP), all suffered from falling print advertising revenues in 2006. DMGT reported an 11.5% fall in print advertising revenues for the year ended 1/10/2006. JP lost 8% for the six months to 30/11/2006 and Trinity Mirror announced that shrinking print advertising was responsible for a 4.8% decrease in 2006 Group revenues (news releases: 12/12/2006, 11/01/2007, 01/03/2007).

·    Embracing the Net. Several UK publishers have reacted to this change in consumer demand and integrated their products and services into the Internet.

DMGT explicitly attributed its strong financial results for the year ended 01/10/2006 - operating profit up 6% from the previous year - to the growth of its digital division (news release: 23/11/2006).

The Association of Online Publishers reports that news and media websites experienced a 28% year-on-year growth in their market share of UK internet traffic between Jan 06 and Jan 07 (news release: 02/03/2007).

2.        Consolidation. The UK publishing sector was awash with takeover activity in 2006, as companies sought to increase revenues by expanding both their online and mobile presences.

·    Magazine publisher Emap - whose titles include the men’s magazine FHM - bought Yospace, a technology and new media group, in February 2006. Emap hope to use this acquisition to accelerate the growth of their digital capabilities (news release: 02/02/2007).

·    Specialty publisher Reed Elsevier made several acquisitions, including Dataflight Software and CaseSoft - providers of legal software and digital services respectively (news release: 24/07/2006).

·    Trinity Mirror acquired Email4Property Ltd, an Internet directory service and marketing tool for estate agents, for a total consideration of £4.4m (news release: 10/05/2006).

3.        Divestment of non-core operations.  As in so many other industries, many publishing companies are re-focusing on their core activities and selling off marginal or unprofitable holdings.

·    Pearson, whose brands include The Financial Times and Penguin Books, announced that it had agreed the sale of Pearson Government Solutions, which provides US government agencies with information and organisation services, to the private equity group Veritas Capital for a total consideration of $600 million (news release: 11/12/2006).

·    Emap completed the sale of Emap France, its French consumer periodicals division, to the Italian publisher Mondadori for approximately £380 million in cash (news release: 31/08/2006). 

Publishing on the Stock Market

There are 38 publishing companies with a primary listing on the London Stock Exchange. This sector contains a good spread of large, medium and smaller companies – with market capitalisation ranging from £1.2 million right up to £7.4 billion.

In short, there is a good mix of blue-chip, mid-cap and smaller firms within the main market - and the market capitalisation of the ten largest companies in the sector accounts for a relatively modest 62% of the sector as a whole.

Reed Elsevier is the leviathan of the UK publishing Sector. Formed through the 2002 merger of Elsevier of the Netherlands and Reed International, Reed Elsevier publishes information for the science and medical, education, legal and business markets.  

Reed Elsevier’s share price edged up 5.89% in the first two months of 2006, on speculation of a takeover bid by Dutch-listed Wolters Kluwer, a fellow specialty publisher.

Source: LSE 31/01/2007

Reuters Group is perhaps the best known of the UK publishers in the FTSE100. Founded in London in 1851, Reuters is an international news agency, which derives some 90% of its revenues from its famous financial information services.

Following a decline in revenues in 2005, Reuters spent 2006 restructuring the business and refocusing on its core holdings - October saw the Group announce the sale of its stake in Factiva, a specialist financial information and consulting services provider, to the Dow Jones Group for $178 million. But despite reporting revenues of £2.57 billion for the year ended 31 December 2006, Reuters share price only rose a modest 3.4% in 2006 (news releases: 15/12/2006, 01/03/2006).

DMGT is the largest newspaper publisher in our “top ten”. Its interests include papers, the associated digital operations, information and business publishing. Its flagship title is The Daily Mail, although DMGT also owns the free London tabloid Metro and some 100 regional dailies and weeklies through its Northcliffe Newspapers division.

In November 2005, DMGT sent ripples through the market when it considered selling Northcliffe as part of a “strategic review” - but the Group ultimately decided to retain the business in the absence of a suitable bid.

DMGT’s share price slipped 4.5% in 2006 amidst continuing uncertainty over Northcliffe and poor print advertising prospects (news releases: 17/02/2006, 27/03/2006).

Informa is one of the less well-known UK publishers. As a publisher of specialist information for the academic and scientific markets, its titles range from The Journal of Wine Research to The Women’s History Review. 

The Informa share price soared 37.6% in 2006 after receiving a “preliminary approach” from fellow publisher Springer Science & Business Media - but talks were terminated in November, after the Group rejected Springer’s 630p per share offer as too low. Informa also released some impressive figures, including an operating profit of £60.4 million for the half year of 2006, against a £50.3 million loss for the first half of 2005 (news release: 26/09/2006). 

Trinity Mirror is a newspaper publisher - its flagship title is the Daily Mirror, but it also controls 240-odd regional titles, such as The Liverpool Echo.

The UK Publishing Industry on the AIM

There are 20 UK publishers - just over half the sector - listed on AIM. And as we might expect from AIM, this assortment of firms contains some spectacular risers and more than a few divers.

Datamonitor is a business information company providing corporate clients with analysis and forecasts across the energy and financial sectors. Its share price soared by 92.1% in 2006 after releasing strong figures for the half of 2006, and acquiring the IT and telecoms consulting firm Ovum in December.  Datamonitor expects Ovum to enhance Group earnings within the first year of ownership (news release: 08/12/2006, 27/02/2007).

Online direct marketing company TMN Group saw its share price rocket by 95.8% in 2006.  The Group reported a 190% increase in profits for the six months to 31 October 2006, over the same period in 2005. TMN attributed its strong showing to the successful acquisition and integration of the market research company iD Factor and the email agency EDR (news release: 07/12/2006).

MonsterMob Group is a developer of mobile content, including games and ring tones. Following the acquisition of three Chinese mobile content producers between August 2005 and April 2006, the MonsterMob Group share price fell a catastrophic 88.4% in 2006. Revenues from the Middle Kingdom suffered under new local regulations as the Chinese Ministry of Information Industry restricted mobile marketing activities and required free trial periods for