For years the publishing industry has been dealing with the internet onslaught - rather than trying to beat it, it has joined forces to some extent, with many companies in the sector expanding their offering online.
However, this has not changed the overall picture much. According to industry analysis by WPP-owned GroupM, national newspapers will post negative sales growth again this year, albeit a one per cent fall in 2008 compared to two per cent decline last year. The suspicion is that an added online offering by national newspapers probably does little more than re-distribute revenue, instead of growing it. "The publisher's dilemma is that they are sticking with having to go digital whether they like it or not....it is the best growth play in the media spectrum", says GroupM. In contrast, PricewaterhouseCoopers predicts that there will be gains in the European market as a whole from 2008 to 2011, "which will help counter ongoing shifts of resources to the internet in western Europe, leading to advances in newspaper advertising for the EMEA regions as a whole".
Last year's performance was fuelled by retailers' advertising, however 2008 started ominously for many newspapers, following profit warnings from several retailers who must now crack down on costs in the face of their own declining revenues. Among the regional newspapers - and Johnston Press is particularly exposed - the view is that they will suffer from poor sentiment in the jobs market, expected lower spend on motor advertising and further erosion of online revenues, with players like Google targeting small advertisers. Johnston Press has been investing heavily in its digital operation and growth has been good. However, this has been off a small base, and may be insufficient to offset declines on the print side.
Competition remains very fierce in the magazine market, with high street monthlies feeling the most pain. "The advertising mainstream is less willing or able to make the two-month advance decision for glossies" says GroupM. Fortunately, the business-to-business market is more resilient, but is still vulnerable to any credit slowdown leading Lehman Bros to downgrade the European media sector from 'positive' to 'neutral', adding that it is avoiding traditional media and print-based search companies, and looking at opportunities among advertising agency and professional publishing stocks. It defines the traditional media sector as free-to-air television and radio, newspapers, and magazines. This makes Reed Elsevier, United Business Media and Thomson/Reuters less appealing.
| Company name | Price (p) | Mkt val. (£m) | P/E ratio | Div. yld (%) | 12M price chng.(%) | Last IC view |
|---|---|---|---|---|---|---|
| DAILY MAIL 'A' | 457.75 | 1631.58 | 9.3 | 3.13 | -41.5 | |
| EMAP | 908 | 1959.85 | 14.5 | 3.48 | 9.07 | |
| EUROMONEY INSTL.INVESTOR | 389 | 400.58 | 11.9 | 4.88 | -29.01 | Good value, 449p, 21 Nov 2007 |
| INFORMA | 359.25 | 1525.46 | 10.7 | 4.04 | -39.72 | |
| JOHNSTON PRESS | 242.25 | 698.6 | 6.9 | 3.92 | -39.59 | |
| PEARSON | 620.5 | 5013.81 | 14.7 | 4.82 | -26.26 | no comment, 780p, 23 Oct 2007 |
| REED ELSEVIER | 585.5 | 6618.91 | 17.1 | 2.82 | -5.64 | |
| REUTERS GROUP | 565 | 7094.24 | 29.4 | 2.11 | 26.19 | |
| TRINITY MIRROR | 304.5 | 861.51 | 6.7 | 7.19 | -35.89 | |
| UNITED BUSINESS MEDIA | 484 | 1178.75 | 10.3 | 3.85 | -34.66 | |
| YELL GROUP | 307.25 | 2397.62 | 8.5 | 5.76 | -49.71 |
