We have a raft of publishing firms releasing results this month and next. Here are two different flavours for comparison and contrast.
Business information
Shares in Euromoney Institutional Investor (LSE: ERM) fell a couple of percent this morning, 1,028p, on the release of preliminary full-year results, although they actually looked quite reasonable and were pretty much in line with expectations.
Adjusted pre-tax profit fell by a modest 5%, to £102.5m with adjusted EPS down a similar proportion to 66.5p, and the firm maintained its full-year dividend at the expected 23.4p per share to yield 2.3% on the current share price.
The business and financial publisher and event organizer has suffered along with the rest of the print media business, as the idea of sending out information written on dead trees is really becoming old hat these days.
But according to chief executive Andrew Rashbass, the company’s recovery strategy, instigated in March is working, and he pointed to “the acceleration in subscription growth, which constituted a record 58% of our business in 2016, and in the flow of successful product launches” as examples of its success.
The firm is also changing direction through acquisition, having snapped up metals news and prices platform FastMarkets during the year, and Reinsurance Security, which rates reinsurance companies.
Euromoney shares are on a forward P/E, based on next year’s forecasts, of around 16 now, which is a bit above the FTSE average, and its dividend looks set to yield a below-average 2.3%. That, coupled with the decline of the print publishing business, might make the shares seem like a poor investment.
But it looks to me as if Euromoney is managing the shift to digital publishing and information provision competently, and the firm could well be at the bottom of a relatively modest downturn cycle with EPS growth on the cards again for 2017.
If that’s the case, we could be looking at a decent long-term investment here.
Traditional publishing
Turning to a more traditional publisher, shares in Daily Mail and General Trust (LSE: DMGT) have been under pressure since early 2014, but they’ve been staging a bit of a rally in the latter half of this year. The price took a dip immediately after the Brexit vote, but since a low on 6 July we’ve seen a 37% rise to today’s 790p.
A pre-close update in September helped, confirming that the group’s outlook remained in line with market expectations with underlying revenue growth of 4%.
The group continues to own 70% of Euromoney Institutional Investor, so the fortunes of the two companies are closely tied, with Euromoney’s revenues effectively contributing around 15% to Daily Mail’s returns on a revenue basis.
Full-year results should be with us on 1 December, and analysts are expecting them to show a fall in EPS of around 10%. But that would put the shares on a perfectly respectable P/E of 15 which would drop to under 14 if the predicted return to earnings growth for 2017 comes good.
Dividend yields are looking pretty average at around 3%, but the cash handout is growing and it should be more than twice covered by earnings.
It’s a sector not without risk, that’s for sure, but I see the recent share price recovery as being backed by sustainable earnings, and this is a share worth a closer look.
