Emap shares shaken by profits guidance

Shares in media group Emap were sharply lower today after it warned the City that annual profits were likely to come in at the bottom end of hopes.

Shares in media group Emap were sharply lower today after it warned the City that annual profits were likely to come in at the bottom end of hopes.

The company, which owns magazines FHM and Closer as well as radio stations Kiss and Magic, said it had been battling against weaker-than-expected trading conditions at its consumer magazine and radio divisions.

The group also warned that the weak performance was set to continue as the two businesses would also be below expectations for the 2007/8 financial year.

Emap responded to the downturn by pledging to cut £20m (€30m) of costs over the next two years. Shares were down 6% today.

At its interims announced in November, Emap said its radio division had seen growth of 39% to £81m (€122m) after powerful performances from Kerrang! And Magic during the six months to September 30.

With the group now emphasising the weakness of the radio market since November, analysts believe advertising revenues must have seen significant declines in the past few months.

This compares with Heart FM owner Chrysalis, which recently reported an upswing in advertising revenues since the new year.

A spokesman for Emap said there were no further details available regarding radio performance, but said revenues were traditionally “volatile”.

Advertising and circulation pressures appeared to be continuing at the group’s consumer magazine arm, with Citigroup analyst Rogan Angelini-Hurll predicting a 4-5% deterioration in advertising revenues for the second half of the year.

The company has been battling declining circulations, amid a sector-wide fall in the mens, auto and teen magazine sales, compounding advertising pressures.

However, the group said its business-to-business division, which now makes up 50% of the company, continued to perform well driven by recent acquisitions.

Mr Angelini-Hurll reduced his annual pre-tax profits forecast for the year to March 31 to £195m (€296m), while also downgrading expectations for 2008 to £176.8 million. This compares with annual pre-tax profits of £223m (€338m) banked in 2006.

Emap said its cost saving plans, which will include the re-location of seven of its business-to-business divisions into one central property, would “transform how we operate, drive efficiencies and deliver real scale benefits”.

The group did not comment further on the plans and would not confirm if there would be job losses as part of the attempt to restructure the business.

It said that it would be investing around £10m (€15m) in new technologies and buildings and that one-off costs from the changes were set to come in at £30m (€45m).

Panmure Gordon analyst Alex DeGroote said: “Emap’s current costs base is around £700m (€1.05bn), so this looks reasonable but not enough to benefit forecasts.

“Again Emap refers to the need to migrate to faster-growth platforms (e.g digital), which underlines the structural challenges it faces”.

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