Publishing group EMAP yesterday announced that it would be cutting back its internet operations to the tune of £10 million, on top of a slash in digital investment announced earlier in the year (see EMAP Receives US Approaches, Cuts Digital Spend And Sees Year-End In Line With Expectations). The group also said that financial results would be largely in line with expectations and that it had received a number of buyer approaches for its US business.
The combination of these announcements helped to push its share price up 10p to 740p by the end of trading yesterday. The
Times says that this rise in stock was more a ‘sigh of relief’ from investors than it was a commendation. The market is pleased that EMAP is reigning in internet activities now that some of the excitement has gone out of the market.
EMAP’s willingness to sell the Petersen division in the US – bought only two years ago – also lifted stock, says the Times, adding that withdrawal from the US will be a major disappointment to the group. “More critically, it would lose credibility. It may have been unlucky with the timing of the deal, and the fact that the US economy turned down as quickly as it did. But it says little about EMAPÂ’s strength if it is unable to make a better fist of toughing things out,” the paper argues.
Perhaps in trouble, but not on its last legs is the Times‘ verdict on EMAP.
The Independent laments British companies’ tendency toward US acquisitions that destroy shareholder value ‘on a grand scale’. EMAP is the latest to fall foul to this, it says, noting that Petersen – a business which cost the company £800 million two years ago – is now being tagged at around £400 million.
EMAP bought Petersen at a time when US publishers were “basking in top-of-cycle euphoria”, says the Indy. This was made more seductive by theories that the emerging ‘new economy’ had put the blocks on the traditional business cycle. Now, says the paper, we are all wiser.
Stock in EMAP, against predicted earnings, gives a ratio of 10 times – cheap, perhaps, but ‘moribund’ until a solution to the company’s US problems is found.
Times: Hold Independent: Cheap, but may remain low
UBS Warburg: Buy ABN Amro: Add Cazenove: Hold SG Securities: Strong Buy HSBC Securities: Reduce
