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Profit drops at Penguin in first half 2012
01.01.70 | Benedicte Page
Penguin profits have dropped by £20m in the first half of 2012 to £22m, nearly halving the £42m profit gained over the same period in 2011, parent company Pearson reported in its interim half-year results today. However e-book revenues are up 33% and now represent almost 20% of Penguin revenues,
Sales at Penguin were also down, to £441m, a 4% drop on the first half of 2011. The results stated the publisher's first half trading was affected by a lighter publishing schedule and "less favourable product mix, particularly in North America", the "exceptional performance of competitor bestsellers" The Hunger Games and Fifty Shades of Grey, and the "continued pressure on physical book publishing and retailing".
Penguin c.e.o. and chairman John Makinson said the company "always knew that we would struggle to match last year's exceptional performance in 2012 and that our publishing performance would be unusually weighted towards the second half of the year. Both these factors have influenced the sales comparisons for our US company in the results we are announcing today. In other parts of the world sales are tracking in line with, or above, last year's levels and we remain confident, not just in the outlook for the second half of the year, but in our ability to capture the opportunities presented by new models, such as self-publishing, and by the proliferation of new digital products and channels."
Penguin UK c.e.o. Tom Weldon said: "The first half of 2012 has gone exactly as planned. Without the Jamie's 30 Minute Meals phenomenon comparisons to 2011 were always going to be tough, but the breadth and depth of our publishing have protected us, and with one of our strongest Christmas lists for many years, we are expecting our second half to be spectacular."
Meanwhile, e-book sales were up by 33%, representing 19% of Penguin revenues worldwide, with particular e-book successes highlighted as including Jojo Moyes' Me Before You and Sylvia Day's erotic novel, Bared to You.
The publisher reported 49 bestsellers in the first six months of 2012, the same number as the first half of last year. Penguin UK had 33 top ten bestsellers over the first six months. Expected highlights for the second half of the year include books from Zadie Smith, Jamie Oliver, Pippa Middleton and David Walliams, as well as authors including Jacqueline Wilson and Jeff Kinney in Children's.
DK is reported as having "an excellent first half", with good sales growth, and the Lego publishing programme continuing to "drive sales", though the statement acknowledged "the travel market remains challenging". DK now has 35 titles available on the new Apple iBook platform. DK c.e.o. John Duhigg said the first half performance was driven by "amazing content' and through a focus on "developing new customers and channels to offset pressures in our traditional markets".
Penguin Children's is reported as continuing to perform well, "growing sales in the first half", with sales boosted by the Lego programme as well as brands such as Moshi Monsters, Roald Dahl and Peter Rabbit.
Penguin's international sales also were reported as having grown in the first half of the year, attributed in part to a "strong performance in India".
On Penguin's acquisition last week of US self-publishing company Author Solutions, the statement said: "This acquisition gives Penguin a leading position in the rapidly growing self-publishing space and together, Penguin and ASI will be able to offer a wide range of services across the broad publishing spectrum."
Looking to the next six months, it said: "We expect Penguin's publishing and its competitive performance to be stronger in the second half of the year, and we expect the structural change to continue." It also said that over the next six months, Penguin will "continue to take action to adapt to the rapidly-changing industry environment", and will over that period be expensing integration costs associated with its acquisition of Author Solutions.
Overall at Pearson, sales increased by 6% in headline terms to £2.6bn, with adjusted operating profit down by 10% to £188m, which it contributed to a combination of its sale of FTSE International, a £17m drop in professional education profits due to a change in UK apprenticeship funding, and the lighter publishing schedule and structural industry change at Penguin.
Elsewhere in the business, profits in the education division were up 6%, with 30% growth in North America and 17% in International, to £62m and £73m respectively. In its professional division, sales were up from £177m in the first half of 2011 to £180m, with adjusted operating profit falling from £26m to £9m, a 65% fall. This was attributed largely to the change in apprenticeship funding in the UK.
Its FT Group reported a sales increase of 6%, to £216m, with adjusted operating profit at £22m, up from £21m. Digital subscriptions for the FT are up 31% and now exceed print circulation.
Pearson chief executive Marjorie Scardino said that this year Pearson's digital and services businesses will bring in the majority of the company's revenues for the first time.