Penguin reported lower sales and profits in the first half of 2011 as it adjusted to the "unprecedented challenges" afflicting the publishing sector including the loss of high street booksellers in the US and Australia and the shift to digital.
Sales valued £457m, down 4% on the same period in 2010, with operating profit down £2m to £42m in the period to 30th June 2011. E-book sales were up by 128% now representing 14% of Penguin revenues worldwide, or £64m.
Parent company Pearson reported sales up 6% to £2.4bn and operating profit up 20% to £208m, thanks to sales growth at both its education and Financial Times' businesses.
In the company statement, Penguin is reported to have "made a strong and competitive start to 2011 in spite of significant retail disruption in its major markets". The "significant industry changes" in the period included "a rapid shift towards digital sales channels and digital books and intense pressure on physical book retailers". The results statement anticipates that Penguin will "perform in line with the overall consumer publishing industry this year".
Underlying growth in Penguin's operating profit was reported as 13% for the period ended 30th June 2011, with profits "sustained with rapid digital growth", and the result of an "increased emphasis on product and channel profitability, the widespread adoption of digital technologies and the continuing benefit of a restructuring programme undertaken in 2009". Underlying sales growth was flat, but it said that during the course of 2010, the business made a number of "minor changes to management responsibilities in certain countries" which have affected the reported segmental numbers and reduced Penguin’s revenue growth rate at constant exchange rates.
In a separate statement, Penguin c.e.o. and chairman John Makinson said: "The past six months have represented a watershed for book publishers and book retailers alike. The rapid penetration of digital devices and content, coupled with the severe pressure on physical booksellers, have presented the whole industry with unprecedented challenges." He said Penguin had "been able to maintain its sales and further strengthen its margins during these turbulent times".
Pearson's results statement reported a strong performance from Penguin's business in the US, with the territory continuing "to lead Penguin in its adaptation to dramatic industry shifts", and publishing a record 157 bestsellers. In the UK and Australia, "good market share gains (from 10.2% to 11.7% and 0.5% respectively) in markets that were generally weak" were reported, with the collapse of REDgroup in Australia cited as a compounding factor.
At DK, the Lego publishing programme, core reference and pre-school titles were highlighted as successful areas, with the travel market flagged up as a "challenging" area. Penguin India was described as having had "an excellent first half", with its "creative publishing programme" and "strong direct sales business" said to have driven the success, along with an underlying improvement in the economy.
Digital investment was highlighted by the launch of an "amplified edition" of Jack Kerouac's On the Road, the launch of the second BabyTouch app, and DK's Miriam Stoppard's Pregnancy app. Direct to consumer initiatives such as Book Country, Bookish and aNobii were all launched in the first half of 2011, with growth in the Penguin eSpecials programme in the US anticipated to have "tripled in size by the end of the year".
In the UK, Penguin's 46 bestsellers over the period included the paperbacks of titles such as The Fry Chronicles by Stephen Fry, Dawn French's A Tiny Bit Marvellous, Michael McIntyre's Life and Laughing, and 30 Minute Meals by Jamie Oliver and The Brightest Star in the Sky by Marian Keyes. The Wimpy Kid and Moshi Monsters titles were highlighted as key successes for the Children's division. Looking to the second half of 2011, titles by Jeremy Paxman, Claire Tomalin and Charlie Higson, among others, were highlighted, with DK's Lego Ideas Book and app of The Human Body also among those singled out.
Elsewhere within Pearson, its international education business reported half year sales of £639m, up from £504m in the same period in 2010, and operating profit up to £63m from £36m in 2010. Operating profit for its professional education business was up to £26m from £17m in the same period in 2010, with sales reaching £177m, up from £136m. At the Financial Times Group, digital subscriptions increased by 34% to almost 230,000, with sales reaching £203m in the first half of 2011, compared to £192m in 2010. Operating profit was up £1m, to £31m.
Pearson chief executive Marjorie Scardino said: "Structural changes in our industries are gathering pace, but we are confident that we have the strategy, the competitive positions, the investment capacity and the culture to sustain our strong record of performance."
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