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Electric Word

  • BY: Andrew Hore |
  • POSTED: 07/07/2010 |

Information publisher Electric Word has increased its interim profit even though revenues declined.

Electric Word has reduced costs with marketing spending falling most sharply. The company has still been investing in new projects so it is not harming its longer-term prospects. Part of the reason for the improvement in margins is a switch from paper to digital publications. Prices of digital products tend to be lower but costs are also lower. 

Revenues fell from £8.72m to £8.18m in the six months to May 2010. The reported profit fell but the underlying profit excluding amortisation, write-downs and share-based payments rose from £832,000 to £925,000.

All of the decline in revenues came on the educational side where some titles were consolidated. However, operating margins rose from 15% to 20% and this should be sustainable.

Chief executive Julian Turner admits that government spending cuts could make the next 12-18 months difficult for the education side of the business. It will be more difficult to sell new subscriptions to publications and it is difficult to assess how renewals will go. However, longer-term there will be opportunities for new publications provided by the changes to school management.

Online gaming revenues continue to drive the growth in the sport business division, which also contributed to the improved group profit.

Investment in the consumer division has pushed it into loss. The My Child business sells to parents so is not hit by lower government spending.

Net debt has fallen from £1.5m to £510,000 in the six months to May 2010. Cash generation was strong in the first half.

The strong balance sheet will enable Electric Word to consider acquisitions. Turner says that assets are coming on the market where prices are more realistic than in the recent past.

Electric Word can save costs by integrating the acquisitions. It has renewed the lease on its London office for a further five years and there is spare space.

Underlying profits are expected to rise from £1.94m to £2.08m this year. Nearly all of that improvement was achieved in the first half.

At 4.12p a share, Electric Word is valued at £9.79m. The shares are trading on five times prospective earnings.

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