Emap polishes up its gloss

FISH and local newspapers are not what most people would identify as the classic ingredients for entrepreneurial success, unless of course you are Harry Ramsden. But take a handful of regional papers, add a specialist interest magazine - Angling Times, launched in 1953 - and you have in Emap's case the makings of a media empire.

Emap - East Midland Allied Press as it still was until 1985 - has come a long way since then, transforming itself into an international media group, including moves to establish itself in the commercial radio market, with interests in 11 stations.

Architects of Emap's considerable expansion since the mid-1980s are the chief executive, Robin Miller, and group managing director, David Arculus, who make up a highly rated double act.

Now capitalised at over pounds 1.1bn, Emap has long had FT- SE 100 ambitions, set to be fulfilled if growth continues.

Indeed, in a broad media sector rattled by big changes this year - new rules on cross-media ownership and collapse of the Net Book Agreement - Emap has continued to win City plaudits and seen its share price increase outperform the market by around 15 per cent.

Interim figures are due on 20 November, with profits of around pounds 34m expected. In the wake of Emap's pounds 265m spending spree last year, and the pounds 100m addition of Metro Radio at the beginning of this financial year, analysts will be looking closely at how well the recent acquisitions are settling in.

The focus at the half-year will be on the two newest divisions - commercial radio and Emap France - both viewed by analysts as key pointers to future growth.

The acquisition of Newcastle-based Metro Radio in June boosts Emap's position as the second-largest commercial radio operator after London's Capital Radio. It also gives it a lucrative hold on the fastest growing advertising medium in the UK, which grew by 25 per cent in 1994 and is set for a further 15 per cent growth this year.

"Radio will contribute around 20 per cent of our profits in the full year," says David Grigson, the finance director, "and we expect this share to grow over the next two to three years."

While Emap is constrained by media ownership rules from adding more stations, further profits growth is expected once the benefits of initiatives such as centralising its advertising sales operation begin to flow through. Opportunities for expansion are likely, however, as more broadcasting licences are issued.

Analysts are also looking for good news on Emap France, where its consumer magazines range from Le Chasseur Francais to weekly TV guide Tele Poche. It is still early days for this division, but the group clearly sees France as a springboard to European expansion. It is under no illusions, however, as to the competition it faces. "There are a number of big hairy monsters already playing this game," says Mr Grigson, pointing to European media empires such as Hachette and Bertelsmann.

Emap is unlikely to become too starry-eyed about prospects in Europe while its core UK consumer and business publishing business continues to power ahead. Last year, consumer magazines contributed around 40 per cent of group profits as the diverse stable of titles reaps the benefits of the current advertising boom.

Next month sees the arrival of Total Sport, from the division that publishes titles such as Q, Empire and FHM, and just in case it has missed any motor bike fans with its existing six titles, including Motor Cycle News, Emap recently launched Ride.

"Even in relatively mature markets, it shows there is room for new products," says Mr Grigson. But Emap does not always get it right. Closing Carweek last year cost it nearly pounds l0m.

Business magazines and the range of linked exhibitions, conferences and directories - and increasingly information via electronic media - provide a further rich vein for Emap to mine.

Reed's planned sale of regional newspapers has prompted speculation that Emap might yet review its involvement in its regional titles. "They are a smaller part of Emap than they used to be," Mr Grigson admits, "but we have a good regional business that is growing."

The impact of recent acquisitions and Emap's impressive track record means expectations are high. The shares are on the "buy" list of several brokers and full-year forecasts for Emap put profits at around pounds 83m against pounds 64m last time.

"Emap is showing some of the strongest earnings growth in the sector, and its scores will continue to outperform the market," says Neill Junor at the house broker NatWest Securities. The current p/e around 24 looks high, but analysts say this is not unusual. "It is still at a discount to Reed and Reuters."

Emap

Share price 547p Prospective yield 1.9% Prospective p/e ratio 19.6 Dividend cover 2.5 1994 1995 1996*

Sales pounds 362m pounds 547m pounds 680m Pre-tax profits pounds 45.7m pounds 63.9m pounds 83.8m Earnings per share 16.6p 22.2p 27.9p Dividend per share 8.52p 9.75p 10.75p

* BZW forecast