Currency Boosts Penguin, Though Profits Slip
By Jim Milliot -- Publishers Weekly, 7/27/2009 8:27:00 AM
For international companies, shifts in currency can make a financial performance look better than what actually took place and at other times make things look worse. In the case of Pearson and its Penguin Group subsidiary, the dramatic strengthening of the dollar against the pound turned a 6% sales decline in the first six months of 2009 into an 11% increase. Total revenue at the Penguin Group was £452 million ($744 million at current exchange rates) compared to £408 million last year. Profits fell 19% on a reported basis, to £21 million and 23% excluding the impact of foreign exchange.
Penguin chairman John Makinson said that given difficult times in all of its geographic markets, the exceptionally strong first half of 2008 due to the strength of Eckhart Tolle and weakness in reference publishing he was satisfied with the first half performance. He said the U.S. and U.K. book markets in general have done a little better than expected, though condition remain challenging. The weakest market in the first half was travel and reference, and earlier this month Penguin announced plans to downsize its DK Publishing Group. Charges for that reduction, as well as other cuts at Penguin UK, will be recorded in the second half of the year. Makinson was hopeful that the signs of improvement in the worldwide economy, strong publishing lists in its various units and the likelihood that the major bookstore chains in the U.S. could to more re-stocking indicate that the second half of 2009 will show improvement over the first six months.
In the U.S., Penguin CEO David Shanks said the company did better than expected with Charlaine Harris "making up" for most of the huge sales numbers compiled by Tolle last year. Harris' most recent, Dead and Gone, has shipped 540,000 copies of the hardcover to date. Greg Mortenson titles continued to do well in the period and The Girls from Ames was a surprise hit with more than 200,000 copies in print. Sales in the children's group rose in the period and Shanks said he is very happy with the market reaction to new marketing efforts instituted by Don Weisberg who took over the group last year.
E-book sales were "very strong" in the period and their share of overall revenue continues to increase, Shanks said. He believes that with more players entering the market (Barnes & Noble for example), sales in the segment should continue to increase. Despite the success of e-books, however, Shanks remains worried over the $9.99 price point and what long-term impact that could have on publishing economics. "Sales of hardcovers remain an important component" of the book publishing, he noted.
Shanks was hopeful that with a strong list Penguin will show improvement in the second half. He wasn't worried about the number of big titles coming out this fall from other publishers. "Anything that draws people into the stores is good for the business," he said.
