Penguin Posts Record Year

by Jim Milliot, PW Daily -- Publishers Weekly, 2/26/2007

Total sales at Penguin Group rose 5% in 2006, to £848 million ($1.56 billion), and operating profit increased 10%, to £66 million. Group chairman John Makinson noted that excluding Brady, which was moved from Pearson Education, a small U.K. acquisition and currency fluctuations, sales were still ahead 3%. Profits were hurt by a write-off of "a small number of millions of dollars" related to the AMS bankruptcy, Makinson said.

Makinson said sales were up in all areas, including strong top-line growth in Penguin UK and DK. Penguin India had the largest gain of all Penguin subsidiaries, with revenue up 23%. Sales in Penguin China "doubled" from a modest base, Makinson said.

In the U.S., which still accounts for the majority of sales and earnings, revenue grew at a slightly slower pace than for the company as a whole, said president David Shanks, though both sales and earnings were up. The strongest performing segments were Penguin's mass market and trade paperback operations. The combination of big gains in paranormal fiction and the premium paperback format spurred the mass market increase, Shanks said. Shanks couldn't be more pleased with the performance of the premium paperback format, proclaiming that the format "is here to stay." Penguin will release 21 titles in premium paperback in 2007 and will add new features to make the titles even easier to read in the fall, Shanks said.

While Penguin's frontlist performed well last year, the key to boosting results in 2006 was the improvement in backlist sales, Shanks said. Backlist benefited from a 25% sales increase in the Penguin Classics line, which marked its 60th anniversary with several new initiatives. Trade paperback sales were led by the continuing strong demand for The Kite Runner, The Secret Life of Bees and The Memory Keeper's Daughter. Hardcover sales were off slightly in the period, as several of Penguin's major novelist didn't release titles last year, although Shanks said Penguin is "very excited" about its hardcover lineup for 2007.

Children's sales rose in the year, helped by a significant increase in the number of bestsellers. Audio sales increased 6%, driven by a 50% gain in the sale of digital downloads. Sales through penguingroup.com rose 30% last year, and e-book sales increased 17%. Returns in the year were down across the board.

Makinson said Penguin is working with parent company Pearson to build a digital archive that will let its partners "access our content on our terms." Makinson said he expects to soon name someone to a new position to help coordinate Penguin's digital programs around the world.

Despite the healthy increase in profits worldwide, margins only rose from 7.5% to 7.8% in 2006, which Makinson said was due to the AMS bankruptcy and a weak dollar that squeezed DK margins in particular. He said Penguin is committed to achieving double-digit margins by 2008.

In Pearson's educational operations, school group revenue rose a total of 12%, to £1.45 billion, helped by the acquisition of NES. Sales in the U.S. school program increased 3% and testing sales rose in high single digits. Higher education sales increased 2%, to £795 million. Pearson expects school group sales to rise 4% to 6% in 2007, while higher education group sales are forecast to increase 3%-5%.

This article originally appeared in the February 26, 2007 issue of PW Daily. For more information about PW Daily, including a sample and subscription information, click here »

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