The “unprecedented” impact of foreign exchange had a dramatic negative effect on John Wiley’s results for the third quarter ended January 31. Revenue for the company fell 13% on a reported basis, and declined 2% without the effect from currency translations. Operating income fell 7%, to $63.3 million, on a reported based. In addition to currency issues, Wiley had delays in processing subscription renewals in the STMS group plus trouble with the soft retail market in the U.S. The latter resulted in a 19% decline in sales in the professional/trade segment, to $100 million, or a 14% decrease excluding unfavorable foreign exchange. While the U.S. was soft, there was modest growth in Canada, Germany and the U.K.
Direct contribution to profit in the professional/trade segment was $25 million, compared to $38 million for the third quarter of last year. The decline was partially mitigated by expense management and lower accrued incentive compensation. Excluding unfavorable foreign exchange, direct contribution to profit declined 25% from the prior year. For the first nine months, global P/T revenue declined 12%, to $316 million, or a 10% decrease excluding unfavorable foreign exchange. Year-to-date direct contribution to profit fell 26%, to $77 million, or a 23% decrease on an exchange neutral basis. The decline is attributed to lower revenue, higher inventory provisions and a $2 million bad debt recovery in the prior year, partially offset by lower accrued incentive compensation and prudent expense management. During the quarter, Wiley signed a publishing deal with Meredith, which will have its first book come out later this spring. The relaunch of Dummies.com resulted in a doubling of page views and unique visitors.
Wiley CEO Will Pesce said that while the results in professional/trade are disappointing, "it is encouraging that we have increased market share in key publishing categories.” But because of softness in the professional/trade group, Wiley is reducing full-year revenue guidance--on a currency neutral basis--from mid single-figure growth to low single-figure growth. Wiley reaffirmed its full-year earnings per guidance of approximately 20% growth on a currency neutral basis and excluding the unusual tax benefit reported in the prior year. Pesce said foreign exchange will continue to have a significant adverse affect on Wiley’s revenue and EPS in the fourth quarter.
In Wiley’s other segments, global scientific/technical/medical/scholarly revenue for the quarter declined 13%, to $202 million, mainly due to an unfavorable $35 million foreign exchange impact. On a currency neutral basis, revenue advanced 2%. Journal subscription revenue was even with the prior year, as revenue from new journals was partially offset by the processing delays and lower backfile sales. The processing delays have mostly been resolved. STMS book sales improved in markets outside the U.S. Publishing areas that exhibited significant growth include the life sciences, professional, and the social sciences and humanities.
For the first nine months of fiscal 2009, global STMS revenue was flat with the prior year at $696 million, but advanced 6% excluding unfavorable foreign exchange.
In the higher education segment, global revenue declined 2%, to $72 million, due to unfavorable foreign exchange. Revenue advanced 7% on a currency neutral basis, driven by strong growth in nearly every subject category, higher-than-expected revenue from recently acquired textbooks, new editions and the continued success of WileyPLUS. With the exception of Asia, which continues to be affected by the devaluation of the Indian rupee, all regions exhibited growth. Year-to-date global higher education revenue grew 4%, to $196 million, or 8% excluding unfavorable foreign exchange.
For the full company, nine-month revenue was down 3%, to $1.21 billion, and operating income was flat at just over $177 million.