The purchase of G+J Consumer Magazines (primarily Parents, Family Circle and Fitness) from Gruner+Jahr appears to have gone very well. After three fiscal years (June 30 cycle) of fairly flat revenue in the $1.1 billion to $1.2 billion range and modest increases in net income, Meredith is on the move.
For the first six months of Meredith's fiscal year, ending December 31, revenue rose to $620 million from $420 million. Income from operations rose to $107 million from $92 million. Broadcasting was weak during the period. Broadcasting operating profit fell from $46.4 million to $39.1 million. Political advertising revenue fall-off seemed to account for most of this.
Magazine publishing is where the company showed its mettle. Even without the G+J titles, revenue for the six months ending December 31 would have risen 9% due to ad strength and interactive media revenue. With the new titles, advertising revenue in publishing division rose 58% and circulation revenue rose 60%.
Meredith took on $350 million in debt to buy the new magazines, and it has paid off handily for investors. Since hitting a low of $44.51 a little less than a year ago, the company's market capitalization has gone up almost $550 million and the stock now sits at $56. So, the capital for the acquisition was well spent.
Meredith now has to get organic growth from the magazines. Broadcasting will not help much, at least until another cycle of political ads comes around. But local stations are going to remain under pressure as the networks lose audience.
The fairly modest rise in Meredith stock shows that they have done a good job plugging in the new publications. Further gains will almost certainly depend on whether the total magazine ad revenue and online initiatives can continue to grow or whether Meredith will go back to the flat top-line profile it had for three years or continue to show substantial improvements in advertising and circulation.
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Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine which was on the Adweek 10 Hottest Magazine list in two separate years. He has also been president of Switchboard.com, which at the time was the 10th most visited site on the internet according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about.