Electric Word

Specialist information publisher Electric Word is demonstrating its defensive qualities and profitable focus throughout the downturn.

Bossed by chief executive Julian Turner, Electric Word is a subscription newsletter, magazines and websites business that additionally delivers events, books and special reports. Operating through professional education, sport and specialist consumer divisions, the company’s healthy sector mix and diverse revenue streams lend it both defensive qualities and growth potential.

Recent interims to May revealed impressive 19% growth in adjusted pre-tax profits to £800,000. Operating margins moved north to 10.4% (2008: 9%), driven by recent restructuring, the pruning of unprofitable business, as well as a continued migration on-line.

Turnover declined by 3% to £8.7m, though this reflected the restructuring of the previously loss making My Child 'positive parenting' website within specialist consumer, resulting in improved profits from a lower revenue base. Excluding the My Child asset, sales were actually up 4% at £8.4m, driven by increased events activity. During a half in which cash from operations improved by 45% to £300,000, the professional education division put in a steady performance, holding margins above 14%, whilst the sports business achieved strong growth in revenues.

Alongside the results, Electric Word announced a £2.45m placing priced at a discounted 3.625p. Though involving some short-term dilution, Turner insists the funding will allow Electric Word to pare debt levels and leaves it better placed to fund organic growth and complete select acquisitions.

More than holding its own in challenging markets, Electric Word trades on a miserly prospective multiple of 4.4 times, based on forecast November ’09 earnings of 0.9p. A discount to quoted peers, this valuation looks decidedly ungenerous and a re-rating is now due.