That EMAP is a series of different companies is best illustrated by the different interpretations of the “EMAP” acronym by its staff.
In the consumer magazine division, where people gush about the company’s style of management, it is interpreted as “Every meeting a party”. But at the business publishing division, where budgets are tighter, it is more commonly referred to as “Every manager a prick”.
The fact that it parted company with the true root of its acronym – East Midlands Allied Press – in June this year by selling its regional newspapers for 205m, has done little to ease the sense of an identity crisis.
EMAP seems to breed contradictions. It is a 1.5bn company that sees itself as a cottage industry. It is renowned for creativity and innovation, yet has a reputation for strict cost-control and good management. Next Monday (November 11) it will report healthy interim profits of 46m, but has reached a size where an opportunistic approach to business is no longer enough. It is a darling of the City, yet its board is conducting a very public battle to remove two non-executive directors.
The row centres on a change in EMAP’s articles of association, agreed earlier this summer, which allows the board to remove directors more easily during disputes.
But the two non-executive directors now threatened with dismissal claim they, and institutional investors, were misled by EMAP chairman Sir John Hoskyns – a former adviser to Margaret Thatcher.
For the City, the most worrying aspect of Hoskyn’s attempt to remove the non-executive directors Ken Simmonds and Joe Cooke is that it has thrown into high relief the fact that chief executive Robin Miller and group managing director David Arculus have been at loggerheads for years.
It has also emerged that Hoskyns encouraged Arculus, aged 50, to retire early, having provisionally chosen Miller to be his successor as chairman of the media group. “The non-executive directors dispute is a side issue,” says Nick Ward, media analyst at Credit Lyonnaise Laing. “The big fall in the share price came when the Financial Times reported a rift between Arculus and Miller.”
EMAP is planning an extraordinary general meeting (EGM) in December to oust the two directors. They object, saying their views are not being heard on the board.
“The changing of the company’s articles of association has been cack-handed,” adds Ward. “At the end of the day, EMAP is a little oligarchy that fights like cat and dog, but so what? Results have been fantastic.”
The worry that Arculus or Miller might leave the company has died for the time being. Both have pulled together to approve the EGM, and one source says the differences between the two are less to do with strategy than with personality and background. But the future direction of the company concerns observers – and may remain dangerously undecided while both Arculus and Miller are in place. The fear in the City is that the differences between the two have only been papered over, and they may reappear once Simmonds and Cooke have been dumped.
The boardroom dispute wiped 100m off EMAP’s value in two days last month, but the price is creeping back. Analysts forecast that pre-tax profits for the first half of 1996 will be up 35 per cent from 34m to 46m when announced on Monday, and they are preparing to forgive the company for apparently misleading them over Simmonds and Cooke’s position.
The reason for this forgiving streak is obvious for all to see – the City has become used to dynamic profit and growth from EMAP. Since 1992 group revenues have increased from 270m to 705m in the year to last April.
“Only recently has it grown through acquisition,” says Ward. “The big drive was organic growth from the consumer magazines in the Eighties and early Nineties. The magazine world was previously dominated by general magazines targeted at women. EMAP’s genius was to slice the salami thinner, to segment the market through innovation.”
Tom Moloney, chief executive of EMAP’s consumer magazines division, agrees: “The old definition of magazines was either hunting and fishing specialist titles or women’s magazines. The world isn’t like that any more. Every magazine has to be targeted at, and understand, the lifestyle of its specific readers.”
EMAP’s success in consumer magazines has been based on a “cradle to grave” approach – launching titles aimed at those growing out of the titles they already read. For example, in the music sector Smash Hits leads onto Select, which leads onto Q magazine, which leads onto Mojo.
In 1989 the company expanded for the first time into broadcast. Some believe it decided that the scope for segmentation in magazines was reducing and so moved into radio having spotted the potentially massive growth in the industry.
But life is rarely that simple. Tim Schoonmaker, now chief executive of EMAP Radio, in fact joined Virgin, Centurion Press and pirate radio operator Gordon MacNamee in a bid for a London licence in 1991. After the licence was won, it was decided that there were too many partners in the station and EMAP won control of what became Kiss 100 FM by bidding 500 more than Virgin and Centurion.
After that, EMAP picked up the ailing Radio City in Liverpool at a knockdown price. But it was not until 1994 that the group got serious about radio. It paid 71m for Trans World Communications, which gave it large stations in Manchester, Leeds, Cardiff and Preston. A year later it became a contender for the title of biggest radio group in the UK by buying the Metro Radio Group in Yorkshire and the North-east for 99m.
The company’s other major move in the Nineties fits that same pattern of market expansion: firstly toe in the water, then acquisition and finally becoming dominant.
A joint venture in France with Bayard Presse amounted to just one magazine in 1990. But by 1994, having spent 107m to buy 38 magazines, EMAP was the third-largest publisher in France.
France was chosen because the titles were running at only nominal profits and carrying a lot of excess fat. It was also seen as a softer region to crack than Europe’s other big magazine market, Germany. The French company increased operating profits by 72 per cent in its first full year under EMAP. It now accounts for 29 per cent of EMAP’s annual turnover.
This year EMAP continued its French expansion, buying the TV listings title Télé Star and two other titles for 142m from Luxembourg media giant CLT. EMAP now controls 16 per cent of the French magazine market.
“EMAP has shown a policy of buying whole markets,” says John Wisbey, a former publisher of Esquire and a magazine industry expert.
“Where Condé Nast or the National Magazine Company have one market leader, EMAP aggressively buys three or four titles to own a market. It seems they pay a sizeable premium to buy at any cost.”
A good illustration of “owning a market” is in the media business press. Through multiple acquisitions, EMAP now owns Media Week, UK Press Gazette, Broadcast, TV World, Screen International and Media & Marketing Europe.
In the business press, EMAP has concentrated on the media, technology, building and retail sectors. In the past two years it has been putting its efforts into sectors that lend themselves to online information. This includes buying CAP Nationwide Motor Research, which processes car prices, for 18m and media data company BRAD, both in 1994.
The UKPG deal also brought EMAP a foothold in other European markets through its purchase of the Media Daten electronic information service. It also gave it 22 directories across Europe which could be turned into online information providers.
It is in the area of business press that the strict financial control of the company is most starkly apparent. One divisional managing director has boasted of paying his staff a third less than his competitors, which may explain the “Every manager a prick” interpretation of the EMAP acronym by staff in the business press division.
The company boasts about its federal structure, claiming decentralisation as its watchword. For example, the radio group allows every radio station to run itself and, unlike rival GWR, imposes no group-wide music policy or syndicated shows.
“People get space to execute their ideas,” says Sue Hawken, managing director of EMAP Elan. “In the case of Q Magazine, Dave Hepworth, editorial director, and editor-in-chief Mark Ellen went to the board and said ‘look we’re pissed off and bored with the current music press and we have an idea’. The board backed them, as much because of the trust they put in Mark and Dave.”
However, some observers have a different interpretation of EMAP’s success. They believe the company’s high margins are a result of a big investment in divisional management that keeps costs down: “There is a lot of investment in business management,” says Wisbey. “But you do get the impression it is very aggressive with its staff.”
Hawken believes there is no contradiction between creativity and keeping a tight rein on costs: “By giving people control of their own project they act like it is their money, so they don’t go overboard on lots of staff. Also, big teams kill creativity.”
The sale of East Midlands Allied Press regional newspapers in June for 205m to Johnston Press was a watershed for EMAP. The decision was based on the belief that with the regional press consolidating into big groups, investment would be needed to compete. This was money that could be better spent on higher yielding sectors including television – an area which, until last week, it had not ventured into.
The sale reduced the company’s debt from 350m to 140m and raised the possibility of further acquisitions. However, the City hopes it will stick to consolidation for the time being: “The biggest danger to any company is to expand on too many fronts and lose focus,” says David Forster, media analyst at Salomon Brothers.
The company has said it may look at business magazine acquisitions in the US. There is also speculation in the radio industry that the big new regional licences awarded next year will dilute EMAP’s share of radio and allow it to bid for Heart FM in Birmingham and London.
Forster believes the company is at the “toe in the water” phase with cable TV and programming, as it was with radio and in France. This year it moved the Kiss radio brand onto cable as a programme for Live TV, and last week announced the acquisition of the cable music channel The Box. But true to its past, it took the opportunity to make its first acquisition in the US, buying 6.5 per cent of The Box’s former parent Video Jukebox Network.
“EMAP is the kind of company that gets used to a market without betting the whole shop on it,” says Schoonmaker, who now controls EMAP’s television as well as radio interests. “So this is just an opportunistic purchase.”
If the company follows the pattern of its entry into other markets, it would be expected to keep that toehold for up to three years before gobbling up cable TV interests in the UK and US. This is where its dilemma is most acute. Having opportunistically employed a wait-and-see approach to other sectors, with cable it now faces a different situation – it can’t afford to bide its time.
The City may indeed want EMAP to consolidate but the media company cannot afford to wait and watch the cable industry being carved up in the wake of Cable & Wireless’ creation of a 5bn player in the cable and telecoms world (MW October 18). If it wants to be a player, it has to move now and the 207m from the regional paper sales is not enough to pay its entrance fee. It could be EMAP’s biggest gamble yet.
It will have to borrow, which makes a boardroom fight and its standing in the City all the more damaging. On the other hand, if it simply marks time, it could become vulnerable to takeover. At the moment the City believes that no suitor would do as a good a job of developing EMAP as its existing management.
Next month’s EGM will end with Simmonds and Cooke axed. But the wider issue of who will be running EMAP – Arculus or Miller – will still need to be resolved. The victor will have to steer EMAP through what could be its most difficult period.