While libraries are reeling from severe budget cuts due to the financial crisis, how are the commercial publishers that rely on us doing? Hurting too? Not really, it seems. Here is what informa (Taylor & Francis) is telling investors today:
The strong portfolio of products within the Informa stable allows the group highly favourable valuation characteristics including:
* Excellent free cash generation
* High return on capital employed
* Excellent quality of earnings - significant subscription revenues with high renewal rates
* High margins especially on data and subscription products
* High operational gearing and cost flexibility
* Products which do and will continue to benefit from technological advances and changing consumer trends
From: informa / Investor Relations
What does this mean?
Excellent free cash generation = when we send in our subscription payments, they have tons of cash on hand. In ordinary household terms: when you get your paycheque, the money is not all going to pay the bills right away, you pay these off and have lots of spending money.
High return on capital employed = for what they spend on getting the journals, they get way more money back.
High margins especially on data and subscription revenues with high renewal rates = high profits. Does it mean that they could afford to give your library a MUCH bigger discount - say 30 to 40 % more - and still more than cover their costs? Yes, it does. I don't have enough detail to specify the amount, but this does seem reasonable to ask.
High operational gearing and cost flexibility = even though they are making way more than it costs to produce the journals, they are finding ways to cut corners and make even more profits. If they are passing on some of the savings to your library, please let me know!
Products which do and will continue to benefit from technological advances and changing consumer trends = they think no matter what happens, they will just keep on making more and more money.
This post is part of the economics 101 series.