Penguin Putnam Posts Modest Gains in Transition Year

In what was described by Penguin Putnam executives as a year of "repositioning the business," total sales for the company rose 1% to $869 million, while operating profits fell to $80 million from $95 million in 1997. Michael Lynton, CEO of Penguin, noted that the decline in profits was largely due to write-offs associated with the integration of Penguin's U.K. Ladybird Books operation into Penguin's children's group; he added that the company's "underlying" operating profits rose 6%. Sales in the year were affected by the loss of revenue from Troll Communications, which was sold in 1997.

Although he declined to break out specific sales figures, Lynton told PW that all of Penguin's American divisions grew in the year. He said that sales in the children's group rose to more than $150 million and that sales of mass market paperbacks "rebounded nicely." Penguin chief financial officer David Wan added that "some stability has come back" to the paperback ID market. Wan also noted that Penguin's U.S. operation had an operating margin of more than 12% and that the company expects margins to improve in 1999. Penguin was able to achieve a 12% margin despite the fact that some of the financial benefits gained from integrating Penguin and Putnam were offset by increased revenue investment in building its future frontlist of bestselling authors.

Lynton said that the integration of the Penguin and Putnam businesses is nearly completed, with the consolidation of the company's warehousing operations the final task to be accomplished. Penguin is phasing out its Newbern, Tenn., facility and will move its inventory to warehouses in New York and Pennsylvania. The move is expected to be completed by next February.

Penguin will publish a total of approximately 2500 titles in 1999, the same number it has released in recent years. Wan noted that while the number of titles will remain flat, Penguin's investment in new authors will increase this year. Lynton concluded by observing that with the changes the company has made it is "well positioned for sales and profit growth in 1999."