Covid-19 losses at Hearst UK will eat up a “large proportion” of the magazine publisher’s cash resources.
But the publisher said its US parent company Hearst Communications Inc has confirmed continued financial support if needed.
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The post-Covid financial outlook was shared in the 2019 full-year accounts for National Magazine Company, of which Hearst UK is its subsidiary, which reveal increased profitability in pre-Covid 2019. Pre-tax losses in 2019 were £2m, down from £6m the year before, and the company reported a 3.6% drop in revenue from £146m to £140.6m. Operating profit more than doubled from £0.7m to £2.2m.
Hearst UK chief executive James Wildman said in the report the company’s Covid-19 scenario planning indicates a drop in revenues that will result in operational losses, but that he does not expect to have to ask Hearst for additional funding.
Wildman (pictured) said: “Fluctuations in demand and increased online competition for advertising revenue could have a marked impact on profitability.
“However, the positioning of our magazine brands and our mixed portfolio of magazines and diversification into digital publishing, events and other revenues helps to manage the exposure to this risk.”
Although lockdown impacted newsstand sales, Hearst – like many other magazine and news publishers – said subscriptions had grown. Hearst has seemingly managed to avoid closing magazines as yet this year, unlike some of its competitors.
Hearst UK has also been hit by social distancing and a ban on mass gathering which stopped major events, a key part of its diversification strategy, from taking place.
But it has experimented with going digital, holding a livestreamed version of Women’s Health Live less than two weeks after the UK went into lockdown.
It also managed to open a new product testing facility in Feltham, West London, in July despite an original launch date in the first quarter of this year that was set back by the pandemic.
Wildman said accreditation of products is a “pillar of the group’s diversification strategy” and the new site will mean the Women’s Health, Cosmopolitan, Elle, Runner’s World, Harper’s Bazaar Country Living and Men’s Health brands can follow in the footsteps of Good Housekeeping, which already tests and gives approval to products from its Soho base.
Other threats from Covid-19 include a “possible impairment of goodwill if the economic impacts affect future cash inflows and a possible increase in bad debts”, plus a likely increase in pension liabilities due to a decrease in the discount rate and a likely fall in pension asset values as a result of recent volatility in equity markets.