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MARKET COMMENT
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Carburton Street, London -- It's tough to admit to mistakes. But Emap (LSE: EMA) and its Chief Executive Kevin Hand finally seem to be facing up to their US blunder. Only two years after the purchase of US magazine publisher Petersen, Emap revealed today that it had received a number of approaches concerning its US operation. Emap is currently considering its options but, at the right price, investors should welcome a disposal. Buying the profitless Petersen for £941m had always looked an optimistic purchase. One year after the deal, a 7% drop in US advertising rates prompted a group profit warning. And Petersen's particular publishing market -- automotive -- has proved problematic ever since. Although the US U-turn will damage the credibility of Emap's management, the potential to damage Emap's balance sheet caused by hanging on to the operation is the more important issue. Selling off Petersen will thankfully alleviate Emap's £700m debt burden. The group's interest cover, at a slender five times, has always looked a little disturbing should advertising conditions deteriorate. Not only that, but with Emap embarking on an ambitious, but uncertain, £120m Internet venture, the company's accounts were becoming very stretched. While the US remains troublesome, Emap's trading statement has highlighted brighter spots. Revenue and profit growth from UK radio and consumer magazine operations has ranged from solid to buoyant, while an improvement in operating efficiencies has more than offset a slowing advertising market in France. Emap's European performance means full-year profits will meet expectations. Overall, question marks remain over Emap's management. The timing of the Petersen acquisition and (given the current US economy) of any near-term sale look rather clumsy at best. However, now that the management has signalled the possibility of a Petersen disposal, perhaps those vultures rumoured to be eyeing up Emap will return to their slide rules. On the current price to earnings (P/E) rating of 20, a Petersen-free and debt-free Emap could make a tasty morsel for more distinguished media moguls. More: Emap discussion board