Despite a weak year for media companies, Playboy Enterprises showed its turnaround is continuing with strong revenue numbers last year and projected overall growth for 2006.
“We enter 2006 in a stronger competitive and financial position than a year ago,” said company chief executive Christie Hefner, referring to the company’s 2005 financial report issued Tuesday. “We expect that our entertainment and licensing businesses will show another year of strong profit growth that again will mitigate continued weakness in publishing.”
Although its fourth-quarter earnings were hampered by high restructuring costs and a one-time gain in that quarter, the company managed to push its revenue ahead by 2 percent over a year ago thanks largely to growth in its international licensing and TV sector.
The report’s forecast of profit growth by about 20 percent this year helped move the stock by 7 percent during afternoon trading on the New York Stock Exchange. The stock had closed at $14 on Monday then spiked to $15.50 on Tuesday before closing at $14.68. Today, it’s holding at $14.41, with a 52-week high of $15.88, reached Nov. 18, and 52-week low of $11.80, reached May 13.
For the year, Playboy reported a net loss of about $700,000 or $0.02 per diluted share which included $19.3 million in restructuring costs on $338.2 million in revenue. The company would have reported an $18.6 million profit and $0.56 per diluted share without the charge.
By comparison, the company reported a $10 million profit or $0.30 per diluted share on $329.4 million in 2004.
The latest numbers show that Playboy’s turnaround is continuing after suffering through years of losses, said Robert Routh, an analyst with Jefferies & Co.
“Their recent deal with Comcast for VOD (video on demand) and these other licensing deals are going to help drive their results,” Routh said.
Already, analysts say the company’s licensing deal with the Palms Casino in Las Vegas could generate $5 million for Playboy this year alone, giving rise to speculation the company could strike similar deals with casinos in London, Shanghai and elsewhere.
Improved revenue could also mean lower interest rates for the company which is trying to pay off an estimated $115 million in debt.
Hefner’s upbeat growth forecast also relies on Playboy’s move into digital technology. The company is licensing its content to be sold online and on cell phones in parts of Europe where mobile technology is only now beginning to take off.
Hefner said the deals would include video clips of its Playboy models along with their photographs, video games and even their voices to be sold as ring tones.
One of the company’s bright spots was entertainment where it reported a 6.9 percent revenue increase last year, going from $189.2 million in 2004 to $203.4 million in 2005. It’s domestic television networks drove the increase with a 13.1 percent hike, going from $43.5 million in 2004 to $52.1 million.
The company’s publishing side, which operates 20 foreign editions of Playboy magazine, is showing continued weakness with a 30 percent drop in revenue during the first quarter and an overall slide for the year when its numbers went from $119.8 million in 2004 to $106.5 million.
The company’s efforts to prop up its struggling unit was exemplified last month when it hired Louis Mohn as magazine publisher. Mohn had been head of magazine publisher Primedia’s consumer automotive group.
Overall, analysts had been forecasting earnings of $0.67 per share for 2006, with revenue of about $359 million for a 6 percent increase from last year. Playboy did not issue a revenue forecast.
