The first six months of 2018 proved to be a mixed period for the five large trade publishers that report their financial results. Operating margins rose at two publishers, fell at two others, and held even at the fifth in the first half of 2018 compared to the same period last year. Fluctuating currency rates played a part in the first-half results, and publishers reported continuing strong gains in sales of digital audiobooks.

HarperCollins had the strongest six-month performance, with revenue up 13.7% and profits jumping 50%. The revenue gain was aided by $28 million from a sublicensing agreement with Amazon Studios for J.R.R Tolkien’s Lord of the Rings trilogy that was concluded in the second quarter of the calendar year ($21 million went to HC’s bottom line). HC also benefitted from the positive impact of foreign currency changes.

Those factors aside, HC CEO Brian Murray pointed to strong performances in many of the company’s operating units, including its general, children’s, and Christian books divisions. Frontlist titles that did well included Girl, Wash Your Face; I’ll Be Gone in the Dark; and Magnolia Table. Backlist sales were led by The Hate U Give and The Subtle Art of Not Giving a F*ck. Digital audio sales also had a strong six-month performance.

Though currency fluctuations helped HC, they hurt results at Penguin Random House. Revenue at PRH fell 3.3% in the first half of 2018 compared to the same period a year ago, and earnings declined 17%.

Both PRH parent company Bertelsmann and PRH global CEO Markus Dohle attributed the declines in large part to the negative impact of exchange rates. In his letter to employees, Dohle explained that though “headline” figures were down, excluding the impact of exchange rates, “underlying operating revenue and profit numbers for Penguin Random House in U.S. dollars have been stable year over year.”

Double-digit gains in audiobook sales were a highlight of the first half, and results also include the January purchase of Rodale’s book assets. Dohle pointed to other investments PRH made in the first half of the year, including the creation of a number of imprints—among them Kokila at Penguin Young Readers and Random House Graphic at Random House Children’s Books in the U.S. The company also invested in its supply chain, including the opening of a new building in the U.S. to expand the capacity of PRH’s Maryland facility.

At Lagardère publishing, sales fell 1.9% in the first half of 2018, with the negative impact of €42 million in foreign exchange offsetting an €18 million gain from a number of 2017 acquisitions, including Bookouture and Jessica Kingsley.

In the U.S., sales rose 1.4%, and profits were also up. HBG CEO Michael Piestch attributed the improvement to “excellent ongoing backlist performance and strong publishing programs across divisions.” In addition, Pietsch said, “Hachette Audio continued its steady growth, and our client services business had a strong first half.”

Simon Schuster managed to raise operating income 6.8% in the first six months of the year, and revenue held steady at $367 million. The profit improvement was attributed to lower production costs, which SS CEO Carolyn Reidy attributed in part to lower royalty write-offs. Higher sales of digital audio, up by more than 20% in the first half of 2018, helped to offset sluggish e-book sales. Print sales were stable. In addition to higher audio sales, SS’s adult group had a good second quarter, led by Fahrenheit 451, The Outsider, The Restless Wave, and Spymaster.

After a good first half of 2017, sales in Houghton Mifflin Harcourt’s trade segment dropped 7.8% in the first six months of 2018. The company attributed the revenue decline to fewer physical sales in both its young readers and general interest categories, and to a decline in overall e-book sales. The drop in e-book sales, HMH noted, was driven by reduced sales of The Handmaid’s Tale and 1984, which drove e-book sales in 2017.

Operating Performance January–June, 2017–2018

($ and € in millions)

2017 2018 Change HarperCollins Total Sales $781.0 $888.0 13.7% EBITDA $76.0 $114.0 50.0% Margin 9.7% 12.8% Houghton Mifflin Harcourt Trade Total Sales $79.0 $72.8 -7.8% Adjusted EBITDA $2.3 ($0.7) – Margin 2.9% – Lagardère Publishing Total Sales €1,019.0 €1,000.0 -1.9% Recurring EBITDA €41.0 €40.0 -2.4% Margin 4.0% 4.0% Penguin Random House Total Sales €1,532.0 €1,482.0 -3.3% Operating EBITDA €206.0 €171.0 -17.0% Margin 13.4% 11.5% Simon Schuster Total Sales $367.0 $367.0 0.0% Operating Income $44.0 $47.0 6.8% Margin 12.0% 12.8%