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157. Among the questions we set out earlier as requiring an answer (Chapter 1, para. 51) were 'How efficient is the Press as a business?' and 'Is its return on capital reasonably comparable with that of other publishing businesses?'
158. If the structure of the O.U.P. were to be described in terms normally applied to a business concern it could be said to have adopted that of a holding company working through five wholly owned operating companies, the Clarendon Press, the London Business (itself possessing a large number of subsidiary companies), the New York Business, the Printing Business, and the Wolvercote Paper Mill. On this analogy the Delegates could then be regarded as the Board of the holding company collectively responsible for the well-being of the business to their share-holders, the University. The Chairman and the members of the Finance Committee may then be said to be executive members of the Board and the Secretary to the Delegates the Managing Director and Financial Controller. Thus major policy decisions are made jointly by the Chairman and members of the Finance Committee and the Secretary. Lesser decisions to do with the day-to-day conduct of the business are made by the Secretary, as Managing Director, on his own or, if several departments are involved in them, after they have first been discussed with him at the Management Committee.
159. The 'Group' as a whole employs assets of over £10 million, and has a total turnover, including printing and paper sales, well in excess of that figure.
160. As a background to discussion of the business side of O.U.P. we show in Table IV on page 79 certain basic figures for the relative contribution and comparative profitability of the five businesses. These figures must, however, be taken with some reserve since in their trading relations the individual departments are not wholly divorced one from another and the allocation of overheads between them is inevitably arbitrary.
Relative Size and Contribution to Earnings of the Separate Businesses, 1967; 1968; and Average of Five Years, 1964-8 inclusive (all expressed in percentage terms - O.U.P. as a whole = 100)
Clarendon Press Turnover 1967: 19.6 1968: 18.3 1964-8: 19.3 Pre-tax profits 1967: 26.3*1968: 10.9* 1964-8: 19.1 Capital employed 1967: 17.9 1968: 15.8 1964-8: 18.3 Pretax profits as percentage of (A) turnover 1967: 12.6* 1968: 5.5* 1964-8: 10.2 (B) Capital employed 1967: 16.0* 1968: 7.2* 1964-8: 13.1
London Business incl. Branches Turnover 1967: 28.2 1968: 23.9 1964-8: 27.3 Pre-tax profits 1967: 42.0 1968: 41.4 1964-8: 38.1 Capital employed 1967: 30.8 1968: 31.1 1964-8: 31.5 Pretax profits as percentage of (A) turnover 1967: 14.0 1968: 16.0 1964-8: 14.5 (B) Capital employed 1967: 14.9 1968: 13.8 1964-8: 15.1
Printing Business Turnover 1967: 12.5 1968: 11.9 1964-8: 12.4 Pre-tax profits 1967: 18.8 1968: 17.7 1964-8: 17.0 Capital employed 1967: 13.2 1968: 12.4 1964-8: 13.5 Pretax profits as percentage of (A) turnover 1967: 14.2 1968: 13.7 1964-8: 14.2 (B) Capital employed 1967: 15.6 1968: 14.8 1964-8: 15.8
Wolvercote Mill Turnover 1967: 12.5 1968: 11.7 1964-8: 13.4 Pre-tax profits 1967: (5.8) 1968: 7.7 1964-8: 1.9 Capital employed 1967: 8.4 1968: 8.3 1964-8: 10.0 Pretax profits as percentage of (A) turnover 1967: (4.4) 1968: 6.1 1964-8: 1.5 (B) Capital employed 1967: (7.6) 1968: 9.6 1964-8: 2.4
O.U.P. Inc. New YorkTurnover 1967: 27.2 1968: 34.2 1964-8: 27.6 Pre-tax profits 1967: 13.0 1968: 16.1 1964-8: 19.6 Capital employed 1967: 12.0 1968: 15.0 1964-8: 12.7 Pretax profits as percentage of (A) turnover 1967: 4.5 1968: 4.3 1964-8: 7.3 (B) Capital employed 1967: 11.8 1968: 11.1 1964-8: 19.2
General Fund Pre-tax profits 1967: 5.7 1968: 6.2 1964-8: 4.3 Capital employed 1967: 17.7 1968: 17.4 1964-8: 14.0 Pretax profits as percentage of Capital employed 1967: 3.5 1968: 3.7 1964-8: 3.9
Notes to Table IV
Certain figures have been adjusted from those shown in the audited accounts to put all the years on a comparable basis, which basis is the one currently used by O.U.P. The adjustments are as follows:
(1) Clarendon Press Turnover. Prior to 1966 the distribution charge made by the London Business had been deducted from the sales figures, whereas from 1966 onwards that distribution charge has been deducted as an overhead.
(2) London Business. Prior to 1966 the sales figure had included those books distributed by the London Business for the Clarendon Press. From 1966 onwards distributions for the Clarendon Press have not been included in sales.
(3) The Wolvercote Mill. Sales figures have been slightly adjusted to reflect a new trading arrangement under which sales are no longer made on behalf of the Mill by Spicers.
*The difference between the pre-tax profits of the Clarendon Press for 1967 and 1968 are largely attributable to purely technical factors.
161. In this chapter we examine first the businesses, then deal with the structure of the central management which brings these parts together, and finally consider management policy and questions of finance. The three publishing businesses have already been considered in the preceding chapter and call for less detailed treatment than the Printing Department and the Wolvercote Paper Mill.
162. Oxford. The organization of the Oxford publishing departments is shown in Figure 5 (below). The full-time staff, including the Secretary and the small central office staff, number 215 and there are 16 part-time employees. The Clarendon Press shares the Walton Street premises with the Printing Works, some editorial work overflowing into houses in Walton Crescent. The Cartographic Department is housed separately at 37A St. Giles' and has a total staff of a further 38.
163. The books published by the Clarendon Press account for some 16 per cent of the O.U.P.'s General List. By number they have accounted recently for some 21 per cent of the Press's annual publication and by value for some 19 per cent of its annual book- sales. Over the past five years the rate of return on the capital employed by the Clarendon Press has been comparable with that of the London Business and its contribution to the total profits of the Press over that period has averaged some 19 per cent. The composition of the Clarendon Press list is indicated below.
Approximate Contribution (percentages) of Different Publishing Categories to Total Turnover and Profit of the Clarendon Press (1967-8)
Academic (excl. Science). Of total turnover 31; of total profit 5
Science. Of total turnover 7; of total profit 9
Reference. Of total turnover 26; of total profit 60
Cartographic. Of total turnover 6; of total profit (10)
School books. Of total turnover 25; of total profit 30
Paperbacks. Of total turnover 1; of total profit 0
Other (including loss on University publishing). Of total turnover 4; of total profit 6
From this table it will be seen how substantial is the contribution made by the reference books and school books to the profitability of the Clarendon Press Publishing Department.
164. We appreciate that it may not always be possible to apply to the publication of learned works of the Clarendon Press the management methods of a commercial business. One such case put to us by the Delegates was the difficulty inherent in applying forward budgeting to the Clarendon Press academic books. Clearly there may be factors here which would result in less accurate forecasts, but the fact that certain works are, and must be, published without regard to profitability makes it all the more necessary, in our view, to apply the accepted financial techniques to the exercise. We recommend that the Delegates should introduce a system of forward budgeting in respect of the Clarendon Press Publishing Department as in the other parts of the publishing businesses.
165. The procedures adopted by the Oxford and Cambridge Presses for the treatment of subsidies to learned works differ. When the Syndics of the Cambridge University Press agree to publish a book which is expected to make a loss, a specific sum is approved as the subsidy necessary if the book is to be sold at a certain price, account being taken both of a small print order and of the capital tied up in slow-moving stock: this sum is then transferred from the central Syndics' account to a publishing account and the trading results show the position after allowing for the subsidy so granted. At Oxford the loss lies hidden within the profits of the Clarendon Press as a whole. The Cambridge procedure meets the requirement put forward to us by the Secretary to the Curators of the University Chest, that 'any loss deliberately accepted on the publication of learned works [should be] shown cleanly as a cost'. We recommend that the Delegates should adopt a system of accounting for the learned works which will show as a cost any losses deliberately incurred in unremunerative publishing.
166. We make recommendations later in our report in regard to the top accounting positions in O.U.P. but note here that the Delegates have already accepted the case for the establishment of a separate post of Accountant in the Clarendon Press, distinct from the office of Group Accountant. This may, we believe, prove to have advantages for the Clarendon Press.
167. The Clarendon Press undertakes a substantial part of the University's official publishing without charge, at an average cost to the Delegates of some £14,000 annually. (These annual publications comprise: the Oxford University Gazette; the University Calendar and University Handbook; the Almanack, Statutes, Examination Decrees; the Residents' List; the University Diary; and various annual and occasional pamphlets.) Production of the Gazette accounts for about one-third of this total, to which must be added £1,000 in respect of editorial costs. (The total cost of the University Gazette is about £18,000 per annum, of which some two-thirds is paid from central University funds.) In addition to the annual publications, the Delegates have also borne the cost of such other items as the publication of the evidence and final report of the Franks Commission (some £9,000) and these figures exclude the cost to the Press of a number of special arrangements with the Curators of the Bodleian Library and the Ashmolean Museum for the publication of their respective catalogues. It is arguable that a truer picture might be presented if the cost of the University's domestic publishing were charged to it rather than received as a concealed subsidy. But in any case we recommend that the cost be shown distinctly in the published accounts of the Delegates along with similar information on the cost of the University's printing. (We make recommendations regarding the publication of accounts at Chapter 5, para. 256.)
168. The London Publishing Department - Home. Books originating from the publishing departments in London constitute - with Bibles and Prayer Books - 30 per cent of the combined general catalogue of O.U.P. By number they have recently accounted for some 18-20 per cent of the annual publications and by value for over 25 per cent of the annual book sales of the Press as a whole. (These figures, which are necessarily approximate, are derived from figures provided by the Secretary to the Delegates. If account is taken only of sales from Neasden (some part of which is resold by the Branches and the New York Business), books edited in London account for 50 per cent of the sales of the U.K. publishing businesses.) The contribution to the business of the Press of the overseas branches of O.U.P., and of the New York Business, are considered separately below; but it is relevant to note here that although the books from other learned presses overseas which O.U.P. stocks and sells in this country (and, in some cases, in continental Europe and elsewhere overseas - see Table II at page 60, and para. 129 above) account for 30 per cent of the full list, they produce only some 5 per cent of the total turnover of the home publishing departments.
169. The main Editorial Offices and the Sales and Promotion Departments are housed at Ely House, Dover Street, with the Music Department nearby in Conduit Street, and employ a staff of 192. The Administration, Accounts, and Data Processing Departments, and also the Bible Department, are based on the main warehouse at Neasden under the supervision of the Administration Manager, employing together 390 people. (The small staffs at the Music Warehouse, Glasgow Warehouse, and the Depository in the High Street bring the total U.K. staff of the London Business to 642.) The Publisher is assisted in running the business by a Management Committee comprising, under his chairmanship, the Deputy Publisher, Chief Editor, Sales Manager, and Administration Manager. The organization is shown in Figure 6 (below).
170. The administration of the London Business is complicated by the geographical split between the central London offices and the warehouse and computer at Neasden. The way this has been organized, with the Administration Manager at Neasden in charge of the departments there, deals very effectively with the problem. Ely House in Dover Street is certainly a distinguished 'shop-front', but the complicated arrangement of the accommodation which it affords must make it very unsatisfactory as offices from which to administer effectively the sales and promotion effort and the overseas branches. It appears to us that in the long term a further move may need to be considered.
171. We received a considerable volume of very favourable evidence on the efficiency of the O.U.P. computer system at Neasden in its handling of booksellers' orders, accounting, and stock control. The scope of this organization is by no means exhausted and we see every reason to believe that further benefit will accrue from it over the whole field of O.U.P.'s operations. The members of the O.U.P. staff responsible for the installation deserve great credit; and the management can also take credit for putting to very effective use the special aptitudes and interests of individual members of the staff.
172. The staff of the London Business clearly retain the sense that O.U.P. is 'different' from other publishing firms, but we found there, nevertheless, an appreciably more commercial atmosphere. This is entirely understandable. The general books in the London list are obtained and published in direct competition with commercial publishers and required to show an appropriate profit; moreover, the London Business operates the full sales and promotion sides of all O.U.P. books, with limited exceptions, and is responsible for the central warehouse and data-processing services. We have discussed above (Chapter 3) the proposals for a gradual concentration of non-specialized editorial work in Oxford and recognize the delicate balance of advantage in this complex question. At the same time we are concerned that every care should be taken to guard against the dangers attendant upon a move away from the capital and a closer absorption of the present London activities in the Oxford Business. These we believe to lie, first, in the separation of the editorial and sales forces and, second, in the possible loss of some of the editorial independence and initiative which now characterize O.U.P. London. We consider it important that publishing decisions in regard to the general 'trade' book market should not suffer from any tendency to subject them to the less commercial philosophy applied in Oxford and itself appropriate to the learned books proper. In this connection it may be hoped that the inclusion of the Publisher as a full member of the Finance Committee, a change we consider necessary on other grounds, together with the establishment of the Joint Management Committee, should help to retain the right balance.
173. The growth of O.U.P. as a business is very closely linked to the independent publishing in London and more recently in the overseas branches as well. While it is not true that the profits of the London Business have been needed to carry the cost of unremunerative learned publishing, the Learned Press has none the less benefited greatly from the broad base of operations provided by the London and New York Businesses and the overseas branches.
174. The London Publishing Business - Overseas Branches. Table VII on page 88 lists the territories in which the various overseas branches of the Press are situated, and summarizes the functions performed by each of them. The branches account for some 20 per cent of the O.U.P.'s publishing turnover. They employ in all 586 people and, at managerial level, just under one-half are British resident members of the O.U.P.'s London staff.
175. The arrangement by which all the overseas branches are administered through the London office stems from their primary function as stocking and selling centres for O.U.P.'s publications. The Delegates have recently recognized the need for a reorganization at Ely House to take account of the fact that several of these branches have become or are becoming individual businesses of considerable importance. Problems arise, for example, over local publishing; over the need for modified editions of Oxford and London titles to meet local conditions; and over the central production of editions or new works suited to several overseas markets. We therefore welcome the decision to form a Branches Division in London (see Chapter 3, para. 98). A single, clearly defined channel through the London Publisher for the communication of decisions is vital for the effective operation of overseas subsidiaries. Moreover, the taking of decisions in London should be facilitated by the presence in that office of men who have first-hand knowledge of the problems of the various branches, who keep constant contact with them by letter and telephone and who can be regarded by Branch Managers as their informed friend at court. We urge also the need, apparent to the members of the Committee who visited Canada and Australia for regular and far more frequent visits in both directions so that Branch Managers may be able to feel more certain than now always appears to be the case that they understand what the Delegates' policies and objectives are; and conversely so that the sales problems of the 'man on the spot' and the nature of the competition he has to face may be more readily appreciated and his proposals for meeting them - which may include changes in the format of the books he has to offer - may be given greater weight (Mr. Marris visited Toronto after accompanying other members of the Committee to New York. On separate occasions while the Committee was in being Mr. Marris and Professor Richards were in Australia.) In short, that local initiative may be more understandingly regarded. We were therefore glad to be told that a first conference of Branch Managers was due to be held in Oxford in the spring of 1970, and believe that this should be a regular occurrence. (We now understand that the first such conference is not to be held until the autumn of 1971.)
Overseas Branches
Titles code: A = Branch originals, B = Local editions, C = Total
Canada;HQ and warehouse outside Toronto (freehold); fully stocking; 70 staff (1967); Titles in print A: 120 B: 36 C: 156 New titles (average of last 2 years) A: 15 B: 9 C: 24
Australia (covering Pacific islands, not N.Z); HQ Melbourne (freehold), office in Sydney; fully stocking; 48 staff (1967); Titles in print A: 270 B: 48 C: 318 New titles (average of last 2 years) A: 29 B: 5 C: 34
India (covering Nepal, Burma); Bombay (General Manager), Calcutta annd Madras; A few major booksellers deal direct with Neasden; 214 staff (1967); Titles in print A: 477 B: 402 C: 870 New titles (average of last 2 years) A: 17 B: 19 C: 36
Pakistan (covering East and West); HQ Karachi, offices in Dacca and Lahore; fully stocking; 43 staff (1967); Titles in print A: 70 B: 88 C: 158 New titles (average of last 2 years) A: 8 B: 26 C: 34
Southern Africa (covering Rhodesia); HQ Capetown, offices in Johannesburg and Salisbury; stocks branch publications only; 27 staff (1967); Titles in print A: 125 B: 24 C: 149 New titles (average of last 2 years) A: 7 B: 1 C: 8
West Africa (covering Nigeria only); HQ Ibadan (leasehold), rented warehouse in Apapa. Holds local titles. Handles about three-quarters of O.U.P. trade with Nigeria. 64 staff (1967); Titles in print A: 121 B: 25 C: 146 New titles (average of last 2 years) A: 19 B: / C: 19
East Africa (covering Kenya, Uganda, Tanzania, Ethiopia, Malawi, Zambia); HQ Nairobi, Dar-es-Salaam, Lusaka, Addis Ababa. Holds partial stocks as well as local titles. 40 staff (1967); Titles in print A: 232 B: 112 C: 344 New titles (average of last 2 years) A: 46 B: / C: 46
East Asia (countries east of Burma); HQ Kuala Lumpur, Singapore, Hong Kong, Tokyo. Holds substantial stocks. 80 staff (1967); Titles in print A: 368 B: 154 C: 522 New titles (average of last 2 years) A: 51 B: 17 C: 68
New Zealand HQ Wellington: 3 staff (1967); Titles in print A: 1 B: 8 C: 9 New titles (average of last 2 years) A: / B: 1 C: 1
Notes to Table VI
A fully stocking branch carries stocks of all types of O.U.P. publications and handles all orders from or traceable to its territory. Almost all branches act as agents for one or more other publishers.
Figures for titles are divided to distinguish books originating within the branch area and those published by a branch which are reprints or local editions of titles first produced in the United Kingdom.
India: three separate branches under a General Manager.
West Africa: previous Ghana Branch closed but Ghanaian representative recently reappointed.
East Asia: four separate offices under a General Manager. Tokyo office is wholly owned subsidiary with local registration.
176. The wide variations in the size and scope of the overseas branches and the equally wide variations in the level of selling, general, and administrative expenses in the markets in which they operate make it difficult to arrive at any valid comparison between them. The Canadian and Australian branches are substantially the largest in terms of turnover, with India, East Asia, Eastern Africa, and West Africa doing a broadly equal level of business. The level of profit on net sales, however, varies markedly between branch and branch and between one year and another.
177. It is necessary for the Publisher to keep a close watch on national and international trends in the regions in which the overseas branches operate. Those in the developing countries especially are liable to be directly affected by the political situation. Trading conditions in Ghana, for example, forced the Delegates to close the branch there in 1965. (An office was reopened in Ghana in February 1968.) Several branches are also meeting direct competition from state-subsidized English-language publishing supplied under aid programmes.
178. The New York Business.
The New York Business was established in 1896. The organization is shown in Figure 7 on page 90 (below). We were impressed by the regard in which O.U.P. New York was held, by people in America well qualified to judge, for its effectiveness.
179. The headquarters and editorial offices of Oxford University Press Inc. occupy one floor at 200 Madison Avenue and a new warehouse and business offices have recently been built at Fairlawn, New Jersey, where a computer is used to handle stock control and orders. As with the London Business, the separation proved inevitable if O.U.P. was to continue to publish in New York; and this was considered necessary since the Business has no local university base in America and does not confine itself to learned publishing. In addition O.U.P. has a West Coast office at Berkeley, California. The total staff of the Business numbers 290, of whom only the President and three others - apart from a varying number of secretaries - are United Kingdom citizens.
180. O.U.P. New York is editorially responsible for some 8 per cent of the General List of the Press. Its turnover comes in almost equal parts from its local publishing and sales of Oxford and London books. In all, the Business is responsible for over one-quarter of the combined turnover of the publishing departments, and this represents more than the contribution of all the other overseas branches together. Moreover, the Delegates envisage that the New York Business will continue to grow.
181. The New York Business has been given limited borrowing powers by the Delegates but, apart from this, the finance necessary for the growth of the American publishing venture has been generated internally. Like the other component businesses of O.U.P., it remits 40 per cent of its profits after tax to the General Fund (see para. 208). It is thus clear that the New York Business has not grown at the expense of learned publishing but has contributed in fact substantially to the financial strength of O.U.P. as a whole.
182. Approximately half the sales of the New York Business consists of books imported from England, the remainder being New York's own publications and, to a much lesser extent, local adaptations of Oxford or London titles. It is notable that, as in the United Kingdom, the return to the American business on Bible sales gives grounds for concern. The Head of the New York Business stressed to us his view that the total sales of O.U.P.'s English publications would be substantially improved if some restriction could be placed on the practice of 'buying round', arguing that channelling a much larger proportion of the sales through the New York Business would make available a larger allocation for promotion in the American market. (By buying round' and selling round' is meant the purchase or sale of English books direct to an overseas customer by a bookseller in England, by-passing the overseas agent or branch office of the publisher.) The practice among American buyers to which he draws attention stems from considerations of price, of early delivery, and, to some extent, of prestige. The Delegates told us that as far as possible they were trying to restrict this practice but we do not believe that it is altogether preventable without disrupting established channels of trade. The Delegates are already, however, experimenting with a greater use of air freight for the initial supply of appropriate titles and this, combined with a rather greater interval between the dispatch of initial stocks to New York and the English publication date, could help to improve the situation, as could rather more extensive stock-holding in the United States.
183. There has been a recent rearrangement of the responsibilities of the senior staff in New York of which one consequence is that all 'local' publishing will in future be under the direction of one senior member of the management. This should have several advantages of which one will be the more effective selling of books which were not intended in the first place as textbooks, but are now finding a place as required reading in Colleges and Universities. There is also, we believe, scope for more attention to be devoted to the sale of individual Oxford and London books in the American market than has always been given in recent years, although we recognize that the sheer bulk of O.U.P.'s publishing in England makes the task of the sales and promotion staff in New York very difficult.
184. O.U.P. New York is a company incorporated under United States law and pays taxes as a commercial concern. The Cambridge University Press business in New York is not incorporated and we were assured that the relative advantages of incorporation, which involve complex questions of company and tax law, are re-examined from time to time in the light of prevailing circumstances.
185. We formed the impression that the salaries in the New York Business were not seriously out of line with those of other American publishing houses. It was clear that the staff generally liked working for a firm with the ideals and standards of O.U.P. and we heard of some men who had chosen to stay despite the knowledge that they could receive both promotion and higher remuneration elsewhere.
186. As mentioned in the previous chapter, the Delegates have recently decided that the New York Business should be represented whenever possible at meetings of the Joint Management Committee. This is a step we welcome; but it is not in itself enough and we would emphasize the importance of maintaining a regular exchange of visits at the senior levels and regular visits by Delegates (see recommendation at Chapter 3, para. 89) - so that at all levels there is a full mutual understanding.
187. The Printing Business. The Printing Department, from which O.U.P. grew, shares the Walton Street premises with the Oxford Publishing Department. Headed by the Printer to the University, it employs about 930 people and has annual sales of the order of £1.5 million. The Printer is aided by an Assistant Printer (appointed by the Delegates) who is mainly concerned with the technical operations, and the Personnel Manager who is responsible for staff and labour matters. The organization is shown in more detail in Figure 8 on page 94 (below). In addition to the warehousing incorporated in the Walton Street premises, the Printer has charge of the warehouse at Jordan Hill, use of which is chiefly made by the Oxford and London Publishing Departments for the storage of paper and of unbound and bound stock. The management structure of the Printing Works takes the departmental form to be expected in a business of this kind and the Printer works to annual and quarterly budgets and monthly management accounts produced on a system designed by consultants. Unless specifically instructed otherwise by the Finance Committee, he is required to undertake work on a normal commercial basis. The Printing Works employs about 13 per cent of the total capital resources of O.U.P. as a whole and, on 12 per cent of the total turnover, is responsible for some 17 per cent of the pre-tax profit of O.U.P. The return on capital employed is about 16 per cent and, like the other Businesses of the Press, it is required to pay a 'dividend' of 40 per cent of its after-tax profits to the General Fund. Printing for the University itself is charged at a commercial rate, less a discount of 2.5 per cent.
188. We were informed that it was the policy of the Delegates to keep the capacity of the Printing Works substantially below the regular output of the home publishing departments to avoid any pressure to publish simply to provide work for the Printer. In fact only about 70 per cent of the turnover of the Printing Works arises from work done for the Press, the remainder being divided between University printing, work for examining bodies, and other outside work. The Printing Works undertakes less than 50 per cent of the total printing purchased by the home publishing departments.
189. In view of this we inquired into the reasoning behind the Delegates' decision to expand and modernize the Printing Works at a cost of some £750,000, resulting in a requirement for a substantial increase in working capital. We were told that there were two main reasons. The older buildings now occupied by the Printing Works round the Walton Street quadrangle date from the period 1827-34 a, and are not suited for the efficient operation of the modern printing machinery introduced since the war. The new buildings behind the original quadrangle, of which the first and larger stage is now complete, will relieve the congestion in the present bindery, and provide a modern purpose-built lithographic department and improved canteen facilities. Secondly, the space thus released will give badly needed accommodation to the Clarendon Press publishing departments.
190. The bookwork undertaken by the Printer falls into two distinct categories: the printing of new titles makes appreciable calls on the composing rooms whereas the production of reprints does not. The number of reprints produced is normally more than double the number of new titles and periodicals. The machine rooms, where the actual printing is undertaken, and the bindery thus rely heavily on a steady flow of reprints in order to keep them fully occupied. In the earlier stages of our inquiry the Printer was experiencing difficulties over a short-fall in reprint work due to changes in publishers' plans (both within O.U.P. and among outside customers). (Very long runs of printing on new books such as a dictionary or The New English Bible can also improve the flow of work to the machine rooms.) This is still partly the position, but the Printer stated that he was satisfied it was a temporary phase and that work will be forthcoming to justify the modernization and re-organization. On the other hand, we had evidence before us of the increasing possibility of competition from cheap, high-quality, printing overseas - competition which faces the whole printing trade in the United Kingdom.
191. The Walton Street works are particularly well equipped to deal with long runs of printing, called for in the production of the dictionaries and other reference works, and now more and more called for in the production of paper-bound reprints. It has special facilities for handling very thin sheet paper in large sizes, acquired from long experience of Bible printing. In the composing rooms of the Department, O.U.P. has an exceptionally wide range of Monotype matrices for the casting of special types and a body of men skilled in their use. The Delegates therefore believe that the enlargement of the Printing Works will enable it to take on an increased proportion of the production of learned works. (It is already the more straightforward work which is at present given to outside printers and this, naturally, is a larger proportion of the London than of the Clarendon Press output.) The printing of science books is an exception, in that this is frequently offered to outside printers specializing in this sort of work and able to offer the required speed of production.
192. The same specialized skills are required for the production of examination papers and similar printing, not only for Oxford but also for over fifty other examining bodies at home and overseas. It was represented to us that this latter work, which sometimes calls for only a minimal number of copies, could be done as quickly and more economically by the use of modern typewriter and offset printing processes; but the Printer took the view that this type of work marries effectively and economically with the specialized composing needed for learned book publishing. 'Non-book composing' amounts to one-third of the total output of the sections of the Printing Works which are concerned. Printing examination papers may be commercially advantageous from a printer's point of view; but we must record also that the output of examination papers for the University and for other examining bodies, and the priority which they must have, is bound to limit the ability of the Printer to reduce the time required for the production of books. We recommend that the possibility of the University's establishing a separate small offset unit for the production of some examination papers, as has been done by the local Examination Boards, should be studied. (A further reason adduced in favour of letterpress work for examination papers -and for much learned publishing - was a commercially intolerable level of correction and re-writing at printer's proof stage, which would be quite impracticable if the offset method were more generally adopted. A change would therefore require changes also in the practice of examiners.)
This might, among other things, make it possible to expedite the dispatch of off-prints of Oxford examination papers to members of Congregation - a matter on which we heard some complaint. The same unit could probably handle the production of Council and General Board papers without any loss in the notable speed and efficiency with which this is now done by the Printer.
193. O.U.P. installed film type-setting equipment in 1960 in order to obtain experience of this new development in printing technology and have now appointed a special assistant to the Assistant Printer whose main task is to investigate the application of computers to Printing. It seems likely that the production of reference works will be one of the first fields in which computer-assisted type-setting can profitably be employed.
194. While the Printer recognized also the growing use, particularly in conjunction with educational books, of a variety of non-printed matter such as models, computer programmes on cards or tape, slides, film strips, and audio and video tapes, he was firmly of the opinion that this lay outside the proper province of a printing works. (At Chapter 3, paras. 136 ff. above, we make recommendations concerning research and development for the Press as a whole.)
195. We now turn to the level of salaries and wages and labour relations. The limiting effect of the level of top salaries on the scope for engaging managerial staff at the middle levels is discussed as a general issue below (para. 217). For salaries of learned readers' the Printer works roughly on the basis of the Burnham Scale. Craft wage levels are negotiated nationally between the Federation of Master Printers and the Printing Trades Unions, and O.U.P. adheres to the national agreements. An incentive bonus system designed by management consultants has been in operation since 1950. The Printing Works is wholly union-organized and a 'closed shop' operates: there are three printing unions involved, and also a few members of the A.E.U. and E.T.U. who abide by printing industry agreements - and regular consultation is provided for by an established Works Advisory Council and four departmental sub-committees which meet quarterly. There are graduated contributory pension schemes for both supervisory and works staff and the level of turnover of staff compares quite favourably with the available figures for the national average in the printing trade.
196. It was recognized by both the Printer and the representatives of the Federated House Chapel, with whom we had a valuable discussion, that the recent advances in printing technology, and those which are foreshadowed with the development of film and computer typesetting, pose particularly difficult problems in a business which is by tradition compartmentalized among different craft unions. The Trades Union representatives made it clear that they recognized the inevitability of these changes and the need for retraining in new skills; but this will certainly require lengthy negotiation. Having regard to the importance of this matter, we recommend that, through their representatives, the employees be kept fully informed at the earliest possible stage of the Delegates' plans.
197. Wolvercote Paper Mill. [Since the mill was sold by OUP shortly after the publication of the Report, these paragraphs (197 - 202) have been omitted - A.M.]
203. Subsidiary Companies and trade investments. O.U.P. has interests in a number of other small companies formed or joined in the furtherance of its general business. Overseas it has interests in a small number of property companies in order to safeguard its tenancy of offices or warehouses - Thibault House Ltd, Cape Town; Walton Investments Ltd., Wellington; and also in British Book Distributors (N.Z.) Ltd. In the United Kingdom U.P. (Oxford) Housing Society Ltd. operates the estates at Jordan Hill and Wolvercote, and the Press are part-owners of Cartographic Press Ltd., printers of the Oxford Atlases and much other work from the Clarendon Press Cartographic Department. University Mailing Services Ltd. operates a computer-based selective mailing service covering the home Universities on behalf of O.U.P. and other publishers, including the Cambridge Press, who own it jointly. In partnership with B. H. Blackwell Ltd. the Press founded University Bookshops Ltd. which seeks to provide both know-how and essential capital for the development of bookshops in University towns. (There are parallels to this in the ownership by publishers of well-known London booksellers, and in London University's ownership of Dillon's Bookshop.)
204. Other Assets. A large part of the fixed assets of O.U.P. consists of the plant and buildings it owns in this country and to a small extent overseas. However, in addition, and apart from housing occupied by O.U.P. staff or former employees, the Delegates hold the title to a number of house properties in the neighbourhood of the Walton Street premises. The wisdom of these acquisitions was shown when the need arose to extend the Printing Works. There are also, in addition to the O.U.P. housing estates at Wolvercote and Jordan Hill operated by the O.U.P. Housing Society, small amounts of pasture land at Wolvercote and Yarnton and the North Oxford Golf Club. Much of the property is held in the name of the Chancellor, Masters, and Scholars, the bulk of the remainder by nominees of the Delegates. Possession of some of these properties may in the future be of potential value to the University.
205. Finally, the Press has one further group of assets for which it would be difficult to estimate a monetary value and for which no goodwill item appears in the balance sheet. This consists of the various copyrights owned by O.U.P. Of these the most important is the copyright in the material comprising the main works of reference published by O.U.P., which were either purchased outright from the respective contributors or written by the staff of the Press.
206. Within the limits laid down by the Delegates (in practice by the Finance Committee) the heads of the various Businesses are instructed to run their own concerns, coming to the Secretary and the Finance Committee for approval of new projects or for matters of major importance. Apart from these formal submissions to the Secretary and through him to the Finance Committee, the heads of the separate Businesses in this country have frequent informal discussions with the Secretary. The contacts between the New York Business and Oxford and those between the overseas branches and the Publisher in London do not appear to us to have been in the past as close and frequent as we think they should be (see paras. 175 and 186 above).
207. Relations between the separate Businesses are in principle, and generally in practice, 'at arm's length' - that is to say each takes the appropriate profit on the work which it does (as opposed to the alternative system under which work is charged forward at cost and the group as a whole takes its profit at the point of sale). Thus the Wolvercote Mill and the Printer offer the Publishing Departments terms no different from those offered to a most favoured customer outside the Group, and the Publishing Departments are free to seek a quotation for a job from the Printer and from an outside printing firm. In general, therefore, each business (in commercial terms each 'operating company' is free to buy and sell in the best market, and its head is responsible, within the overall directions he receives, for covering his costs and earning his profits. It was put to us that this relationship - common enough between the operating companies of a holding company - is desirable, since by allowing the heads of the separate Businesses to assess the profitability of their own operations it puts the responsibility where it should properly be. It should also make the relative profitability of each apparent to the Delegacy when considering the annual accounts. We see every reason to accept this view provided that central co-ordination by the Secretary as 'Managing Director' of the Group is maintained.
208. The General Fund has been developed by the Delegates to hold the property owned by the Press (as opposed to its other fixed assets) and to receive the dividends paid by the Businesses and Branches. Its secretariat now also deals centrally, on behalf of the component Businesses, with all questions of taxation and insurance and coordinates pension policy in the United Kingdom. Since 1965 all departments of the Press have been required to pay rent to the General Fund for the premises which they occupy and, unless specific exemption is given by the Finance Committee, to remit to it 40 per cent of their after-tax profits. We do not believe that the retention by the individual Businesses of 60 per cent of their profits leaves them too great a degree of financial independence; anything less would probably be excessively restrictive, particularly in the case of O.U.P.'s overseas operations.
209. The object of requiring the payment of dividends to the General Fund is to accumulate liquid resources in the Fund so as to ensure that central finance is available for allocation within the Group as between major development projects proposed by the individual departments, in accordance with the priorities laid down by the Finance Committee. Thus, in recent years, substantial funds have been devoted to the enlargement of the Printing Works in Walton Street. The Delegates also drew our attention to the fact that it is only now becoming possible in this way to build up the reserve fund which the size of the business requires (see paras. 226 ff. below).
210. The traditional structure of publishing has been that appropriate to operations on a small scale, centred very often on one person or one family, with management methods suited to the individuality of the principals. Quite large publishing businesses have been run in this way and O.U.P., if always on a rather different footing from private publishing firms, has largely shared their approach. Its management has had remarkable success in handling the financing of a multiple business, with branches all over the world and with interests in printing and paper-making as well as publishing. But there has been a substantial change in recent years. Educational publishing has become 'Big business' and publicly quoted companies are acquiring small privately owned ones. O.U.P. has shown itself ready to adopt new techniques, as in its application of computers to publishing. Nevertheless, it may have now to modify the structure of its management so as to meet new conditions.
211. In Chapter 5 below we discuss the constitution of the Delegacy and its Finance Committee, which for all practical purposes is the management of the Press. It will there be seen that we recommend an increase in the size of the Committee and the recognition of the position of its Chairman as performing the functions of an executive chairman of a company.
212. We note here two special aspects of the present composition of the Finance Committee which cause us concern. These are its general age structure and the lack of any recognized younger successor to the present Chairman. The average age of the present non-official Delegate members of the Finance Committee is over sixty-one, and there is no admixture of young men who will provide the depth of experience of the working of the business in future years. This stems from the length of tenure allowed to Delegates under the present Statute; we make recommendations concerning this elsewhere. On the specific issue of a successor to the Chairmanship, we understand that with the growing complexity of modern business it is normal for a company to have a recognized 'heir apparent' who, by virtue of his position, is enabled to acquire an intimate knowledge of the business as a whole. We believe that it is of great importance that those charged with making appointments to the Delegacy should pay careful attention to the age structure of the Finance Committee and we recommend that the Finance Committee should appoint a Deputy Chairman or Chairmen who (or one of whom) could be expected to succeed to the Chairmanship.
213. The structure we propose assumes a particularly close working relationship between the Chairman of the Finance Committee and the Secretary in his capacity as 'Managing Director'. In practice the Secretary also performs the functions of Chief Financial Executive of the Group and it is effectively he, and not the Group Accountant, who formulates financial policy and puts recommendations in this field to the Finance Committee. In our view this imposes on one man a burden of work so great that it must be to the disadvantage of the Press as a whole: and it seems probable that the working of O.U.P. would benefit from a wider spread of the load.
214. In Table VI (page 88 above) we have listed the countries in which the branches of the O.U.P. are situated. With the exception of Canada all these countries, to a greater or lesser extent, operate systems of exchange control. Many of them, too, enforce systems of internal credit control which can affect the freedom of a foreign-owned company to borrow, on long or short term, as freely or fully as a domestically-owned company. Because of this and because the cost of money throughout the world has risen sharply and seems likely to remain high, companies conducting an international business of the size and complexity of the O.U.P. (and especially those conducting a significant part of their export business in the 'developing countries') have found it necessary to exercise a tighter control over their cash resources in general and of their location in particular; and the skilful deployment of a company's liquid funds has become an important and somewhat specialized function of management. Among such companies it is common practice today for their senior financial officer to be on the Board with authority throughout the business for all matters falling within his particular province. In the O.U.P., however, it is the Secretary - its Managing Director - who must perform this specialized function and we believe that he and the Finance Committee should be given the added support which the appointment of a senior finance officer would provide. Such an officer, at any rate initially, would spend a considerable part of his time visiting the branches and the New York Business and acquainting himself at first hand with every aspect of their financial affairs. In this country he would be able to assist the heads of departments and, when overseas financial problems arise, his personal familiarity with local conditions and regulations should facilitate their solution.
215. The post we have in mind might be designated 'Assistant Secretary (Finance)' and would be at the level of seniority, and carry the salary, which this title indicates. We do not consider that the ad hoc employment of consultants or the advice of the O.U.P. auditors or domestic bankers can meet the requirement; and we believe that the addition of an outside expert member to the Finance Committee increases both the need for this appointment and the value of the advice such an outside member can bring to the work of the Finance Committee. We recommend therefore that such a post should be created.
216. The respect in which O.U.P. is held by its competitors in publishing is a fair reflection of the calibre and efficiency of the senior staff. We were impressed, moreover, by the consensus among those we talked to that there was a real difference between working for O.U.P. and for a commercial publishing house, a point underlined by the refusal by several members of the staff of substantially higher salaries outside the Press. Publishing is an area of business in which salaries were traditionally low, but the situation is now changed in several respects. The growth of commercial publishing in the field of education has tended to blur the distinction between academic and commercial publishing; and under the pressure of increasing competition there is a new recognition of the importance of the part played by sales and promotion staff, accountants, and data-processing experts, who have traditionally taken second place in what was described to us as 'an editor-oriented field'. In the case of O.U.P. there has been a strong tendency to relate salaries to the level of academic salaries in the University. The Delegates have to some extent recognized the change of climate and in the revision of O.U.P. salaries in 1967 moved away from the close link with academic salaries; but it will be essential in the future for O.U.P. salaries to remain within closer range of those in commercial educational publishing.
217. It is now widely accepted that in any commercial organization it is necessary to set the salary of the most senior post at a level which will allow for a salary structure which gives sufficient scope and prospects to those at all the various levels in the business. This question of the appropriate ceiling applies both to O.U.P. as a whole and to the separate component businesses both at home and overseas. Recognizing this, the Delegates sought in 1968 confirmation from us that a modest increase in the most senior salaries would not conflict with our thinking as a committee. But the increases then brought into force can represent no more than a temporary holding operation.
218. We recognize that O.U.P. is and will remain 'different' and that it may still hope to attract staff who work from choice in a concern not primarily governed by the motive of profit. Nevertheless, we consider that in order to provide the appropriate salary structure it is necessary that the salary for the Secretary to the Delegates should henceforth be judged more on a comparison with comparable positions in publishing than in relation to positions in the University. We recommend therefore that the Secretary to the Delegates should have a salary in the region of £7,500 - £8,500 per annum on the basis of 1968 values of money and that there should be corresponding adjustments to the salaries of the other senior executives. It must be recognized that even so the proposed salaries will still be somewhat below those obtaining in commercial publishing at large. (The provision of comparatively generous pension arrangements is more and more regarded as of great importance for the retention of staff at the senior levels. The Delegates will no doubt take steps to keep their arrangements under fairly frequent review.)
219. As we have shown in Chapter 1 above, the Oxford University Press is a wholly owned department for which the University itself is responsible. It is clearly unusual as a University department in its size and in the diversity of its activities and, both as a department and as a University Press, it is also unusual in being financially self-sufficient. We have shown elsewhere that it is exceptional for a University Press confined solely to learned publishing to exist without support from the parent body; but O.U.P. (like Cambridge University Press) had a broad enough base for viable operation, in the early days by virtue of the Bible and Prayer Book privilege and more recently from expansion into educational publishing generally. Equally, O.U.P. is exceptional as a large business concern in that the substantial capital employed today has been self-generated by the reinvestment of profits earned in the business.
220. It is not easy to make realistic comparisons between the financial operations of O.U.P. and those of other publishing firms. There are several reasons for this: the limited amount of information available with regard to commercial companies; the very great difference between the various companies engaging in publishing; and, particularly, the special nature of O.U.P.'s business, which involves the maintenance of a high level of slow-selling stock of learned works. However, Table VII below (p. 108) draws broad comparisons with the financial operations of a number of the principal publishing firms. (It is also relevant that the form in which O.U.P.'s accounts is somewhat complex and the present may be a convenient time to modify the format.) As will be seen, the capital gearing of O.U.P. - the proportion of fixed-interest borrowing to other capital employed in the business - is substantially below the average, as is the ratio of current liabilities to assets employed. The level of profit as a percentage on total sales is if anything rather above the general level for the other firms.
Profit (before deducting interest and taxation).as percentage of Capital Employed
O.U.P. 1965/6: 14.8 1966/7:12.60 1967/8:10.5
Commercial publishers 1965/6: 24.6 1966/7: 21.2 1967/8: 17.7 (averages of results, where available, for nearest comparable period from seven public companies engaged to a greater or lesser extent in educational publishing; figures adapted from audited accounts)
Profit (before deducting interest and taxation) as percentage of Total Sales
O.U.P. 1965/6: 12.9 1966/7:11.0 1967/8:9.3
Commercial publishers 1965/6: 11.7 1966/7: 10.4 1967/8: 8.2
Capitalization
Long-term debt (based on figures for each company in respect of its financial year ending during 1967) as percentage of total capital employed: O.U.P.: 2.8 Commercial publishers: 12.9
Current assets as proportion of current liabilities: O.U.P.: 3.6:1
Commercial publishers: 2.3:1
221. It will also be observed, however, that the level of O.U. P. profit in relation to assets employed is little more than half the comparative figure for other firms - a direct reflection of the high level of stocks, to which reference is made above, and the comparatively low rate of turnover. These are inevitable aspects of learned as distinct from commercial publishing. Since the Delegates recognize a duty to keep in print a large number of works for some of which the annual level of sales may be very low, a relatively high proportion of the firm's capital is employed in holding stock, some of which is slow-moving. At our request the Delegates had an analysis made of the financial cost to O.U.P. in recent years of keeping learned works in print. We were informed that this was not something readily susceptible to measurement in financial terms but that a comparison between the gross profit on various categories of Clarendon Press titles with what could be considered a fair commercial rate of return suggested a 'loss' in one year on this account of some £50,000. On this basis the present cost to O.U.P. of providing this service to scholarship amounts over a decade to half a million pounds. The growth of this expenditure has already been contained, if not reduced, by the computerization of the Neasden Warehouse and may in the future be susceptible to further reduction from new technological developments.
222. Reference has been made above to the relatively low level of O.U.P.'s long-term borrowing. The Delegates' financial policy has been influenced by two factors: a determination to ensure that the Press should never make calls on the University for finance or become a liability to it, and the fact that, unlike a commercial publishing firm, it is not open to them to raise new equity capital. In consequence they have been conservative in their long-term borrowing, which has been limited to part of the cost of certain overseas premises and a single debenture from the Industrial and Commercial Finance Corporation in connection with the re-equipment of the Paper Mill.
223. The existence of the Press today as a large enterprise making substantial profits which it employs in the maintenance and expansion of its business inevitably poses questions regarding alike the need for its continued growth and the policy of reinvesting the whole of its profits in the business. The University is the owner of the enterprise, and it is understandable that some should ask why part of the Press's annual profits should not be paid over to the University for its general purposes. A commercial company running an enterprise like that of the Press would be expected to pay a dividend to its owners; and why, it is asked, should not the Press? This is a question to which we must now give our close attention, and we begin by recalling the financial benefits in fact obtained from the Press by the University.
224. In the previous chapter it has been seen that the publishing undertaken without charge by the Clarendon Press for the University itself amounts to a contribution in kind of about £15,000 per annum. As to the Printer, the special rates which he charges for work for the University are worth, on average, some £2,500 per annum, though some discount might, no doubt, also be obtained from a commercial printer. Again, the Press each year makes gifts of books to the Bodleian which the Library uses for exchange purposes with foreign libraries, the value of these gifts amounting today to about £1,500 per annum. In addition, the Delegates have from time to time made ad hoc contributions in cash or in kind to University purposes. Thus, in 1929 they offered to place five acres of their Jordan Hill site at the disposal of the Bodleian for a repository and in 1931 gave £10,000 to the Bodleian Extension Fund. In 1939 they made a voluntary contribution of £5,000 to the general purposes of the University and a further £1,000 per annum for four years towards any of the projects mentioned in the University's appeal. In 1964 they covenanted to contribute to the Historic Buildings Appeal such sum as, after allowing for recovery of tax, would yield £10,000. In 1966 they undertook the publication of the Report and volumes of evidence of the Commission of Inquiry, thereby in effect making a contribution of about £9,000 (the amount lost on the publication) to the costs of the Inquiry. Furthermore, they recently made a gift of the site of the Clarendon Press Institute to the University to aid it in its redevelopment of Wellington Square for University purposes. Another form of contribution is that the Delegates have arrangements with both the Bodleian and Ashmolean under which they underwrite the publication of certain catalogues; and, as already noted in Chapter 3, they have recently agreed to underwrite fully the various Faculty Monograph Series.
225. The financial contributions made by the Press to the University, however useful, have been comparatively modest in relation to the size of its annual profits, and the question thus still remains whether it could and should make a regular annual contribution to the University's general finances. This was indeed done by the Press during the period 1907-21, when the Delegates made an annual payment of £2,000 to the Chest for the general purposes of the University. But the end of the First World War left the Press short of finance, with the result that in 1921 the payments were discontinued; and in 1922 the view expressed by the Royal Commission in its Report was that the first call on the Press's funds should be 'the publication of works by members of the University which are of literary or scientific value'. In the economic crisis of 1929, however, when the University faced a period of financial stringency, Council asked the Delegates for the renewal of their annual subvention. The Delegates declined, both on grounds of principle and of the Press's own financial needs, putting forward instead the offers of a site and a grant for the Bodleian which we mention in the preceding paragraph. Since that time, the Registrar informed us, the question of a regular subvention by the Press to the University's general finances has not been raised again.
226. The Delegates themselves, in a memorandum, did not altogether exclude the possibility of a direct subvention to the general finances of the University at some time in the future. They told us that, if the Press should come to have more than sufficient funds to carry out all its proper functions, including provision for its own re-equipment, they accepted that any surplus should be used either to increase the provision for long-term research projects, to assist the publication of more works of learning at non-commercial rates, or to make a direct cash contribution to the University. At the same time, however, they stressed the heavy charges on the Press's financial resources, the extent of its financial needs, its shortage of cash, and its need to build up liquid reserves; and they concluded that there was no prospect of a disposable cash surplus appearing in their accounts in the near future. Having regard to the size of the Press's annual profits, we thought it right to examine the considerations put forward by the Delegates in some depth.
227. Earlier in this chapter we underlined the very substantial annual cost to the Press involved in carrying large stocks of slow- selling scholarly books. This cost, incurred in the interest of the learned world as a whole, constitutes not only an important contribution to the wider purposes of the University but also a heavy charge upon the resources of the business. The Delegates indeed told us that over a period of twenty years the increase in stocks had been sixfold and equivalent to nearly 68 per cent of total net profits after tax. Then, by reason of its mere size, the Press has every year to find the finance to meet very large annual expenditures. The outlay in editorial and production costs on books approved by the Delegates for publication with the Clarendon Press imprint (excluding dictionaries and long-term projects) now approaches £1 million per annum. This sum, which has to be found from profits and the reduction of stocks, increases every year by reason of rising costs, as well as from any augmentation in the number of books published. Furthermore, some of the individual publications which the Press undertakes, such as dictionaries and works of reference, involve outlays of very great magnitude. The costs for the Oxford English Dictionary Supplement, for example, are already well over £100,000, as are also those of the Latin Dictionary. Again, the costs of the the revision of the Dictionary of National Biography, under consideration by the Delegates, are estimated at well over £1 million over the next fifteen to twenty years: about £750,000 in editorial and £350,000 - £400,000 in production costs. Even if some contribution towards these costs is ultimately obtained from outside bodies, it will leave a very large sum to be found by the Delegates.
228. Similarly, the Press's general needs for capital expenditure run into large figures. In the period 1954-7, for example, the re-equipment of the Wolvercote Mill involved the expenditure of £970,000. Since then Phase 1 of the Printing Works has called for the provision of some £750,000, extensions to the Clarendon Press Publishing Department some £100,000, the office block and computer equipment at Neasden £550,000, the purchase of the lease and renovations at Ely House £250,000, and new equipment at Wolvercote £80,000 - all of which expenditures were met in the last five years. Abroad, a new warehouse in West Africa has cost £50,000. in the same period the aggregate of smaller individual items of necessary capital expenditure has amounted to some £716,000. Over the next five years we were informed that the Delegates face requirements amounting to some £700,000, of which the most important are: Phase 2 of the Printing Works' development, amounting to £600,000; modernization of the Jordan Hill warehouse, £300,000; overseas branches, further computer expenditure, and other expenditure at Neasden together totalling at least £500,000; and smaller items in all amounting to £1 million. Phase 3 of the Printing Works' modernization will cost a Further £1 million in subsequent years. Furthermore, we are clear that the enlargement and modernization of the Printing Works will entail a need for a substantial amount of additional working capital during the next five years. Again, the expansion of the Clarendon Press editorial staff which has taken place and the further expansion which we recommend, particularly on the science side, will require substantial additional expenditure, the profits from which may take some time to show themselves in the accounts. Another source of heavy expenditure over the next few decades, we think, is likely to be new technological developments in educational publishing: films, tapes, records, and other audio-visual processes.
229. We have said enough, without going into further detail, to make the point that the Press, like any large and flourishing business, has heavy and almost constant calls upon its finances; and to show the very real magnitude of the sums involved. True, the profits also of the Press are large and may be expected to grow. But any consideration of the Press's ability to pay a regular dividend to the University out of these profits has to take account of a radical difference in the positions of the Press and a commercial company in regard to the raising of finance. A commercial company derives its capital from the subscriptions of its shareholders, from long-term loans, and only from its profits to the extent that there may be a sufficient surplus after meeting its loan obligations and paying dividends. It needs to pay a dividend and to increase that dividend from time to time if it is to have any prospect of raising further ordinary share capital from its shareholders to finance the developments necessary to enable it to keep pace with its competitors. Otherwise it must have recourse to outside borrowing. The Press, on the other hand, has no subscribed capital and largely eschews long-term borrowing, financing itself out of its own profits. If the Press were to pay regular substantial dividends to the University, it would pro tanto reduce its capacity so to finance itself. It would then have to come to the University for the new money needed to enable it to keep its competitive position, and these periodic demands might be for sums of a quite unwelcome size. Such an arrangement would both introduce an incalculable element into the financial operations of the Press and tend to undermine the independence of the Delegates in the management of the business. This independence the Delegates are justified, we think, in representing as essential to the financial health of the business and to the well-being of the Press as a whole.
230. The considerations mentioned in the previous paragraph would not, of course, exclude the possibility of a regular subvention to the University if the Press's financial state were such that it could both satisfy its capital requirements and pay the subvention out of its own resources without undue strain. But we are satisfied that this is not the case at present, nor likely to be so within the foreseeable future. Quite apart from its capital needs, which are large and continuing, the Press must accumulate liquid resources adequate for the secure operation of the business. It is only during the past five years, that the Press has been able to build up a central fund of liquid resources. This has now reached a figure of approximately £700,000. A substantial part of the £700,000 has been derived from property transactions in regard to Amen House and Ely House. However, when the lease of Ely House expires in fifteen years' time, the Delegates will be faced with the need of finding a replacement. The balance of the £700,000, the Delegates told us, they had been able to set aside only because the amount of working capital available to the branches had been very strictly controlled. It was their intention over the next few years, when prospects justified it, to make greater amounts of working capital available to the branches, particularly for Japan, and possibly also to the New York Business. In addition, as the turnover of the Press increases and inflation progresses, the business as a whole will require larger and larger amounts of working capital. Then there are the heavy requirements for capital expenditure which the Press expects to face in the foreseeable future and some of which we have outlined in previous paragraphs. Nor is it to be excluded that at one time or another an exceptional opportunity may present itself to the Press making a sudden demand on the Delegates for a very large capital outlay. It is impossible for us to say with any accuracy to what extent all these requirements for funds can be financed by cash flow and therefore to what extent the existing pool of liquid funds will require to be drawn upon. However, even if no call were to be made on this central reserve, a pool of liquid investments of the order of £1 million, in our view, is only of a size that prudence would dictate for a worldwide business of the magnitude and nature of the O.U.P., particularly in view of the comments we have made in para. 229.
231. Would it, nevertheless, be possible to obtain the payment of a dividend, by directing the Press to curb its expansion and divert some of its profits from reinvestment in the business into the University Chest? Such a policy, we believe, would be self-defeating and would also endanger the efficacy of the Press as an instrument for the promotion of learning. It would be self-defeating because the idea that a business such as the Press could be made to stand still and at the same time maintain a steady level of profits sufficient to pay a substantial dividend is almost certainly an illusion. Those whom we consulted were unanimous that any business must continue to progress if it is not to fall back; and that the need of a business to progress is related to human as well as economic factors. Only a successful and progressive concern can provide that stimulus and sense of satisfaction to its personnel without which it cannot maintain the highest standards in its business or recruit the best type of men to its staff. These considerations apply with particular force to a publishing business, above all at the present juncture when 'big business' has begun to operate in publishing, and even learned and educational publishing has become extremely competitive. Accordingly, if O.U.P. is even to maintain its present level of profitability, its publishing standards and its efficacy as an instrument for the promotion of learning, it must progress. Nor can the University, in our view, fail to take account of wider national interests in this connection. In purely commercial terms the Press is a considerable net earner of overseas currency, with overseas sales in excess of £3 million; and overseas sales of British books, we were told, also make a significant contribution indirectly to the balance of payments by stimulating the sale of other British goods. Furthermore, any general curb on the development of O.U.P. could hardly fail to diminish the influence of English thought and culture in other countries.
232. This does not, of course, mean that no curb of any kind should ever be set on development of the Press. What it does mean is only that, in our view, to restrict the natural development of the Press for financial reasons in order to obtain a dividend for the University would be a misguided policy. In general we do not think that the Press's financial situation in the foreseeable future will enable it to pay a substantial annual dividend to the University without imposing corresponding constraints on its finances and undue fetters on its publishing activities. We consider that in the immediate future the first calls on the Press's annual profits must continue to be its own financial needs for re-equipment, development, and liquid reserves and that the question of any regular subvention to the University should be postponed until these needs are more than sufficiently covered by the level of its annual profits. We therefore so recommend.
233. Although we see little prospect of the Press's being in a position. in the foreseeable future to make a substantial annual subvention to the University out of profits, we do not exclude the possibility that the Delegates should from time to time make such contributions, in cash or in kind, to the University for specific purposes as they can afford (and as they have made in the past). On the contrary, we consider that the Delegates should recognize it as their duty, in appropriate cases, to contribute to the University in this way. We have in mind particularly meeting the needs of a faculty, or of the Bodleian, Ashmolean, or similar body in a publishing project; contributing a site for University purposes as in the case of the redevelopment of Wellington Square; and making occasional cash grants for specific University projects. Clearly, contributions which serve simultaneously the purposes of the Press and of a University Faculty or body are particularly appropriate. The publishing projects just mentioned are of that kind, and another of the same kind suggested to us in evidence was possible aid by the Press to the Bodleian in the purchase of manuscripts or collections of papers with a view to a subsequent learned publication by the Clarendon Press. It is not for us, but for the faculties and departments concerned, to explore these possibilities further. We think it right, however, here to record our view that in these areas of contact between the Press and the University there is room for a rather greater contribution by the Press to the academic purposes of the University.
234. Finally, there is a further consideration which indicates that such contributions as the Press may make to the University should take the forms suggested in our previous paragraph rather than any substantial regular payment. The Press's high reputation in publishing circles and throughout the learned world depends not only on its own exceptional performance but also on the knowledge that, as an independent non-profit-distributing enterprise, it is free from domination by commercial considerations. The loss of that reputation might indeed be a serious matter, and if it came to be thought that the University regarded the O.U.P. as a regular means of making money for itself, irreparable harm might be done. This argument applies to the O.U.P. as a whole; and it does so perhaps with particular force in the case of the New York Business, which, unlike American University Presses, competes with commercial publishers in general trade publishing and yet is accorded in the United States recognition as a University Press. There is indeed a danger that if the Press were required to make a regular and substantial subvention to the University, the Delegates might find themselves more reluctant to undertake learned publishing ventures likely to be unremunerative and, conversely, might feel obliged to look more actively for sources of commercial profit, possibly at the risk of some academic standards. If by reason of the character of the Delegates this danger may not be great, no less damaging to the Press would be the belief in the outside world that such a change of policy had occurred. In short, the image of the Press as a non-profit-distributing enterprise seems to us to be an object the maintenance of which is important in itself.
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