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Future faces tricky year ahead

After a lockdown induced boost, Future now faces tricky macro conditions which could slow growth
Future faces tricky year ahead
  • Online users fall slightly
  • Cash conversion remains high

Future (FUTR) owns lots of specialist magazine titles covering topics from gaming and technology to personal finance. Covid-19 gave the group a boost. With people locked at home, its effective catchment increased and digital advertising revenue rose as companies looked for ways to find customers online. This unexpected boost to business means comparators against last year are particularly tough.

In its recent half-year results, online users fell 2 per cent to 306mn, having jumped 31 per cent last year. Future currently reaches 35 per cent of US online users and has aims to reach 50 per cent. Despite the slip in online users, organic revenue grew 4 per cent, driven by 10 per cent growth of organic digital advertising.

The organic numbers exclude the revenue from acquisitions and disposals. Four acquisitions have been made since October to help establish “leadership positions in Women's Lifestyle and Wealth content”, as well as adding data capabilities to improve advertising returns.

The shares have fallen over 40 per cent year to date which leaves them trading on an appealing forward PE ratio of 12. There are risks ahead, though. Advertising revenue could decline during the recession as companies look to lower operating costs. The slip in online users also suggests it could be reaching peak market penetration in the US. As Netflix (US:NFLX) showed recently, when user growth starts to slow the market can react aggressively.

The upside is that because the magazines are specialist titles they will hopefully have a stickier readership. Adjusted free cash conversion was also around 100 per cent which will help the company manage its debt pile.

Future is another lockdown winner the market has drawn back from. For bold investors, its current valuation may offer an appealing entry point. We are going to stick with our recommendation despite some inevitable rough times ahead. Buy.

Last IC View: Buy, 3,610p, 30 Nov 2021

FUTURE (FUTR)    
ORD PRICE:2,114pMARKET VALUE:£2.55m
TOUCH:2,110-2,114p12-MONTH HIGH:3,968pLOW: 1,876p
DIVIDEND YIELD:nilPE RATIO:30
NET ASSET VALUE:771p*NET DEBT:49%
Half-year to 31 MarTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
202127356.941.3nil
202240481.052.5nil
% change+48+42+27-
Ex-div:-   
Payment:-   
*Includes intangible assets of 1.54bn or 1,273p a share.