FTSE 350 Review: A mixed bag for media

Several businesses in this category started life in print publishing. At one point, FTSE 100 giant Relx (REL) published more than 300 titles, including New Scientist and Variety, while Ascential (ASCL) owned a host of trade magazines. Informa (INF) has a similar back story, having published the shipping publication Lloyd’s List until last summer.

However, these companies have turned their backs on their former lives in recent years, selling off famous titles in order to focus on information-based analytics and corporate events. Data has proved a hit, generating reliable recurring revenues and attracting a loyal readership (just 7 per cent of Relx’s sales now come from print media, and almost 60 per cent are generated by subscriptions). The data tools on offer relate to specific industries, and are valuable to professionals within these sectors, meaning client retention tends to be high.

Unsurprisingly, events have proved less successful over the past three years. However, things are rapidly improving in North America and the reopening of China could prove to be an important catalyst. Informa expects growth from China to have picked up by the end of 2023 and into 2024.

The move away from traditional media is not always easy. Pearson (PSON) has desperately been trying to distance itself from textbooks for years, but has consistently underwhelmed. In 2022, however, it was the best-performing stock on the FTSE 100 in terms of total returns. It’s now worth keeping a close eye on. 

By contrast, companies that have stuck to more familiar territory are under growing pressure. Specialist magazine group Future (FUTR) reported a solid set of results for the year to 30 September 2022, but organic subscriptions are falling. For now, this has been offset by excellent advertising sales, but things could change as more companies try to save money on marketing. Baltic Classifieds Group (BCG) and ITV (ITV) are facing similar challenges. We are more optimistic about ITV because of its valuation – after a difficult few years, we believe the broadcaster is now cheaper than the sum of its parts. 

Not all advertising is made equal, however. Estate agents pay a monthly fee to Rightmove (RMV) to advertise their properties on the website. This has proved to be an incredibly robust business model, cemented by the network effect: as more properties are listed on Rightmove, more house hunters are drawn to the website, which in turn increases the value of the advertising. A housing slowdown isn’t great news for the company, but the underlying business case remains extremely strong. 

When it comes to ecommerce, Auto Trader Group (AUTO) and Auction Technology Group (ATG) also look to be in good shape, despite the cost of living crunch and – in the case of Auto Trader – a shortage of used cars. 

Last but not least: marketing companies. WPP (WPP) and 4imprint (FOUR) are at polar ends of the marketing spectrum. While WPP is keen to flash its tech credentials, 4imprint focuses on physical promotional products (think branded t-shirts and tote bags). And yet 4imprint is valued like a tech company with a price/earnings ratio of 31, and its shares have shot up by 75 per cent over the past 12 months. By contrast, WPP’s price/earnings ratio sits at just 16 and has seen its shares fall by 25 per cent in the same period. 

For now, as recession looms, we’re wary of both companies. But there’s no denying that 4imprint is having a stellar run, with a huge order book and an impressive pile of cash.