Join our community of smart investors

Sales shrink at Future

The magazine publisher is struggling with low advertising revenues as tough economic conditions reduce its readership
May 18, 2023
  • Still generating lots of cash 
  • Resilient margins 

Shares in Future (FUTR) have fallen by 15 per cent after it warned that full-year profits are likely to be “towards the bottom end of current market expectations”. 

It has been a tricky six months for the specialist media company. Organic revenue has shrunk by 10 per cent, and its online readership has declined by 23 per cent on a like-for-like basis, with consumer technology magazines hit particularly hard.

Some unexpected trends have started to emerge, however. For starters, magazine sales - particularly subscriptions - have proved resilient. Across the group they only declined by 4 per cent, “an improvement on the secular decline rate we have been experiencing historically”. In contrast, organic digital advertising revenue fell by 18 per cent despite better monetisation.

Performance by geography also holds some surprises. Despite the UK’s economic issues, Future’s performance in the US has been significantly weaker than at home. This is concerning, given that it was previously making good inroads in the region and has just bought several businesses there.

Across the group, however, Future’s profits have held up well against such a tough backdrop. Its adjusted operating margin has only dipped by 1 percentage point to 32 per cent, with inflationary pressures on wages offset by cost savings around offices, staff location and the “re-prioritisation of investment”.

Adjusted free cash flow also remains very high at £130mn (100 per cent of adjusted operating profit) and the group has managed to pay off a chunk of its borrowings, meaning its leverage has not increased.  

The next few months won’t be easy for Future, and this is reflected in its lowly forward price-to-earnings ratio of 6.7. However, the core business looks resilient enough to weather the storm. Hold. 

Last IC View: Hold, 1,405p, 30 Nov 2022

FUTURE (FUTR)     
ORD PRICE:876pMARKET VALUE:£ 1.1bn
TOUCH:874-877p12-MONTH HIGH:2,062pLOW: 851p
DIVIDEND YIELD:0.4%PE RATIO:18
NET ASSET VALUE:875p*NET DEBT:42%
Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
202240481.052.50.00
202340566.449.60.00
% change+0-18-100-
Ex-div:na   
Payment:na   
*Includes intangible assets of £1.7bn, or 1,372p a share