Future struggles with US ad sales

Shares in Future (FUTR) dropped by almost 30 per cent after the magazine publisher posted its full-year results. Its figures did not make for easy reading. Organic US sales fell by 19 per cent in the year to 30 September, despite heavy investment in the region. Meanwhile, organic revenue across the group sank by 10 per cent, and adjusted operating profit declined by 9 per cent to £256mn on a constant currency basis.

A “challenging” advertising market was largely to blame, particularly in the US, where the sales team is less established and the magazines focus heavily on consumer technology. However, organic subscriptions also dipped by 4 per cent as customers did not renew pandemic subscriptions.

Despite the headwinds, there are some things to admire in Future’s results. The group managed to keep its adjusted operating margin steady at 32 per cent, while it reduced its net debt from £424mn to £327mn. Leverage now sits at 1.25 times, compared with 1.48 12 months ago. 

Future’s issues in America remain a big worry, however. In 2021, the publisher bought Marie Claire US and a year later it bought Who What Wear, a US fashion title, and for a while growth was very promising. Now, however, its performance in the region looks on far shakier ground. The departure of chief financial officer Penny Ladkin-Brand, announced with the latest results, further adds to the uncertainty. 

The group expects to return to organic revenue growth in the second half of next year, which is due to translate into “low-single-digit revenue growth” for the full year. Whether it achieves this remains to be seen. However, Future remains a highly cash-generative business which could rebound as sentiment improves. Its forward price/earnings ratio is also approaching bargain basement territory at just 5.4, compared with a five-year average of 17. Hold.