Consumer publisher Future looks set for growth having weathered the recession and US setbacks.
Specialist consumer publisher Future, turned around since 2006 by enthusiastic CEO Stevie Spring, is looking forward to strong profits growth after coping admirably with recessionary pressures as well as distribution problems in America. The share price graph of Future, which offers investors an attractive yield at a budget price, ought to make better reading.
London-headquartered Future, which publishes leisure, gaming, motoring and sports publications including Total Film, Classic Rock and Edge magazine, suffered a loss in 2009 in its US division, caused by distribution problems across the pond. With millions of its magazines unable to be delivered, the company was also hit by wider economic downturn, a double-whammy that led to the US arm losing £5.5 million and group pre-tax profits being pegged back from £9.5 million to £3.7 million for the year to September.
Spring, who joined Future in 2006 after six years as CEO of advertising firm Clear Channel, says the company has been focusing on getting back on track in recent years, noting that when she joined the business it was in a ‘state of emergency’, with debts of £44 million and having ‘underperformed after going on an acquisition spree’.
Upon joining Future, she wanted to ‘refocus the business on niche areas’ and cut the company’s non-English-speaking markets as well as a number of unprofitable publications. These actions helped turn sizeable losses of £36.7 million in 2006 into profits of £9.2 million for 2007.
Spring was also taken with Future’s unusual but attractive business model, which is less reliant on advertising. The wider magazine industry typically generates 75 per cent of revenue from advertising and the remainder from the cover price, but Future’s titles work to the opposite model, with 75 per cent of sales emanating from the cover price, typically around £5 to £6.
Future, she argues, has a resilient and loyal base of customers for its publications, which she describes as ‘prosumers’, or ‘consumers who feel passionately about their interest and for whom purchasing the magazine is part of their lifestyle’. For example, gaming magazine Edge ‘is a must-have purchase for people that work in the industry’.
With publishing moving increasingly online, Spring continues to devise new ideas to defend Future’s business. ‘We want to develop “artefacts” – attractive products that collectors would want to keep for a long time,’ she explains. One such example was the new album by rock star Slash, released by Future through Classic Rock magazine as a special edition and which was sold for £14.99 in selected newsagents. This, according to Spring, represented ‘a different way of getting consumers to purchase music’. Since this release, Future has received interest from a number of music companies impressed at the success of the idea.
Back in May, positive interim results were released that came in ahead of expectations, with pre-tax profits of £3.6 million well north of the £2.7 million predicted by house broker Numis and net debt halved to £11.5 million. Spring remains determined to pare gearing levels further still, having already reduced debt from above £40 million when she took over in the hot seat.
For the year to September 2010, Numis is forecasting reduced sales of £149.3 million (2009: £153.1 million) and a return to form profits-wise, pencilling in growth in ‘adjusted’ pre-tax profits from £7.6 million to £8 million. By 2011, sales should increase to £154.4 million and profits might reach £10.5 million, so long as the wider economy recovers.