Half year group revenue rose 48% to £404.3m, largely reflecting the benefit of acquisitions. Organic revenue was up 4%, with all divisions growing except Affiliates.
Underlying operating profit rose 51% to £134.5m, higher revenue and the effect of operating leverage helped offset increased costs due to inflation in magazines and printing.
Full year margin expectations have been re-affirmed, with the acquisition of WhoWhatWear and positive audience momentum expected to provide a ''modest upgrade''.
The shares rose 3.0% following the announcement.
Future's business essentially comes in two parts. Their media arm, which covers digital advertising and eCommerce, accounts for around 65% of sales. The remainder comes from their magazine business, which includes the likes of Marie Claire, Country Life and TechRadar. As well as print advertising, licensing and publishing services.
The magazine business was hammered by the pandemic. Though it had been declining relative to media for some time. It wasn't long ago that the magazine was the main driver of revenue for the business. But times have changed, and we're glad to see focus shifting to the media arm.
That's because specialist magazines have been losing popularity for a while. Going digital is obviously more defensive than the print versions, but even then, social media's the new newsroom. Bloggers and influencers are the new special-interest experts.
On the plus side, the media arm's eCommerce and digital advertising businesses have shown strong growth over the last few years. Both stand to benefit from the long-term shift to online shopping and digital advertising too. Operating margins of 33%, a function of the group's tech platform that's enjoying the benefits of scale, leave plenty of breathing room. As the group matures, margins should, in theory, come for the ride.
The group's growth strategy relies heavily on acquisitions to keep revenue and profit moving. Organic revenue growth of 4% in the first half is a far cry from the acquisition supported top-line. We tend to prefer companies that focus on organic growth, rather than those that keep their engine hot by buying up everyone else's fuel.
The £629.2m acquisition of GoCo, now fully integrated, is Future's attempt to branch into offering services. Deals of this size, with a company so unfamiliar to the current set up, come with a high risk of getting things wrong. We can't knock the early progress, though.
The Dennis acquisition looks to be integrating well and now represents almost half of the magazine division revenue. Subscription-based revenues tend to be more reliable, and it also offers a chance to build out the important North American market.
Future's price to earnings ratio has come down recently but is still a little higher than the long-run average. It must keep delivering, or the market reaction could be severe. That's why acquisitions are likely to remain a key focus, and we can't rule out the group asking shareholders for more money in the future.
Ultimately, Future has its fingers in a lot of pies, and there are some genuine growth opportunities ahead. But we'd like hardened proof it can generate sustained levels of organic growth and make a success of GoCo and Dennis.
Future key facts
- Forward Price/Earnings ratio: 12.6
- Ten year average Price/Earnings ratio: 10.4
- Prospective dividend yield (next 12 months): 0.2%
All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
Half Year Results (sales growth figures organic)
Media revenue rose 5% to £258.6m, driven by a 10% rise in digital advertising revenue despite lower online audiences. Events almost tripled as the segment recovered post-pandemic. That was offset somewhat by a 10% drop in affiliates, a division that benefitted from covid tailwinds last year.
The Dennis acquisition helped Magazine revenue increase from £90.0m to £145.7m. Excluding acquisitions, revenue rose 3% driven by higher subscriptions and a favourable comparable period for newstrade.
Looking on a geographic level, the UK saw revenue increase 3% to £249.9m driven by Media and Magazines. In the US, revenue rose 6% to £154.4m reflecting growth in digit advertising and affiliates.
Underlying free cash flow rose from £93.9m to £137.8m. At the end of March, net debt stood at £388.7m, up from £176.3 at the start of the financial year, due to the acquisitions of Dennis, Waive and WhatCulture.
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