Interactive Investor

ii view: investors back strategy at Go.Compare owner Future

A stable of magazine brands along with a price comparison site to help consumers save money. We assess prospects.

11th June 2024 15:42

by Keith Bowman from interactive investor

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First-half results to 31 March

  • Revenue down 3% to £391 million
  • Pre-tax profit down 30% to £47 million
  • Adjusted operating profit down 19% to £106 million
  • Adjusted operating profit margin down 5% to 27%
  • Net debt down 9% from late September to £297 million
  • No interim dividend, unchanged from last year 

Guidance:

  • Expects to deliver organic revenue growth in the second half
  • Expects full-year adjusted operating profit margin of around 28%

Chief executive Jon Steinberg said:

"In December we set out plans to ensure that Future is best positioned to capitalise on opportunities in our markets. These plans are centred on growing a highly engaged audience, diversifying and increasing Revenue Per User and optimising our portfolio. I'm pleased to report that in the early stages of this two-year plan we have made good progress, which will enable us to drive accelerating revenue growth."

ii round-up:

Media company Future (LSE:FUTR) creates specialist content which is then distributed via methods including websites, magazines, and newsletters.

Its websites include price comparison provider Go.Compare, as well as magazine brands such as Country Life, Marie Claire and PC Gamer

For a round-up of these results announced on 16 May, please click here

ii view:

Started in 1985, Future today employs around 2,800 people. Media or websites generated two-thirds of sales over its last financial year, with magazines the balance. Sales broadly come from the arenas of advertising, magazines subscriptions and affiliate sales. Affiliate sales work by allowing Future to promote and sell products or services of customers on sites such as Amazon in exchange for a commission on each sale. Geographically, revenues are split between the UK and the US. 

Future continues to execute a two-year Growth Acceleration Strategy (GAS) launched in December 2023. This includes growing its engaged audience, diversifying and increasing revenues per user, and optimising its portfolio.  

For investors, the tough economic backdrop hindering advertising sales cannot be forgotten and costs generally for businesses remain elevated. The impact of artificial intelligence on media content production in the years ahead warrants consideration, while a forecast dividend yield of under 0.5% compares to yields of over 4.5% at WPP (LSE:WPP) and ITV (LSE:ITV).  

On the upside, Go.Compare revenue rose 30% in this latest half, likely buoyed by pressured consumer spending and a push to save money. Investment in tandem with its growth strategy is being made, management believes that the businesses are ‘significantly undervalued,’ while a price-to-net asset value of under 1.5 times contrasts with a three-year average of close to four, suggesting better value.

In all, some caution looks sensible given the share price is up 23% in just the last month - in part a reaction to these results - although self-help measures and a consensus analyst fair value estimate above £13.50 per share provide grounds for optimism.   

Positives: 

  • Diversity of titles and business revenues
  • Strong brand names

Negatives:

  • Uncertain economic outlook
  • Advertising revenues can prove volatile

The average rating of stock market analysts:

Buy

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