ii view: publisher Future bullish on growth

A high flying share price, strength online and with another acquisition completed. We assess prospects. 

Full-year trading update  

• Expects adjusted operating profit to be at the top end of forecasts

Chief executive Zillah Byng-Thorne said:

"I am pleased to report that the continued successful execution of our strategy puts us on track to report another year of strong revenue and profit growth. I am confident that the acquisition of Dennis will help to accelerate our progress, and am delighted to welcome the team to Future.

ii round-up:

Magazine and website operator Future (LSE:FUTR) today flagged its expectations for full-year adjusted operating profit to come in at the top of analyst forecasts.

Ongoing momentum in digital advertising will see profit materialise at the high end of an estimated range of between £183.5 million to £193.6 million, which followed an upgrade back in July. That’s up from last year’s £93.4 million and 2019’s £52.2 million. 

Shares for Future, which also owns comparison website GoCompare, are up by more than 80% over the last year. Shares for scientific publisher and event organiser RELX (LSE:REL) are up by just under a quarter, while education materials provider Pearson (LSE:PSON) is up by around 30%. 

Future, which offers more than 200 publications including WhatHiFi, Country Life, Cycling Weekly and PC Gamer, continues to benefit from a consumer shift towards digital website content. 

Alongside the trading update, Future also announced that Rachel Addison will stand down as chief financial officer (CFO) to be replaced by Penny Ladkin-Brand, its current chief strategy officer and former CFO.

Management also confirmed that its earlier year acquisition of media subscriptions business Dennis, which offers publications such as MoneyWeek, Computer Active and Minecraft World, had completed. 

Full-year results are scheduled for 30 November. 

ii view:

According to the company, Future’s content reaches 1 in 3 adults in both the UK and the US. The global specialist media platform operates through the two divisions of magazines and media. The magazine business has a combined global circulation of over 3 million delivered via more than 115 magazines, and 410 bookazines published once a year. The media business takes in its website offerings and its events business. Group sales are split roughly 70/30 between media and magazines, with sales split almost equally between the UK and the US. Revenues include a combination of advertising sales, eCommerce product affiliate sales and media event bookings. 

For investors, some Covid caution looks sensible given magazine sales at airports and trains stations are still affected by the pandemic, and there is still some reluctance towards face-to-face media trade events. A recent surge in wholesale gas costs and Ofgem's new price cap have also combined to hinder energy switching at comparison sites such as GoCompare, while a price-to-net asset value ratio comfortably above the three-year average suggests the shares are not obviously cheap. 

However, the company remains well placed to capture the consumer switch from paper publications to online sites. Growth via acquisitions also continues to help, while Future's brand and revenue diversity are worth remembering. In all, and with nearly 99 million social media followers and an analyst consensus fair value price estimate of over £43, this media stock is likely to remain popular.

Positives: 

• Diversity of titles and business revenues
• Growing online customer base

Negatives:

• Events business hit by Covid-19
• Advertising revenues can prove volatile

The average rating of stock market analysts:

Strong buy