ii view: struggling Future shares surge 14%

First-half trading update to 31 March

ii round-up:

Magazine and price comparison website owner Future (LSE:FUTR) today detailed a return to sales growth ahead of its first-half results on 16 May.

A strong performance by its Go.Compare website combined with good growth at its  business-to-business (B2B) offering and resilient magazine demand, fuelled the move back to organic revenue growth in the second quarter.  

Shares in the FTSE 250 company rose by 14% in UK trading having come into this latest news down by close to a quarter year-to-date. That’s comfortably below a 2% dip at adverting giant WPP (LSE:WPP) and in contrast to a near 2% gain for the FTSE 250 index itself in 2024. Future shares have struggled for the past three years, losing around 86% of their value. 

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Future owns magazine brands including Country Life, Marie Claire and PC Gamer, with revenues generated relatively equally across the three areas of advertising, magazines subscriptions and affiliate sales. 

Demand for Future’s digital advertising and affiliate promotions has, however, remained more challenging given the tough economic backdrop. 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.  

The number of users or browsers for Future’s many websites has continued to stabilise but remained down year-over-year.   

Management is now driving a relatively new growth acceleration strategy, with encouraging progress made by its core 'hero' brands and resulting in an outperformance of other brands. 

ii view:

Started in 1985, Future today creates specialist content which is then distributed via various methods including websites, magazines and newsletters. Its specialist content focuses on areas such as games & technology, lifestyle and news, along with wealth & savings. Media or websites generated two-thirds of sales in 2023, with magazines the balance, while geographically, sales are split between the UK and US.   

For investors, the challenging economic backdrop still hindering advertising related sales is not to 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 1% compares to yields of over 5% at WPP and ITV (LSE:ITV).  

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More favourably, pressured consumer spending is likely to be aiding demand for its price comparison website Go.Compare. A new performance improvement plan is being pursued, a diversity of different revenue streams exists, while a price-to-net asset value of under 1 contrasts with a three-year average of close to 4, suggesting better value.

In all, the tough and uncertain economy continues to warrant investor caution. Nonetheless, this economically sensitive media group could be an eventual beneficiary of a consumer and corporate spending recovery, with long-term fans of Future likely to stay put.  

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