Future Publishing - Media With Passion

Future plc (LSE: FUTR), the international special-interest media group, today announces its interim results for the half-year ended 31 March 2009. An analyst presentation will be held today at 10.00am at the offices of UBS, 1 Finsbury Avenue, London EC2M 2PP.

Financial Summary:

* EBITA represents operating profit before amortisation of intangible assets.

The most significant foreign currency affecting the Group is the US Dollar which strengthened by 25% in the first half to 31 March 2009. Revenue analyses later in this statement are also shown in constant currency.

Financial and operating headlines:

• EBITA on track for full year despite 2% H1 revenue decline (11% in constant currency)
• Group H1 EBITA flat excluding reduction of £2.4m which reflects prudent ageing receivables provision and previously announced exceptional US newsstand disruption
• UK H1 profit increased 3%
• H1 results do not reflect full effect of cost savings now implemented
• Investment increased: gross digital spend up 24%; three new magazine launches (The Knitter, Triathlon Plus and Guitar Aficionado)
• Online advertising up 18%, now 24% of advertising revenue (up from 19% in H1 08)
• Subscriptions revenue up 13%, customer publishing revenue up 11%
• Net debt £22.8m.  New £42m bank facilities in place until November 2012, with significant headroom

Stevie Spring, Future’s Chief Executive said:

“Our focus in the first half has been on navigating through some exceptionally tough market conditions, especially in the US.  Stripping out our prudent receivables provision and the exceptional US newsstand disruption, EBITA for the half is broadly flat: a good performance in a turbulent media sector.

“The underlying strength of our special-interest business; our ability to mitigate revenue disappointment swiftly; and continuing progress in our strategy all give me confidence that when the economic storm does finally clear, Future will be well-positioned to benefit.

“We’ve taken proportionate actions to mitigate revenue shortfalls. We also continue to invest in new products, ensuring that we do not limit the Group’s prospects or its ability to benefit from the market recovery in the mid-term. More broadly, our strategy remains on track and we continue to make real progress in the development of our digital network.

“While our outlook for the second half must remain cautious, we are still on course to meet expectations for the full year.”

Enquiries:

Future plc
Stevie Spring, Chief Executive
Tel: 020 7042 4007

John Bowman, Group Finance Director
Tel: 020 7042 4031

Vicky Bacon, Head of Group Communications
Tel: 020 7042 4033

Hogarth Partnership:
James Longfield / Ian Payne
Tel: 020 7357 9477

Chief Executive’s Statement

At the end of last year, I stated my belief that Future was in the best shape it could be to deal with whatever challenges lay ahead in 2009. Since then the macroeconomic environment has continued to deteriorate – the general advertising market has declined steeply, consumer confidence has weakened and we’ve seen exceptional challenges at newsstand. These factors have without doubt tested our mettle, most notably in the US.

In spite of these conditions we’re managing the challenge, and we’re doing it in a way that is proportionate and does not damage our prospects for the future. Stripping out our prudent receivables provision and the exceptional US newsstand disruption, EBITA for the half is broadly flat: a good performance in a turbulent media sector.  The underlying strength of our special-interest business; our ability to mitigate revenue disappointment swiftly; and continuing progress in our strategy all give me confidence that when the economic storm does finally clear, Future will be well-positioned to benefit.

As a special-interest publisher, the close relationships we have with our consumers – our “prosumers” – are helping us in two important ways. First, we are leveraging these relationships to build greater engagement and greater loyalty across different platforms – both to protect us now and to position us well for the upturn. So even in the current market, 23 of our magazines recorded positive circulation growth in audited circulation for 2008. In the UK, Future had 11 of the top 30 risers. Across the Group as a whole, seven of our top ten magazines increased their circulation last year.

These relationships are also helping us to protect yields – in cover price, subscriptions and advertising – because our prosumers and advertisers recognise the unique quality and value of the products they’re investing in. At $8.53, Future has the highest average cover price of any publisher in the US magazine market source.  In the UK, we’ve increased the cover price on 15 of our magazines in the last 12 months. In subscriptions, we’ve increased yields in both our UK and US businesses, up 30% overall in the first half (19% in constant currency) with no adverse impact on retention rates. And in advertising, we’ve maintained our yields.

Our UK business, which comprises 68% of Group revenue, reported improved EBITA of £7.4m in the first six months of FY09, despite a 6% revenue decline.

Across the Group, we’ve increased our gross investment in online by £1.4m and we’ve made good progress in all parts of our strategy, particularly diversifying and growing our digital revenues. Online advertising revenue increased by 18% (4% in constant currency); we’ve more than doubled unique monthly visitors to our websites in the last 12 months; we’ve increased digital customer publishing revenue by 11%; and doubled the number of online shopping partners. Online now represents 24% of total advertising revenue, up from 19% in H108.

For the second half, we expect to offset the significant revenue shortfall in our US business through cost savings already implemented. This shortfall resulted from the double whammy of a steep decline in general advertising and an unexpected disruption to distribution of US newsstand magazines following a dispute among wholesalers and distributors in the North American magazine market which had a significant impact during February and March but which is now largely behind us.

Much of our effort in the past three years has been on diversifying our revenue streams beyond the traditional print-based model and this approach is giving us a greater degree of resilience than many of our peers. So while we’ve seen revenue reductions in newsstand and print advertising, we’ve seen growth in other parts of the business.  In additional to digital revenue growth, we’ve grown subscriptions by 13% in the first half.

Additionally, Future’s commercial partnerships continue to serve us well. During the first half, our customer publishing business, FuturePlus, secured a number of new clients and as a result revenues increased 11% year-on-year. Client wins have included BlackBerry, Coats and NVidia.

We’ve increased gross digital investment by 24% in the first half and launched three new magazines, The Knitter, Triathlon Plus and Guitar Aficionado.

Online, we’ve announced the launch of DailyRadar in North America. DailyRadar is a wholly-owned online network that combines editorial from all of Future’s websites with ‘Blips’: topical, aggregated content. Together these Blips and Future’s sites deliver not just traffic – more than 25 million unique users a month – but an engaged audience of early adopters. Reach and engagement with a young, male audience: gold dust for advertisers. It’s early days for DailyRadar, but it’s another example of our “do and learn” approach that is putting us ahead in digital.

The new magazine launches reflect our strategy of carefully targeted investments in new but adjacent verticals. Triathlon, the UK’s fastest growing participation sport, is a natural extension for the world’s no.1 cycling publisher. We already have strong relationships with both consumers and advertisers in this sector. As the UK’s no.1 publisher in the crafts segment, launching The Knitter – a hard core product for hard core experts – was a logical move. Both of these new magazines are already ahead of target.<

I’m also pleased to say that we’re managing our debt position effectively. In H1 we have continued to focus on the management of working capital and on cost control.  Excluding the impact of the stronger US Dollar, we reduced net debt by 7% compared with six months earlier. During the last three and a half years, despite continued investment in the business, we’ve reduced net debt by almost half and we now have a new bank facility in place through to November 2012.

While the current economic conditions look set to continue, our outlook for the near-term has to remain cautious. But we’re still on track for the full year. And with appropriate and proportionate investment, with intense micro-management of our costs and with a sound strategic focus, we remain well-positioned for the mid-term.

Finally, I’d like to thank each and every one of the Future team for their energy, enthusiasm and commitment in helping us navigate these turbulent times.

Stevie Spring,
Chief Executive, Future plc
20 May 2009