ii view: why shares rocketed at magazine publisher Future

A move towards online content and cost savings from an acquisition push profits materially higher. 

Full-year trading update  

• Profit to exceed current forecasts
• Expects cost savings of £20 million per annum, up from £15 million

Chief executive Zillah Byng-Thorne said:

"We are delighted the strong Group performance has continued, putting Future on track to deliver full-year results materially ahead of expectations. Whilst macro uncertainty remains in light of the pandemic, we are well positioned to benefit from the continued shift to digital media as we grow our global audiences."

ii round-up:

Magazine and website operator Future (LSE:FUTR) today flagged better than expected profits for the full-year to the end of September.  

Future, which offers more than 220 publications including Country Life, Classic Rock and Guitar Player, continues to benefit from a consumer shift towards digital website content. 

August visitor numbers to its websites rose by 25% in the UK and 40% in the US compared to a year ago.  

Future shares rose by more than 15% in UK trading, having doubled from late March lows. Shares for scientific publisher and event organiser RELX (LSE:REL) are up by 16% while shares of Euromoney Institutional Investor (LSE:ERM) are up by a similar amount since late March. 

Future’s previous acquisition of publisher TI Media in April is also delivering ahead of target. Websites under TI Media’s umbrella include Advnture.com and Petsradar.com. Cost savings of £20 million per annum come the end of the full year 2021 are now expected, up from a previous forecast of £15 million per year. 

Other revenue streams away from magazines and under its media division include eCommerce, events and digital advertising. 

Analysts are forecasting adjusted operating profit for the year to the end of September 2020 of between £78.2 million to £83.2 million, up from £52.2 million in 2019.

Full-year results are scheduled for 2 December. 

ii view:

According to the company, its content reaches 1 in 3 adults in both the UK and the US. The magazine division focuses on publishing specialist content. Titles include Homebuilding & Renovating, Digital Camera, Guitarist, How It Works, woman&home, Total Film, What Hi-Fi? and Music Week. Its print and online content covers technology, games and entertainment, sports, music, creative and photography, hobbies, homes and garden, real life, country lifestyle, TV and film and B2B. 

Its media division operates across the similar consumers areas of interest. It generates the three complementary revenue streams of eCommerce, events and digital advertising. In 2019, the media division accounted for nearly 70% of sales, magazines the balance. The US made just over half of group sales, the UK just under half. 

For investors, Covid-19 hit the sale of print publications in travel locations such as airports and trains stations along with cancelling face-to-face media trade events. But it also accelerated a move towards online content and helped capture consumer desire for advice and recommendations under global lockdowns. First-half online users grew by 26% to 253 million. For now, with analysts potentially raising forecasts following today’s news, positive trends at the company underpin optimism.    

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:

Buy