Tomorrow’s world? Future’s digital revenues compensate for print ad decline

Posted by Peter Kirwan on 29 July 2008 at 23:17
Tags: Future

Future Publishing was another company delivering better-than-feared results today.

Several months ago, chief executive Stevie Spring provoked smiles among perennial Future-watchers by suggesting that the company would cope with a downturn relatively well.

The reason for this, Spring suggested, was Future’s status as a special interest publisher. In a downturn, its typical reader would behave less like a shopper in Marks & Spencer and more like a B2B professional whose appetite for tailored content remains constant.

At the time, this felt like a bit of a stretch, but Future’s results for the nine months to the end of June — released today — suggest that Spring might have been on the right track.

Revenue across the nine-month period increased by 1%. Interestingly, however, revenues for Q2 (March-June) grew by 5% YOY. And Future stuck to its forecast for profits at the year-end (which will arrive at the end of September).

Happily, Future’s online adventures appear to be performing to plan. It’s a testament to Spring that a company that used to be an also-ran in terms of sales culture is now capable of saying this in an earnings release:

A 39% increase in online advertising revenue more than offset a 2% reduction in print advertising revenue.

For many, many other media companies, this objective remains out of reach.

The more 2.0-oriented among you will also be intrigued by the news that Future Publishing has spent £1.5m on BallHype, an 18-month-old US start-up that operates Digg-style aggregation sites.

At the moment, Future’s new acquisition aggregates blog posts in entertainment and sports.

Of course Jeff “Link To The Rest” Jarvis would love it. Indeed, looking at Future’s deal, the big, fat, obvious question that forms in my mind is: why isn’t Conde Nast, Emap or IPC doing this already?

A few others follow on behind, of course. Can Future monetize the audience? Is £1.5m a steep price to pay for “proprietary” technology that seems to rely upon open source software and Yahoo interfaces?

Oh. And this one: can Future splice this model to its traditional publishing operations? The more common fate of dot.com bolt-ons like BallHype is to languish and droop as Friends Reunited did at ITV. The odds are that this won’t happen under Stevie Spring.

Morgan Stanley hails Roger Parry as King of the Bears: Prepare your handbasket for hellish ordeal, say bankers

Posted by Peter Kirwan on 18 June 2008 at 12:47
Tags: Daily Mail & General Trust, Future, ITV, Johnston Press, Trinity Mirror, United Business Media

Nasty. Morgan Stanley has slashed its profits forecasts for the media sector in 2009 and 2010.

In an aggressively-worded note, the bank’s media analysts foresee distress spreading from consumer-facing media companies to their B2B counterparts. Like this:

Away from the consumer-related areas we see pressures mounting in the corporate environment.

Finance directors looking into the second half of 2008 and into 2009 are likely to seek to reduce controllable costs whether in advertising, marketing, information costs, travel and other expenses.

This means that, while the thrust of this note is to reduce expectations for consumer-related companies, we also take down numbers for those exposed to B2b markets and professional publishing.

Morgan Stanley has cut its profit forecasts for what it calls “advertising inventory companies” (I guess this means anyone who sells advertising) by a whopping 17%.

Advertising and marketing agencies have been cut by 12%. BSkyB is down by 10%. And “professional publishers” are down by 6%.

Morgan Stanley is very bearish on what it calls the “cyclicals” (ITV, Trinity Mirror), which remain dogged by “a combination of structural deterioration, heavy downgrades and, in some cases, leverage fears”.

One possible exception is Johnston Press. Having endured the pain of an early rights issue, the company “could produce very attractive returns on a 2 year view”.

(Note that reference to “heavy downgrades”: The point here is that share price collapses haven’t yet been “heavy” enough to generate buying signals. The implications of this are fairly scary.)

Among the few positives, Morgan Stanley regards United Business Media and DMG&T as “safe” and “interesting”.

A big shake-out is predicted for adland, as revenue growth moves from 3.75% in 2008 to -1% in 2009. As Morgan Stanley puts it:

In 2008, boosted by a strong start to the year and by the ‘super quadrennial’ factors (Beijing Olympics, US Presidential elections, Euro 2008) most forecasters have assumed organic revenue growth of around 5%.

In 2009 estimates for organic revenue growth tend to range in the vicinity of 3-4%. Our starting point is now to ask why there should be any global advertising growth in 2009.

Losing 1% of growth (in revenues) might not sound like much. But when that 1% falls down to the profit line, it becomes a very big number. In organisations with large fixed costs (including employees), it’s also a very threatening number. . .

Scrabbling around for corroboration on this, Morgan Stanley alight upon Sir Martin Sorrell of WPP, who has been warning of a 2009 slowdown for as long as anyone can remember.

But who is the uber-bear identified by Morgan Stanley as supporting their arguments? Step forward Roger Parry, chairman of Johnston Press, Future Publishing and Media Square, the troubled marketing services company.

No doubt Parry’s unvarnished honesty horrifies the financial PRs who have to work with him. Last week, he explained Media Square’s disappointing results by commenting upon “the amazing speed with which the advertising economy has tanked out in the last six months”.

For good measure, Parry added that “the level to which confidence has fallen is really scary.”

At the time, I was rather hoping that no-one would notice his comments.

Too bad: Morgan Stanley did.

With these numbers you are spoiling us, Ms Spring

Posted by Peter Kirwan on 30 November 2007 at 14:07
Tags: Future, Media

The City’s finest have come over all misty-eyed in the wake of Future’s full-year results.

Numis: “Considerable medium-term upside potential from recent deals to publish official titles for Nintendo and Sony in the US”.

“Second, the group is in vastly better shape now than a 18 months ago, and despite exposure to the UK/US consumer, the group will benefit from an upturn in the gaming cycle and be afforded some protection by the loyal nature of its hobbyist consumers.”

Altium Securities: “We continue to be impressed by the sure footed manner in which this transition has been executed to date.

Meanwhile, Stevie Spring gets the David Teather treatment in the Guardian.

Apparently, Future’s bankers sent Spring a bunch of flowers last week.

“How cute is that?” Spring asks Teather.

Cute enough. Fairly clearly, they’d like her to borrow a bit more.

Future Publishing: 2007 Topline

Posted by Peter Kirwan on 28 November 2007 at 11:54
Tags: Future

Future Publishing continues to make headway under chief executive Stevie Spring.

In year to 30 September 2006, after six successive profit warnings, the company delivered an operating loss of £34m on revenues of £188.1m.

This year, revenues are down to £165.7m. The decline is almost entirely due to closures and sell-offs. But operating profits weighed in at £12.1m.

This is classic turnaround territory. And Spring herself gave investors an earful of the stuff they like to hear. “We did what we said we would do,” said Spring.

“We have re-focused the business on its core and driven out costs, re-investing the savings in those parts of our business – online, core titles, US expansion and partnership publishing – which offer opportunities for above market growth in both sales and margins.”

Future’s online ad revenue growth — up by 50% YOY — won’t do its shares any harm. This is a big increase, well in excess of what the 20% minimum growth expected of all publishers with online operations.

How has the company pulled off this particular trick? Well, part of the answer lies in the baleful state of Future’s online sales before Spring’s arrival. But the City will also give credit where it’s due. Last year, Future invested £5m in new product development and launched new sites with gusto.

Online ad revenue accounted for 15% of all ad revenues during he year ending 30 September 2007. In the context of Future’s entire revenue base, and a magazine portfolio dominated by computer and gaming titles, that’s still rather small. There’s room for development here.

Coverage:
MAD
Press Gazette

Future Publishing: 2007 Results Webcast

Posted by Peter Kirwan on 28 November 2007 at 11:52
Tags: Future, Media

Highlights from the web cast:

Stevie Spring, CEO:

– Starts out by recounting “promises” of last year

– New ad business: increased the number of “non-endemic” advertising clients fourfold

– Online revs up by 50%; customer publishing up by 59% YOY

– In games, 28% of ad revenues come from online

Over to FD John Bowman:

– Net debt down 26% to £24.3m; down 38% from peak 2 years ago.

– EPS up by 14%, Dividend up by 10%: “still allows us to invest in the company next year”

– In UK, revenues broadly flat despite weak games cycle

– UK margins steady at 28%

– Doubled margins in US to 6%.

– Total online ad revenues up from £4.6m to £6.9m YOY.

– Total online investment in 2006 = £5.2m; in 2007, £11.5m

– “Happy to build web presence entirely organically or with targeted cash” (acquisitions).

At this point, it’s sounding like a breeze. . . Bowman is now on to discussing tax. In the background, Stevie Spring (sounds like) breaks in, describing tax as the new rock ‘n’ roll. . . Laughter all round.

“It feels like a new business,” says Bowman. “Ahead of our own expectations for 2007.”

The future: Bowman is now talking about possible economic outlook in US and UK, plus the continuing weakening of the dollar, which could reduce the size of US profits in sterling.

“We aspire to modest growth in revenue in 2008, predominantly organic. . . ”

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