Stevie Spring, the ad executive who replaced Greg Ingham as boss of Future Publishing last year, sounded nervous on her first encounter with City analysts in December.
Quite why is anyone’s guess. During the Nineties, as a senior executive at the ad agency Young & Rubicam, Spring did something that required far more courage. She visited Kelvin Mackenzie at L!ve TV to pitch for his advertising business.
Mackenzie gave her the account, but not before describing Spring to her face as a ‘**** in a gingham dress”.
It says much about Spring’s eye for detail that it was the word gingham that offended her most. The dress in question, she told the Daily Telegraph last year, was a houndstooth check number by Valentino.
As it turned out, Spring – who has never run a quoted company before – performed perfectly well on her debut in front of analysts.
She spoke convincingly about her plans for cleaning up the mess at Future. At her second six-monthly update this month, the numbers suggested that her plans are working.
During the six months to 31 March 2007, Future’s revenues fell by a hefty £11.7m from the £95.3m recorded a year earlier. But underlying operating profits rose significantly, from £5.7m to £7.9m.
This mixture of falling revenue and rising profit is a classic pattern for companies in the throes of a turnaround. Analysts reacted positively and Future’s share price moved upwards.
Under Spring, Future appears to be leaving behind the problems that forced it into painful cutbacks in 2006. Three problem areas stand out.
The first was the company’s disastrous acquisition of 38 magazines from Highbury House in 2005. The £30m deal had its origins in former chief executive Greg Ingham’s rash promise to double revenues by 2008.
Speaking to Press Gazette in the wake of Future’s interims, Spring made clear just how disastrous the acquisition was. ‘If we’d done that deal for one-quarter of the price, no one would have batted an eyelid,’she said.
By December 2006, six months after Ingham was forced out of Future, Spring had closed down more than half of the magazines acquired from Highbury.
But Future’s problems were bigger than one deal. During the mid-Noughties, the company’s cost base spiralled out of control. Notably, after Ingham’s departure, Future closed or sold a sizeable number of its own titles.
The company’s third area of
difficulty – largely unacknowledged by the company before Spring’s arrival – was the web.
As a consumer publisher specialising in computer games and technology, Future might have been expected to approach digital media with aggression. But under Ingham, the company seemed terrified of cannibalising the reader revenues that account for 70 per cent of the main UK company’s turnover. The fact that Future’s gaming and computer magazines are highly profitable only heightened the dilemma.
As last week’s results showed, Spring has been busting a gut to correct past errors. She has sold off the company’s loss-making Italian subsidiary, and cut off investment in a weak French operation.
In the UK, the company has tightened the screws on suppliers, saving £1m on paper, printing and the cost of covermounts. Suppliers that haven’t cut prices have been dumped.
To finance the Highbury deal, Future took out loans, which totalled around £40m. Under Spring, the company has already paid back 25 per cent of what it owes. The rest of the company’s free cashflow is being invested aggressively in operations – particularly web launches.
Future now generates 13 per cent of its ad revenues on the web, up from six per cent last year. Roger Parry, Future’s chairman, is no longer to be heard minimising the threat posed by the web – something he did as recently as last September.
Quite possibly, that’s got something to do with Spring’s recent installation of Seb Bishop, the 32-year-old online advertising guru, as a non-executive director. During the past six months, the company has hired 55 new staff to boost its online efforts.
Can Future make up for its years in the digital wilderness? The company stands a good chance in hobbyist markets where it is already active in print and plans online launches that will target musicians and biking enthusiasts.
Things are slightly different in the company’s core markets of gaming and computers. Future’s year-old gaming site, Games Radar, has doubled its ad revenues in the past six months. Yet it remains a third-placed competitor behind long-established rivals owned by News Corporation and CNET.
Such concerns haven’t troubled the City too much. In the eyes of analysts, Stevie Spring has done a creditable job.
But at the high end, consumer publishing remains a deal-driven business. Sooner or later, there will be the suggestion that Future needs to make a big acquisition, to compete with the likes of Emap, which generates twice as much revenue from consumer publishing.
Partly because a giant like Emap can spread its costs across a larger revenue base, its operating profits are around four times the size of those generated by Future. Such are the attractions of scale. Given Spring’s current rate of progress, you can expect such talk to start doing the rounds in a year, if not sooner.