Future Publishing: 2007 Results Webcast

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. . . ”

Back to CEO Stevie Spring

— Change in distributors to Seymour in the UK; more uplift coming from Seymour’s focus on distribution for niche magazines.

— A Radar brand for each of our audience clusters: games, music & movies, technology and active.

— “We are now the largest exporter of magazines out of the UK. Bigger than IPC.”

— Licensing 64 titles in 33 markets: “Get more from our IP by fusing our editorial with other people’s brands”

— “We now have all 3 of the official [magazine] licences for Xbox, Sony and Nintendo in the UK and US”

— “no.1 for films in the UK by a country mile” [newsstand + consumer magazines]

— Games Radar now bigger than Nuts, NME, FHM online. “We are delivering lots of men”.

— Experimenting with stealth products, “gatecrashing new markets” from San Francisco

— “Personally I’d love to grow another 50% next year” — referring to digital ad revenues.

— “Print funds moves into faster growth areas.”

— Net new product development investment flat next year.

Q&A:

Strikingly, Future is arguing the virtues of its status as a specialist hobbyist publisher. Spring used the expression “prosumer” five or six times to describe the company’s readers.

Prosumer? It’s a combination of “professional” and “consumer”. In Spring’s words: “Our readers are more engaged — they’re closer to having B2B characteristics, very knowledgeable and ready to invest”.

Because of their hobbyist status, she argues, Future can charge higher cover prices than its mainstream, big circulation, rivals. So is readership: “If you look at our research on NRS, [our readers read] 8-9 of 13 copies a year. . . If you are a prosumer, in the same way that I will read Campaign every week, they will read our magazines.”

For the City, the prosumer argument is a nice bit of gloss on a sound argument. It’s credible and may help Future resist the worst that the markets can throw at it in coming months.

Analysts asking plenty of questions about customer publishing. But Future’s investment in online also came in for scrutiny.

Spring talks up Future base in San Francisco. (“Our secret weapon. . . we’re in the heart of web thinking.”) “We currently sell 4m magazines; we’ve got 10m unique users. We’re touching a greater number of people online.”

She adds: “We will manage the net investment to about same level as this year. If revenues are going gangbusters, we can turn up the volume.”

There’s going to be more emphasis on events, too. “We’re investing in new people in the US in the events sector.” Some investment promised in the UK, too.

But it’s plain that Future is still thinking about its online investment in a defensive sense.

“Where we have the strongest deepest [advertiser and reader] relationships already, that’s where we’re investing. In the UK, it’s defensive as much as aggressive. Where we see our revenues morphing online, we need to capture those. We start where we need to protect revenues and grow from there.”

It’s the “grow from there” bit that’s really interesting. But we’ll need to wait until next year for news on that. . .

UPDATE: 29/11/2007: The FT gets round to the story at 10.32 on Thursday morning, 24 hours after the results announcement. Ben Fenton picks up the prosumer theme. Future, he says, “might almost be counted as a B2B business”.

On a p/e ratio of 15.5, the market seems to agree.

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