15 July 2011
Interim Management Statement
Future plc, the international special-interest media group, today publishes its Interim Management Statement for the nine-month period ended 30 June 2011. It describes the Group's financial position and performance during the period, updated to the latest practicable date, together with an update on the US, re-structuring and other matters.
Trading update for the nine months ended 30 June 2011
In general terms, the trends identified in the Group's half-year results (announced on 20 May 2011) continued during the quarter to 30 June. Group revenues for the nine months are estimated to be down 5% on last year, continuing the decline reported for half-year to 31 March 2011.
During the year to date, UK revenues in total have held up well. Circulation revenues are down 3%, whilst digital advertising revenue growth continues to offset print advertising decline.
Digital products are performing ahead of management expectations, and our continuing progress in this field has been recognised by the award to Future by the Association of Online Publishers as Consumer Digital Publisher of the Year. We have seen an acceleration of sales of digital magazine replicas (on platforms such as Zinio); iPad successes continue; and digital advertising revenues (which comprise around a third of advertising revenue) have achieved growth of 40% to date; May was our first £1m digital revenue month in the UK.
The most recent newstrade returns of unsold copies (relating to magazines which went on sale during the first half of the financial year) suggest further significant adverse adjustments to our forecasted sales. Retail opportunities for newsstand magazine sales have decreased even further in the current quarter, reflecting broader challenges at retail and fewer opportunities still for consumers to buy magazines. Print advertising revenues continue to decline, and we are also actively discontinuing subsidised magazine subscriptions.
In addition, a digital product launch planned for the second half-year has been further delayed.
All of these factors will depress 2011 performance.
As a result, the Board has decided to accelerate transition of Future US into a primarily digital business. This process may take 12 to 15 months, to allow time for existing subscriptions and other contractual obligations to be fulfilled.
Outlook for the year ending 30 September 2011
The pattern of total revenue for the nine months to 30 June was consistent with the position reported for the half-year ended 31 March, with the UK business anticipated to deliver revenues and EBITA in line with expectations. However, the US business is likely to incur an EBITA loss for the full year £2m worse than expectations, following the most recent information about print performance in the US. The Board now anticipates that Group EBITA, before exceptional items, will be £2m less than previously expected.
Re-structuring and exceptional costs
The business is executing its operational review of geography and function:
(a) to accelerate the move of the US business to one that is a primarily digital business model, simultaneously reducing volatility associated with print data flows; and
(b) to re-organise the UK business, re-calibrating it to ensure faster adaptation to digital and more efficient execution of print.
The benefit of these steps will be to improve efficiency, reduce headcount, reduce property requirements, and help accelerate the most promising areas of digital product development.
The Board anticipates one-off associated exceptional cash costs of up to £3.5m in 2011.
As at 30 September 2010 the carrying value of the goodwill in the US business was £21.8 million and, in view of the degradation of the US print business, the Group now expects to take a significant (non-cash) 2011 impairment charge in respect of that print business, subject to any business disposals that may be made.
The Group's net debt at 30 June 2011 is estimated at 1.67 times bank EBITDA. The Group continues to operate within all bank covenants and is confident that, including the impact of the information in this statement, the Group will continue to comply with all bank covenants.
Stevie Spring, Chief Executive Tel: 020 7042 4007
John Bowman, Group Finance Director Tel: 020 7042 4031
Charles Palmer Tel: 020 7831 3113
Future plc is an international special-interest media group, listed on the London Stock Exchange (symbol FUTR). Founded in 1985 with one magazine, today we have operations in the UK, US and Australia creating over 180 special-interest publications, websites and events. We hold market-leading positions in games, film, music, technology, cycling, automotive and crafts. Our biggest-selling magazines include T3, Total Film, Classic Rock, Guitar World and Official Xbox Magazine. Our websites include gamesradar.com, bikeradar.com, and techradar.com. Future sells almost three million magazines each month; we attract more than 25 million unique visitors to our websites; and we host 27 annual live events. In addition, Future exports or syndicates publications to 90 countries, making us the UK's number one exporter and licensor of monthly magazines.
This Interim Management Statement (IMS) is prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this IMS is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. Statements contained in this IMS are based on the knowledge and information available to the Directors at the date it was prepared and therefore the facts stated and views expressed may change after that date. By their nature, the statements concerning the risks and uncertainties facing the Group in this IMS involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. To the extent that this IMS contains any statement dealing with any time after the date of its preparation such statement is merely predictive and speculative as it relates to events and circumstances which are yet to occur. The Company undertakes no obligation to update these forward-looking statements.