Below is Chief Executive Zillah Byng-Maddick’s report:
Future has undertaken, and now largely completed, a substantial Transformation programme. The Group has been simplified, the balance sheet strengthened and non-core assets sold. It is now focusing on areas where Future sees the highest potential, being the growing consumer technology market, games, entertainment, music and photography.
The five portfolios are: Technology, Games and Film, Music, Photography and Creative, and the Group continues to create new adjacent revenue streams.
41% of revenues now come from Digital and Diversified activities compared to 37% in 2013.
Future enters 2015 a leaner, simpler business with a strategy that focuses on its core competency of content that connects its customers and clients.
Content that connects
The strategy has content at its heart: creating content that connects with audiences, customers and consumers is at the centre of everything we do. This supports the two key customer experiences – “review led” content and “how to” content.
Future has changed the way it works by no longer operating as individual brands but instead as content teams, underpinned by experts, who create content for all mediums of the business, with editorial teams creating shared portfolio content for all platforms in the business as opposed to a brand-led structure.
The Group’s portfolio enables it to be at the centre of an increasingly digital and technologyled world. The brands and content created help to connect consumers with these trends and ensure that Future meets their evolving needs.
Financial performance
Overall revenue from continuing operations was £66.0m (2013: £82.6m) and EBITDAE was a loss of £7.0m (2013: £0.6m loss), with the positive impact of the Transformation programme largely not reflected in the 2014 result.
During the second half of the year a number of key elements of the new strategy were completed, including the restructuring of the US and UK operations and property rationalisation, with over £15m of annualised overhead savings being realised. These activities will deliver significant margin benefits in 2015.
As a result of disposals and the restructuring, Future has notably strengthened its balance sheet. The year-end net cash position was £7.5m and the Group also agreed an amended and restated credit facility with its lenders.
The timing of restructuring payments and the working capital related to the disposals means that the majority of this cash balance will unwind during 2015. The Group expects the underlying business to be cash generative in 2015.
The second half performance of the continuing business was significantly better than the first half. With an encouraging fourth quarter, Future saw the continuing operations of the Group return to profit.
The Group enters the 2014-15 financial year with its business in a stronger and more stable position.
Restructuring
During the spring, a review of the business was undertaken and opportunities to transform the business were identified. These ranged from simplifying the portfolio to creating a new working model for content creation.
As part of the Transformation programme, a detailed review of the portfolios was undertaken.
This resulted in the disposals of the Sport and Craft businesses to Immediate Media during July 2014 for up to £23.8m and the Auto business to Kelsey in August 2014 for up to £2.3m.
Outside the UK, Future has offices in both the US and Australia. The US business continued to face challenges and this led to us fast-tracking the transition to a digital model, appropriate to the US market.
Print support functions of Future’s international print brands have been assumed by the UK content team. Over one third of US staff have left the business, including a number of the management team. The new management has renewed its focus on delivering sustained margin improvement, which has begun to be seen in the last quarter.
The activities outlined above, plus a rationalisation of the property portfolio including the disposal of the Monmouth Street site in Bath for £1.25m post year-end, new back office processes and a commitment to reduce complexity in the organisation, have resulted in Group headcount being reduced from 980 to 577 at the end of September 2014.
Digital and Diversified revenues
The Group’s connection with its audiences continues to be industry leading.
Future holds the number one or two market positions in all the verticals in which it operates. 57 million users a month access Future’s digital sites and 10 of the websites each attract more than one million users.
TechRadar, the news and reviews site, which is Future’s top brand, grew its users by 27% to 26 million during the year, with 41% of the users accessing the site from their mobile devices.
Future has seen strong growth in audience reach for its total portfolio in Q4 with particularly strong growth of 36% from the Technology portfolio, which holds the market leading position in the UK, and the Games portfolio, which maintains its number two position in the UK market.
Off the back of strong growth in audience reach in Digital Design (up 12%) and Photography (up 21%), Creativebloq and Digitalcameraworld have reached number two positions in their UK markets.
Globally the continuing business now has over 250,000 digital subscriptions worldwide. Future continues to look to maximise its market share and has recently launched bundled print and digital products, helping to introduce the existing print customers to digital versions. Future is the number one publisher of digital magazines in the UK, accounting for 16% of all digital magazine sales.
The Group has continued to make progress in increasing the relative share of its Digital and Diversified revenues ? including revenues from digital circulation, digital advertising, e-commerce, the software business FutureFolio, the custom publishing business Future Fusion, and events ? which together accounted for 41% of revenue in 2014 compared to 37% in 2013.
Future also continues to see substantial opportunities internationally with 74 strategic partnerships and 238 licensed editions in 89 countries. There is an increased interest in licensing FutureFolio and the more traditional licensing offering makes it easier than ever for international partners to harness the best-inclass content.
Managing talent
Future has undergone a significant change during the year, and people are at the centre of any change. The Group remains committed to hiring passionate and talented individuals who are industry leaders in their field of specialism, whether they are creating award winning content, managing SEO across the Group’s content, generating new product opportunities from digital insight or ensuring that Future’s advertising campaigns exceed customers’ needs.
A new organisational structure was put in place during the summer, designed to increase the speed of decision making and encourage individual accountability and entrepreneurship.
The new structure is centred on functional areas of expertise, including the creation of a new Product and Technology team and Consumer a Commercial revenue team.
The structure reflects the best of Future whilst bringing in external experts to allow the team to focus on digital, retail, technology and data. The last member of the new executive management team joined the business on 1 October 2014, which puts the Group in a stronger position going into 2015.
Current trading and outlook
Whilst 2014 has been a disappointing year, it has been a critical year in putting in place the right team, simplifying the business, focusing on a core portfolio centred on consumer technology trends and reducing the cost base to ensure more stability.
Future ended the year in a net cash position, with a rationalised property portfolio and reduced headcount.
The business has largely completed the transformational activities. As a result, the Board expects to see an improvement in underlying margins in 2015 as the impact of operating as a leaner, simpler organisation is realised.
Future does not expect the underlying trends in print circulation and print advertising to change materially, and have factored these revenue declines into ongoing projections. As this is increasingly a lower proportion of the total revenue mix, the net impact is reduced. Additionally, the work completed on reshaping the organisation’s costs is expected to allow margin expansion even with a projected continued decline in print revenues.
The new focus on establishing diversified, repeatable and automated digital revenue adjacent to the existing revenue streams has seen some early indications of success during Q4 2014.
Looking forward, Future continues to see the encouraging trends seen in Q4 when the Group as whole returned to a positive EBITDAE position. The Board expects these trends to continue into Q1 2015.
Trading in the current financial year is in line with the Board’s expectations across all parts of the business.
Zillah Byng-Maddick
Chief Executive
