May 17, 2021

Future pushing deeper into US [Contributor]

Future plc – the UK’s largest magazine publisher – has signalled further expansion with this week’s acquisition of the US edition of Marie Claire. It already publishes Marie Claire in the UK, acquired last year as part of the former Time Inc UK (TI Media).

The deal, under which Future is buying 100% of Hearst’s joint venture with Marie Claire Album, of France, gives the UK company a five-year license to publish the magazine in the US and Canada. It may also have the option to extend the right to publish the magazine which last year reached 17.5m monthly uniques and revenue of $19.1m.

The deal is significant because it signals:

  • Future’s ambition to expand more strongly in the US where it already generates some 50% of its revenue. But its portfolio there has so far been largely focused on the technology-youth brands rather than the mainstream consumer markets that now comprise the majority of its UK publishing. It told investors last year that the TI acquisition would enable it to “grow existing brands in the US” and launch new digital operations “with a US-first mindset”.
  • Ambition to expand substantially the e-commerce that last year had increased by 58% and accounted for 23% of total revenue – some 70% of it in the US.
  • Success with the all-digital Marie Claire in the UK, whose e-commerce revenue more than doubled in 2020. Last month, it launched a luxury beauty range in collaboration with online retailer Net-a-Porter.
  • A determination to maintain the pace of expansion after acquiring TI Media for £140m in 2020 and the GoCompare cost-saving site for £594m in 2021. Although Marie Claire US (which has been published by Hearst since 1994) is not a major investment alongside those deals, we should expect others to follow. Maybe, there is even scope for further acquisitions from Hearst which this week announced major cost-cutting and layoffs in the US and UK.

The Future Plc success under seven-year CEO Zillah Byng-Thorne has been built on strong tech systems, high energy, and relentless exploitation of e-commerce and digital advertising. The pace of deal-making still worries some skeptics who had seen a markedly different company – with the same name – crash and burn successively through a decade of under-capitalized ambition and weak systems.

Future’s shares are currently listed as one of the UK’s 20 “most-shorted stocks” – where some investors seek to profit if the share price falls. But most have been won over by the stunning results, strong cash generation and rising levels of organic development – at a time when few companies can get any kind of growth from magazines. It can, though, be difficult to manage the expectations of shareholders who have pushed the Future share price up x 2.5 in the past 12 months. A single slip could, in theory, still upset the whole strategy.

However, the UK company – whose FY 2020 revenue and EBITDA were respectively 53% and 79% ahead of the previous year – is impressively moving through the gears as it is expected to confirm with half-year results next week. There are many reasons to be optimistic.

Future’s e-commerce success was initially achieved by squeezing business from relatively small specialist brands and platforms, selling to its young tech audiences. TI Media has given it a portfolio of major media brands to monetise, and also more subscriptions revenue. That’s why investors expect it to grow operating profit from £93m in 2020 to at least £150m this year and more than £180m in 2022 (a 28% profit margin). That would be almost x4 profit growth and x3 revenue in three years.

The company, whose market cap is now £2.8bn ($3.9bn), is being ever more closely watched by Meredith ($1.4bn). The bumpy acquisition of Time Inc by Future’s magazine leader US counterpart has been the antithesis of its own successful digestion of the UK subsidiary. What’s more interesting, though, is that Future’s “new” consumer brands are free – for the first time in decades – to expand in the largest media market of all. It’s just beginning.

Reproduced with permission from Flashes & Flames, the weekly subscription newsletter for media executives and entrepreneurs.