Hobby magazines have always enticed readers to spend money, but Future, the publisher of titles such as Homes & Gardens and PC Gamer, has turned that into more than a side hustle.
Last year, the FTSE 250 group helped its retail partners achieve just under £1 billion in sales. Future’s commission for doing this – £216m – accounted for more than a third of its total revenue.
The company has become a darling among investors who have grown accustomed to declining magazine circulation, while many media companies struggle to make money from online readers.
CEO Zillah Byng-Thorne said the sales Future makes through links to recommended products in its articles has become one of its main areas of expertise. “We have our own e-commerce technology,” she said.
Future’s internal system, which took two years to build, automatically adds links to products from sellers with whom the publisher has a revenue-sharing agreement and updates them based on price and availability. When the pandemic-related supply chain crisis peaked in the run-up to Christmas, its headlines ran live blogs pointing readers to retailers that stocked the products they were looking for.
Future declined to comment on the investment required to build the system, but it now employs 180 people on its technology development team.
Like other publishers, Future also makes money through digital advertising and magazine subscriptions. But revenue from its e-commerce arm rose 36% year-on-year to £216m in 2021, becoming its fastest-growing division.
On an average day, readers purchase about 43,500 items – from luxury dog beds to remote-controlled golf carts – after clicking on links in articles written by Future reporters.
Byng-Thorne, who has been at the helm since 2014, is also a senior independent director at THG, another group known for its e-commerce technology.
The Scot joined Future as a part-time finance manager just months before being tasked with turning the business around, after helping Auto Trader transition from a magazine to a digital e-commerce platform .
“[Future] is essentially the poster child in the magazine media business for . . . successfully grow in the context of a declining and struggling industry,” said Abi Watson at Enders Analysis.
This success has led to dramatic share price growth: the stock has grown almost 16 times over the past five years, despite having lost 37% of its value since the start of 2022.
Future’s biggest rivals in the UK in terms of magazine circulation – Immediate Media, publisher of Radio Times playlists, and Bauer Media, the group behind women’s magazine Grazia – have both gone into e-commerce. Neither of the two private companies, however, would disclose how much it contributes to revenue.
“Magazines have always been in the business of recommendation,” said Chris Duncan, managing director of UK publishing at Bauer. But it wasn’t until late 2018, when Google’s search engine algorithms began increasing purchase recommendations from “trusted” sites, that e-commerce as a “separate discipline” really took off. he added.
Future’s success in adapting to Google’s algorithms has coincided with a push in the US, where the London-based company claims to reach one in three people. At last count, the group had over 130 magazines with a worldwide circulation of over 3 million.
But critics have argued that it is difficult to determine how much of Future’s growth is organic. While the first part of his tenure was marked by a restructuring that led to the departure of four out of 10 employees, Byng-Thorne has led a wave of acquisitions over the past two years, with the company spending $1.4 billion pounds to reclaim rival titles.
Last month, Future announced small complementary acquisitions of online entertainment publisher WhatCulture and Waive, a data analytics platform. This followed the acquisition of several magazines last August, including MoneyWeek and news title The Week in a £300m deal, while in 2020 it bought the website price comparison company GoCompare for £594m, arguing it would help it get more reader data and launch a slew of personal finance-focused sites.
The percentage of shares on loan, one of the best indicators of short selling, peaked at 12.7% in July 2020 but has since fallen to less than 1%, according to IHS Markit.
Matthew Earl, managing partner of hedge fund ShadowFall, has been one of Future’s most vocal critics. ShadowFall argued in 2020 that its own calculations on Future’s organic growth did not match those issued by the company, adding that it was too reliant on acquisitions to meet its near-term growth goals.
Earl told the Financial Times he no longer holds a short position in the business but remains skeptical of its growth.
“Acquisitions reinforce our view that all it’s good for is generally to buy other people’s business at valuations lower than what its shareholders subsequently value it,” he said. he declares. “In the meantime, management continues to be richly rewarded for this.”
Future’s print magazine organic revenue, excluding recent acquisitions, has on average declined 13% over the past two years as the company bucks trends seen elsewhere in the industry. The equivalent figure for its websites and events, however, is up a quarter, with e-commerce revenue jumping 47%.
At the time of the ShadowFall attack, Byng-Thorne told the FT she didn’t comment on the research “whether good or bad”, but said the group had a “robust operating model”. Speaking this year, she said Future would continue to grow by acquisition, adding: “I see no reason to change this strategy because it is working.”
Byng-Thorne, who earned £8.8m last year, has earned nearly £34m from Future over the past five years.
The group has suffered for two years from the dissent of shareholders in a dispute over remuneration. In February, more than half of the votes cast were against the company’s pay policy, including a proposal that could award Byng-Thorne more than £40million, as shareholders staged a major protest against the same plan in 2021.
A particularly sticky point was a £532,875 cash bonus given to former finance director Rachel Addison when she left the company last year. The company’s board is in discussions with shareholders following the non-binding vote.
Although 55% of investors voted against the compensation proposals, shareholders realized significant profits under Byng-Thorne’s leadership. If she left, the group’s share price would suffer, said a top 10 shareholder.
Sir Peter Wood, the former chairman of GoCo who is also the company’s fourth largest shareholder and backed recent wage proposals, said Byng-Thorne was worth “every penny”. “I’ve always thought accountants and lawyers don’t make good CEOs, but I’m eating a humble pie,” he said.
Analysts have attributed the more recent share price plunge to a broader decline that has hit digital companies particularly hard. Roddy Davidson of Shore Capital said: “All sorts of highly rated stocks with a tech element have been hammered a bit due to geopolitical concerns. I guess we are looking at a broader market effect.