Magazine publisher Future hit by tighter consumer budget

Increasing numbers of people are jettisoning magazines from their shopping lists as the UK retail spending slowdown claimed a new casualty today.

Magazine publisher Future warned investors that its pre-tax profits before one-off charges would be around 10% below the £23.8m (€35m) reported last year unless there was a significant pick up in demand this month.

The Bath-based firm generates 85% of its sales in the UK from consumers stopping to buy titles such as Xbox and Metal Hammer at news stands.

But with emptier high streets around the country and shoppers increasingly choosy about what they spend they money on, Future said its circulation revenues in the UK fell by 2% over the five months to the end of August.

This is a particular headache for Future as the money spent by consumers on buying its magazines accounts for two-thirds of its revenues, with the remainder coming from advertising.

For the year to September 30, Future said it expected like-for-like growth in circulation to be 2% higher and advertising revenues to be ahead by 5%.

Computing magazines were under the most pressure among its portfolio, although profits from entertainment and games titles were expected to be ahead of a year earlier.

Future said its profits growth in the UK had also been held back by the launch of six magazines this year and the acquisition of 48 titles, including 38 from Highbury House Communications such as Fast Bikes and DVD Review.

A £96.5m (€141.6m) deal to take over the whole of Highbury was abandoned in April after it became bogged down by competition issues.

Today’s profits warning sent shares down 7% and Future conceded that the tough UK retail environment and its impact on news stand sales had affected its planning for the coming financial year.

But investors were assured that Future was well-placed for the medium term following its recent expansion.

Future said it had “a low level of debt and continues to be a highly cash-generative business, making it better able to withstand any continued disappointment in trading levels”.

Elsewhere in the world, Future said its US business was trading in line with expectations although investment in new launches and developing its internet activities had pushed operating profits below the level of last year.

Trading had weakened in France and Italy after a strong first half to the financial year, with consumers buying fewer computing titles.