REG - Future PLC - Full Year Results
07/12/2023 07:00
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RNS Number : 0123W Future PLC 07 December 2023
7 December 2023
FUTURE plc
FULL YEAR RESULTS
Future plc (LSE: FUTR, "Future", "the Group"), the global platform for
specialist media, today publishes its results for the year ended 30 September
2023.
Highlights
Financial results for the year ended 30 September 2023
Adjusted results FY 2023 FY 2022 Reported Var Constant(1) currency var Organic(2) Var
Revenue (£m) 788.9 825.4 (4)% (6)% (10)%
Adjusted EBITDA (£m)(3) 276.8 293.8 (6)% (9)% n/a
Adjusted operating profit (£m)(4) 256.4 271.7 (6)% (9)% n/a
Adjusted operating profit margin (%) 32% 33% (1)ppt (1)ppt n/a
Adjusted diluted EPS (p)(7) 140.9p 163.5p (14)% n/a
Adjusted free cash flow (£m)(9) 253.2 267.2 (5)% n/a
( )
Statutory results FY 2023 FY 2022 Reported Var
Revenue (£m) 788.9 825.4 (4)%
Operating profit (£m) 174.5 188.6 (7)%
Operating profit margin (%) 22% 23% (1)ppt
Profit before tax (£m) 138.1 170.0 (19)%
Cash generated from operations (£m) 241.0 268.5 (10)%
Diluted EPS (p) 94.1 100.9 (7)%
Financial highlights
● Revenue of £788.9m (FY 2022: £825.4m) was down (4)% year-on-year,
impacted by a (10)% organic decline and partially offset by favourable foreign
exchange (mainly USD) and the contribution of acquisitions.
○ UK revenue declined by (4)% on an organic basis with strong growth in
price comparison and greater resilience in digital advertising due to the
leadership positions.
○ US revenue declined by (19)% on an organic basis with softness in Media
revenue as a result of greater concentration in the consumer technology
verticals as well being less advanced on the execution of the strategy in
comparison to the UK business.
○ Media revenue declined by (13)% on an organic basis reflecting a
challenging advertising market combined with the impact of consumer pressure
on our affiliate product business. This was partially offset by a strong
performance in our price comparison business (affiliate services).
○ Magazine performance was resilient, down (5)% on an organic basis,
supported by a higher proportion of subscriptions.
● Profitability remained resilient, despite inflationary pressures, with
adjusted operating profit margin(4) of 32%, only down (1)ppt year-on-year (FY
2022: 33%). This translated into adjusted operating profit decline of (6)% to
£256.4m (FY 2022 £271.7m). Statutory operating profit was down (7)% to
£174.5m (FY 2022: £188.6m).
● The Group remains highly cash generative with adjusted free cash flow
of £253.2m (FY 2022: £267.2m), representing 99% of adjusted operating profit
(FY 2022: 98%). Cash generated from operations was £241.0m (FY 2022:
£268.5m).
● Capital allocation - three acquisitions completed in the first
half for a combined consideration of c.£45m, and a £45m share buyback
programme launched with £13.1m completed at the end of September.
● Leverage(10) reduced to 1.25x (FY 2022: 1.48x) resulting in net
debt(11) at the end of the year of £327.2m (FY 2022: £423.6m). Total debt
facilities at the end of September 2023 were £900m (FY 2022: £660m).
Growth Acceleration Strategy (GAS)
● Launched Growth Acceleration Strategy "GAS", building on strong
foundations to ensure Future is well-positioned to capitalise on future
opportunities in its attractive and growing markets. Two-year investment
programme of £25m-£30m to drive acceleration in a compounding model by:
● Growing a highly engaged and valuable audience - increased focus
on brand leadership and content
○ Maintained or improved leadership positions(12) in key strategic
verticals, and now have 5 positions in top 3 in the US and/or UK (FY 2022: 3),
enabling higher yields through improved revenue per user and resilience.
● Diversifying and increasing revenue per user - adding news routes
of monetisation and driving market-leading positions to improve yield
○ Digital revenue per online user(13) up +22% year-on-year at constant
currency, reflecting execution of our diversification strategy in Savings and
Fashion & Beauty.
○ Price comparison revenue acceleration in H2, with +8% growth at
constant currency for the full year and vouchers growth of +5% at constant
currency supported by our proprietary technology.
● Optimising our portfolio - segmentation of the brands in three
categories to focus investment and continuous review of the portfolio
structure to ensure effective capital allocation.
● Delivering on the strategy will translate into mid-single organic
revenue growth CAGR 23-26, whilst maintaining healthy adjusted operating
margins in the range of 28-30% and strong cash generation.
Board Change
● As detailed in a separate announcement today, after over eight
years at the Group, Penny Ladkin-Brand, Chief Financial and Strategy Officer,
has informed the Board of her decision to step down from the Board later next
year.
● Penny is subject to a twelve-month notice period and the Board has
initiated an external search for her successor.
Outlook
● The stabilisation of trends gives us the confidence to return to
organic revenue growth in H2 2024, translating into low single-digit revenue
growth in FY 2024.
● We have initiated a two-year £25m-£30m investment programme that
will translate into adjusted operating margin in the range of 28-30%, with
£20m incremental costs in FY2024.
● We are confident that the focused execution of our investment
programme will drive accelerating revenue growth of mid-single digit CAGR over
the next three years.
● Longer-term, we are confident that our diversified strategy will
continue to deliver significant value for shareholders, with our investment in
our new content verticals and capabilities underpinning our growth ambitions
and with our strong cash generation giving further optionality.
Jon Steinberg, Future's Chief Executive, said:
"Looking back at the prior year, we have delivered a resilient performance
amid a challenging market, with a resilient full-year profit performance and
strong cash generation, reflecting the diversified nature of our business and
the leadership positions we retain across verticals.
Since joining as CEO in April this year, I have worked with the Board and
leadership team to review our strategy with the clear aim of ensuring we are
optimally positioned for future growth for when the macro backdrop improves.
Our Growth Acceleration Strategy leverages Future's inherent strengths, strong
financial characteristics and unique proposition, making active investments in
targeted areas where we have clear growth opportunities. We are excited about
executing on this strategy which is focused on growing a highly engaged and
valuable audience, diversifying and increasing revenue per user, and
optimising our portfolio.
We are confident our strategy will continue to deliver significant value for
shareholders, with our investment in our leading brands and capabilities
underpinning our growth ambitions."
Presentation
A live webcast of the analyst presentation will be available at 09.00 am (UK
time) today at
https://stream.brrmedia.co.uk/broadcast/656481470db298c3dbf7cb0e
(https://stream.brrmedia.co.uk/broadcast/656481470db298c3dbf7cb0e)
A copy of the presentation will be available on our website at:
https://www.futureplc.com/investor-results/
A recording of the webcast will also be made available.
The definitions below apply throughout the document.
1) Constant currency translates the financial statements at fixed exchange
rates to eliminate the effect of foreign exchange on the financial
performance. Constant FX rates is defined as the average rate for FY 2023.
2) Organic growth is defined as the like for like portfolio in the period,
including the impact of closures and new launches but excluding FY 2023
acquisitions and those which have not been acquired for a full financial year,
and at constant FX rates. Constant FX rates is defined as the average rate for
FY 2023.
3) Adjusted EBITDA represents operating profit before share-based payments
(relating to equity-settled awards with vesting periods longer than 12 months)
and related social security costs, amortisation, depreciation, transaction and
integration related costs and exceptional items. Adjusted EBITDA margin is
adjusted EBITDA as a percentage of revenue.
4) Adjusted operating profit represents operating profit before share-based
payments (relating to equity-settled awards with vesting periods longer than
12 months) and related social security costs, amortisation of acquired
intangible assets, transaction and integration related costs and exceptional
items. This is a key management incentive metric, used within the Group's
Deferred Annual Bonus Plan.
5) Adjusted profit before tax represents profit before tax before share-based
payments (relating to equity-settled awards with vesting periods longer than
12 months) and related social security costs, net finance costs, amortisation
of acquired intangible assets, transaction and integration related costs,
exceptional items, unwinding of discount on contingent consideration and
change in fair value of contingent consideration.
6) Adjusted effective tax rate is defined as the effective tax rate adjusted
for the tax impact of adjusting items and any other one-off impacts, including
adjustments in respect of previous years.
7) Adjusted diluted earnings per share (EPS) represents adjusted profit after
tax divided by the weighted average dilutive number of shares at the year end
date.
8) Adjusted operating cash flow represents cash generated from operations
adjusted to exclude cash flows relating to transaction and integration related
costs, exceptional items and payment of accrual for employer's taxes on
share-based payments relating to equity settled share awards with vesting
periods longer than 12 months, and to include lease repayments following
adoption of IFRS 16 Leases.
9) Adjusted free cash flow is defined as adjusted operating cash flow less
capital expenditure. Capital expenditure is defined as cash flows relating to
the purchase of property, plant and equipment and purchase of computer
software and website development.
10) Leverage is defined as Net debt as defined below (excluding capitalised
bank arrangement fees and lease liabilities, and including any non-cash
ancillaries), as a proportion of Adjusted EBITDA and including the 12 month
trailing impact of acquired businesses (in line with the Group's bank
covenants definition).
11) Net debt is defined as the aggregate of the Group's cash and cash
equivalents and its external bank borrowings net of capitalised bank
arrangement fees. It does not include lease liabilities recognised following
the adoption of IFRS 16 Leases.
12) Comscore Media Metrix Demographic Profile, September 2023 - Mobile and
Desktop Age 2+ and Total Mobile 18+ US and UK
13) Online users defined as monthly online users from Google Analytics and,
unless otherwise stated, is the monthly average over the financial year and
excludes Gardening Know How. Forums are excluded as they are non-commercial
websites for which Future does not write content, and are not actively managed
or monetised.
Enquiries:
Future plc
+44 (0)122 544 2244
Jon Steinberg, Chief Executive Officer
Penny Ladkin-Brand, Chief Financial and Strategy Officer
Marion Le Bot, Head of Investor Relations
+44 (0)777 564 1509
Media
Headland
+44 (0)203 805 4822
Stephen Malthouse, Rob Walker, Charlie Twigg
future@headlandconsultancy.com
About Future
We are the platform for creating and distributing trusted, specialist content,
to build engaged and valuable global communities. We operate c.230 brands in
diversified content verticals, with multiple market leading positions and
three core monetisation frameworks: advertising, eCommerce affiliate and
direct consumer monetisation (subscriptions and newstrade magazine sale). Our
content is published and distributed through a range of formats including
websites, email newsletters, videos, magazines and live events. The successful
execution of our strategy is focused on three pillars: grow engaged audience,
diversify and grow revenue per user and optimise the portfolio.
Chief Executive Officer's review
Media has always been, and will always be, one of the most dynamic industries
and
this year was no different. We have maintained or improved leadership
positions within key verticals, both in the UK and US through our continued
focus on providing expert content to intent-led audiences.
However, we need to make sure we are always looking forward. We have therefore
taken the opportunity to look closely at our strategy and the markets we
operate in to ensure that Future remains at the forefront of the industry and
is best placed to capitalise on future opportunities.
What is clear is that our track record of innovation, adding new routes to
monetisation through organic and inorganic growth, has served us well. The
outcome of the strategy review is a focused and refreshed strategy - Growth
Acceleration Strategy or GAS, like the fuel you put in a car. This strategy
requires a two-year investment programme that will translate into accelerating
organic revenue growth of mid-single digit CAGR over the next three years for
the Group. This would translate into high-single digit to low double-digit
growth for Media and mid-single digit decline in Magazines. Our financial
characteristics of healthy adjusted operating margins (28-30%) and strong cash
flow generation would remain.
GAS will build on our strong foundation of innovation and content expertise,
but, at the same time, recognises the requirement for a rigorous focus, and
greater diversification in the way in which our audiences reach our content.
Since joining, I have been incredibly impressed by the breadth and depth of
talent and
the diversified nature of the business and as such, I want to build on this
strong foundation.
Our strategic objectives
Our strategy is structured around a simple equation: grow engaged users and
grow revenue per user and apply this to as many monetisation routes available.
Our Growth Acceleration Strategy (GAS) is supported by five strategic
priorities:
1. Operating model
2. Expert content
3. US digital advertising
4. Social monetisation
5. Organisational health
1. Operating model.
We are dividing the portfolio into three categories and each category will
have specific actions and investment levels. This will allow increased focus
on return on investment.
Firstly, the Hero brands, which represent about 50% of the Group's revenue and
about twelve brands. Hero brands are leading brands operating in attractive
verticals with high profitability. These brands will be the priority for
investment in terms of content, consumer experience and sales to gain or
maintain market share. These brands are where we see the biggest current
revenue opportunities.
Secondly, the Halo brands, which represent about 30% of the Group's revenue.
Halo brands are in growing underlying markets and have stable profitability.
Their important characteristic is that they add scale to the Hero brands,
enabling sales activation for larger media buys. Halo brands will indirectly
benefit from investment in Hero brands and the group sales team, as media buys
that begin with a Hero brand can be expanded for reach and scale to Halo
brands. Whilst many of these brands are potential hero brands of the future,
they are a secondary priority for investment in the near term.
Finally, Cash Generators, which represent about 20% of the Group's revenue.
These brands operate in markets with more limited opportunity and require
little investment. Whilst most of these brands will have declining revenue, we
maintain a focus on profitability and conversion of profits to cash.
Fuelling the operating model will require £7.0m of additional investment with
£5.5m falling into FY 2024.
2. Expert content
Key to our operating model remains great content which drives the audience. We
are evolving our approach to content for reviews and news, focused on
improving the overall user experience notably through video and improved
buying guides. This priority is about ensuring our content is expert,
authoritative and trustworthy.
Driving content will require £10.0m of additional investment with £8.0m
falling into FY 2024.
3. US digital advertising
The US digital advertising market is seven times the size of the UK market.
Yet, as it stands today, our US digital revenue is only twice the size of our
UK revenue. The delta is driven by disparity in leadership positions between
the UK and US and a more established UK sales team. In the UK our
well-established team is able to drive a higher value mix of advertising
revenue through a greater share of direct sales, premium programmatic
advertising and branded content. We are putting in place the actions to
replicate the UK expertise in the US which will translate into £6.5m of
additional investment with £3.5m falling into FY 2024. The resilience of our
UK business highlights the strength of what we have built and gives us the
confidence that we can replicate this successful playbook in the US and to
reach relative parity in each geographic region.
4. Social monetisation
Our brands reach 217m users on social platforms. We aim to generate greater
revenues from these audiences through branded content and evolving our
eCommerce proposition. Branded content is a format of content that can be
sponsored by a brand, it can be created in collaboration with a brand or with
full editorial independence. Unlike traditional digital advertising, branded
content is less dependent on audience volumes. Who What Wear, the brand we
acquired in June 2022, is the lighthouse for this type of advertising product.
Over 50% of Who What Wear's revenue comes from branded content compared to 28%
for the Group's digital advertising revenue - highlighting the opportunity we
have. This investment in social monetisation will be supported by sales and
content investment but additionally requires £2.5m of which £1.5m falls into
FY 2024.
5. Organisational health
The final strategic priority is about ensuring we have an engaged workforce
that has the process and tools to perform to the best of their abilities.
After launching a new HR system this year, we are working on the roll-out of a
new sales system that will better track sales pipelines and salesperson
productivity to ensure our investment is paying back.
We continue to invest in our people and systems to ensure we are building a
world-class organisation that can drive our acceleration of revenue growth.
This will require £2.0m of additional investment with £1.5m falling into FY
2024.
Execution underpinned by values
We operate as a purpose-driven organisation creating value for all
stakeholders. We aim to operate as a responsible business and everything we do
is underpinned by our purpose and values which fosters an aligned culture
across the organisation. We are extremely fortunate that our brands give us
the platform and opportunities to influence and inspire people across the
globe to encourage positive change.
I've been incredibly impressed by the depth of talent and energy throughout
Future, and I want to personally thank our colleagues for their hard work.
Outlook
● The stabilisation of trends gives us the confidence to return to
organic revenue growth in H2 2024, translating into low single-digit revenue
growth in FY 2024.
● We have initiated a two-year £25m-£30m investment programme that
will translate into adjusted operating margin in the range of 28-30%, with
£20m incremental costs in FY 2024.
● We are confident that the focused execution of our investment
programme will drive accelerating revenue growth of mid-single digit CAGR over
the next three years.
● Longer-term, we are confident that our diversified strategy will
continue to deliver significant value for shareholders, with our investment in
our new content verticals and capabilities underpinning our growth ambitions
and with our strong cash generation giving further optionality.
Financial summary
The financial summary is based primarily on a comparison of results for the
year ended 30 September 2023 with those for the year ended 30 September 2022.
Unless otherwise stated, change percentages relate to a comparison of these
two periods.
FY 2023 FY 2022
£m £m
Revenue 788.9 825.4
Adjusted EBITDA 276.8 293.8
Adjusted operating profit 256.4 271.7
Adjusted profit before tax(5) 221.3 253.1
Operating profit 174.5 188.6
Profit before tax 138.1 170.0
Basic earnings per share (p) 94.7 101.4
Diluted earnings per share (p) 94.1 100.9
Adjusted basic earnings per share (p) 141.8 164.4
Adjusted diluted earnings per share (p) 140.9 163.5
( )
The Directors believe that adjusted results provide additional useful
information on the core operational performance of the Group, and review the
results of the Group on an adjusted basis internally. See the section below
for a reconciliation between adjusted and statutory results.
A reconciliation of adjusted EBITDA and adjusted operating profit to operating
profit and profit before tax is shown below:
FY 2023 FY 2022
£m £m
Adjusted EBITDA 276.8 293.8
Depreciation (8.8) (9.1)
Amortisation of non-acquired intangibles (11.6) (13.0)
Adjusted operating profit 256.4 271.7
Adjusted net finance costs (35.1) (18.6)
Adjusted profit before tax 221.3 253.1
Adjusting items:
Share-based payments (including social (7.8) (6.9)
security costs)
Transaction and integration related costs (7.4) (14.5)
Exceptional items (7.3) (3.4)
Amortisation of acquired intangibles (59.4) (58.3)
Operating profit 174.5 188.6
Net finance costs (1.3) -
Profit before tax 138.1 170.0
Revenue
FY 2023 FY 2022
£m £m
Total revenue 788.9 825.4
Revenue from FY 2023 and FY 2022 acquisitions which have not been acquired for (47.1) (15.1)
a full financial year
Organic revenue 741.8 810.3
Impact of FX at constant rates (0.9) 15.1
Organic revenue at constant currency 740.9 825.4
Group revenue was down (4)% in the year to £788.9m (FY 2022: £825.4m), with
the benefit of acquisitions and foreign exchange translation offsetting
organic decline (decline of (10)% at constant currency and (6)% at actual
currency). FY 2022 acquisitions which have not been acquired for a full
financial year and FY 2023 acquisitions and FY 2023 disposals contributed a
net £47.1m to revenue in the year.
Revenue FY 2023 FY 2022 YoY Var Organic
£m £m YoY Var
Advertising & other 86.9 89.8 (3)% (7)%
Affiliates 193.9 194.4 flat flat
Media 280.8 284.2 (1)% (2)%
Magazines 195.8 215.3 (9)% (7)%
Total UK 476.6 499.5 (5)% (4)%
Advertising & other 159.1 172.7 (8)% (25)%
Affiliates 75.0 78.3 (4)% (25)%
Media 234.1 251.0 (7)% (25)%
Magazines 78.2 74.9 +4% flat
Total US 312.3 325.9 (4)% (19)%
Advertising & other 246.0 262.5 (6)% (19)%
Affiliates 268.9 272.7 (1)% (8)%
Media 514.9 535.2 (4)% (13)%
Magazines 274.0 290.2 (6)% (5)%
TOTAL REVENUE 788.9 825.4 (4)% (10)%
UK revenue declined by (5)% or £(22.9)m to £476.6m (FY 2022: £499.5m).
Total UK organic revenues was stronger than in the US with a decline of (4)%
with (2)% organic revenue decline in Media and (7)% in Magazines. This
resilient performance was driven by a more diversified revenue mix combined
with more established positions in the market. UK Media organic performance
was driven by a resilient (7)% decline in digital advertising and other media,
whilst affiliates were flat as a result of strong growth of +8% in price
comparison offset by a decline in affiliate products. The relatively stronger
UK performance demonstrates how market leadership creates resilience, notably
through a higher mix of direct advertising.
US revenue declined by (4)% or £(13.6)m to £312.3m (FY 2022: £325.9m) with
the benefit of favourable foreign exchange and the contribution from
acquisitions, notably Who What Wear and ActualTech being more than offset by
organic decline. Organic decline of (19)% was driven by an unfavourable mix
with a high proportion of digital advertising and affiliate product revenue,
two categories impacted by challenging market dynamics. Magazines, which are a
small proportion of the US revenue, were flat in the year, helped by +3%
organic growth in subscriptions.
Media revenue decreased by £(20.3)m or (4)% and organically by (13)% to
£514.9m (FY 2022: £535.2m).
Organic digital advertising revenue declined by (19)% despite improved revenue
per user due to the impact of lower online audiences. Importantly, the yield
has remained very resilient as a result of the quality of our audience, and a
favourable mix with more direct advertising. This demonstrates the Group's
ability to deliver valuable audiences to advertisers. Organic other digital
revenue decreased (2)% organically due to phasing shifts of a big event into
FY 2024, the Photography Show.
Organic affiliate revenue decline, improved to (8)% compared to the first
half, with the growth in price comparison (+8%) and vouchers (+5%) partially
offsetting a decline of (28)% in ecommerce products. This performance
highlights the benefit of the strategy of diversification. In Affiliate
products, we have been impacted by the wider macroeconomy through lower demand
as seen in the lower audience numbers as well as a reduction in the average
basket size. The decline was particularly strong in the Consumer Technology
vertical, correlating with the performance of hardware manufacturers in this
market. In our price comparison business, performance was strong, notably in
car and home insurance, benefiting from a high volume of quotes due to high
renewal premia.
Media revenues included £48.8m relating to the in-year acquisitions of
Shortlist Media, ActualTech and Gardening KnowHow and the prior year
acquisitions of Who What Wear and What Culture. ActualTech made a strong start
to life within the group contributing £11.0m of revenue within the year and
more importantly completing the product set in B2B to enable a full stack
advertising solution in our emerging B2B platform. Gardening Know How
contributed £2.3m of revenue to the Group in the year and also helped to move
the Homes vertical into a leadership position, with our Homes vertical now the
third largest network in the US. Gardening Know How is anticipated to go live
on Vanilla, Future's website platform during H1 FY24 to provide a stronger
platform for audience recovery and unlocking future growth.
Magazine revenue declined by £(16.2)m or (6)% to £274.0m (FY 2022:
£290.2m). Magazine organic revenue was down (5)% year-on-year, an improvement
on the historic secular decline rate. Subscriptions experienced a (4)% organic
decline as customers did not renew pandemic subscriptions which is a strong
performance given market trends. Subscriptions now represent 49% of the
Magazines revenue, providing a robust source of recurring revenue. The rest of
the magazine portfolio was down (6)% organically. This resilience was driven
by the strength of our brands which are highly specialist and touch people's
passions.
FY FY Reported change
2023 2022
Consumer B2C 567.7 618.1 (8)%
Price Comparison (Go.Compare) 158.0 146.2 +8%
B2B 63.2 61.1 +3%
Revenue 788.9 825.4 (4)%
Revenue for Consumer B2C was impacted by the challenging digital advertising
market, consumer spend on affiliate and decline in magazines. Revenue for our
price comparison business grew +8% in the year due to favourable market
conditions. Revenue in our B2B business grew +3% in the year thanks to the
inclusion of an acquisition, ActualTech partially offset by organic decline of
(8%) due to challenging market conditions.
Operating profit
Cost of sales were broadly flat year-on-year with inflation, mostly in
magazines with increases to paper and printing costs due to high energy prices
as well as the inclusion of acquisitions and their respective costs, offset by
a reduction in volumes.
Other costs have decreased despite the inclusion of acquisitions and their
respective costs as well as inflationary pressures on salary and wages, driven
by cost savings initiatives from the restructuring programme conducted this
year for which the costs have been recognised as exceptional items. These cost
decreases (translating into a +2ppt impact on the adjusted operating profit
margin) relate to offices, staff location and re-prioritisation of
investment.
As a result, the Group adjusted operating profit margin has only declined by
(1)ppt to 32% (FY 2022: 33%), despite a (1)ppt headwind from revenue mix with
a lower revenue decline from the Magazines business in lower gross
contribution compared to Media business as well as a (2)ppt headwind from cost
inflation on magazine cost of sales and on salaries. This is a testament of
the strength of the platform and the cost agility of the Group, even in the
challenging macroeconomic environment. As a result, adjusted operating profit
decreased by £(15.3)m to £256.4m (FY 2022: £271.7m) with organic profit
performance partially offset by contributions from acquisitions and favourable
foreign exchange. Statutory operating profit decreased by £(14.1)m to
£174.5m (FY 2022: £188.6m) and statutory operating margin decreased by
(1)ppt to 22% (FY 2022: 23%) driven by the performance in adjusted operating
profit, and includes £8.4m of restructuring costs, of which £2.0m is
included in transaction and integration related costs and £6.4m in
exceptional items.
Earnings per share
FY 2023 FY 2022
Basic earnings per share (p) 94.7 101.4
Adjusted basic earnings per share (p) 141.8 164.4
Diluted earnings per share (p) 94.1 100.9
Adjusted diluted basic earnings per share (p) 140.9 163.5
Basic earnings per share is calculated using the weighted average number of
ordinary shares in issue during the period of 119.8m (FY 2022: 120.5m), the
decrease reflecting the share buyback programme which commenced in August
2023.
Adjusted earnings per share is based on profit after taxation which is then
adjusted to exclude share-based payments (relating to equity-settled share
awards with vesting periods longer than twelve months) and associated social
security costs, transaction and integration related costs, exceptional items,
amortisation of intangible assets arising on acquisitions, unwinding of
discount on contingent consideration and change in fair value of contingent
consideration and any related tax effects. Adjusted profit after tax was
£169.9m (FY 2022: £198.1m).
Transaction and integration related costs
Transaction and integration related costs of £6.5m incurred in the year
reflect £5.3m of deal-related fees, £2.0m of restructuring costs related to
recent acquisitions net of £0.8m released following settlement of a provision
for historic legal claims recognised on the Dennis opening balance sheet, of
which £8.9m was paid in the year (FY 2022: £3.6m relating to the Dennis and
Who What Wear acquisitions, £1.2m relating to restructuring and other
integration related costs). £0.9m relates to acquired properties which are
onerous (FY 2022: £9.7m).
Deal-related fees include work related to the Group considering its strategic
options regarding its B2B operations. The Group has been supported in its
considerations by external advisers with their associated costs.
Exceptional items
Exceptional costs incurred in the period include £6.4m relating to
restructuring costs (FY 2022: £2.1m) and £0.9m relating to onerous
properties (FY 2022: £1.3m).
Other adjusting items
Amortisation of acquired intangibles of £59.4m (FY 2022: £58.3m) includes
incremental amortisation arising from the in-year acquisitions of ActualTech
and Gardening Know How.
Share-based payment expenses (relating to equity-settled share awards with
vesting periods longer than twelve months), together with associated social
security costs increased by £0.9m to £7.8m (FY 2022: £6.9m). The nature of
the all-employee Value Creation Plan scheme means that a charge is booked
irrespective of the likelihood of achieving the vesting targets.
Net finance costs and refinancing
On 23 November 2022, the Group further extended its committed debt facilities
with a five-year, £400m term facility partially guaranteed by UK Export
Finance (the 'EDG term facility'). The facility, maturing November 2027, has a
twelve-month availability period and amortises from year 3. It was secured at
competitive market rates, on substantially similar terms to, and with the same
covenants as, the Group's Revolving Credit Facility ('RCF'). On signing, the
first £160m was utilised to prepay the Group's previous Term Loan maturing 31
December 2023. In May 2023, the Group exercised the second one-year extension
option on its £500m RCF, taking the maturity date out to July 2025.
Net finance costs increased to £36.4m (FY 2022: £18.6m) which includes
external interest payable of £29.7m reflecting the utilisation of the Group's
debt facilities to fund the ActualTech and Gardening Know How acquisitions,
and higher interest rates; £3.7m in respect of the amortisation of
arrangement fees relating to the Group's bank facilities; £0.7m unwinding of
discount on contingent consideration relating to the ActualTech acquisition;
and £0.6m increase in fair value of contingent consideration to the
ActualTech acquisition. A further £2.6m of interest was recognised in
relation to lease liabilities, offset by £0.2m of interest income on sublet
properties.
Leverage at 30 September 2023 was 1.25 times, down from 1.48 times at 30
September 2022, demonstrating the Group's ability to continue to de-lever
quickly.
The Group has entered into interest rate swap agreements which swap the
interest profile on a notional £300.0m (2022: nil) on the Group's EDG term
facility to mitigate the risk of fluctuations in interest rates whereby it
receives a variable interest rate based on SONIA and pays a fixed blended rate
of 4.19%.
Taxation
The tax charge for the year amounted to £24.7m (FY 2022: £47.8m), comprising
a current tax charge of £44.3m (FY 2022: £38.3m) and a deferred tax credit
of £19.6m (FY 2022: charge of £9.5m). The current tax charge arises in the
UK where the standard rate of corporation tax in FY2023 is 22% and in the US
where the Group pays a blended Federal and State tax rate of 28%.
The Group's FY 2023 adjusted effective tax rate(6) was 23.3% (FY 2022:
21.75%). The increase in rate in FY 2023 reflects the increase in the UK rate
of corporation tax that took effect on 1 April 2023.
The Group's statutory effective tax rate, inclusive of adjustments in respect
of previous years, has reduced to 17.9% (FY 2022: 28.12%). Excluding the
adjustments in respect of previous years, the FY 2023 statutory tax rate was
24.9% (FY22: 30.2%). The adjustments in respect of previous years recorded in
FY 2023 reflect revisions to prior year estimates where new information
became available as the Group completed its actual tax returns, as well as the
correction of a number of immaterial items. This decreased the Group's
actual FY 2022 corporation tax and deferred tax liabilities against that
estimated at the time of the Group accounts. The difference between the
statutory tax rate of 24.9% and the adjusted effective tax rate of 23.3% is
attributable to the tax effect of the movements on the Group's share-based
payments and other non-deductible costs.
The Group's net deferred tax liability decreased by £23.0m to £107.2m (FY
2022: £130.2m) mainly as a result of the amortisation of acquired intangibles
reducing deferred tax liabilities and the increase of deferred tax assets for
other temporary timing differences.
Dividend
The Board is recommending a final dividend of 3.4p per share for the year
ended 30 September 2023, payable on 13 February 2024 to all shareholders on
the register at close of business on 19 January 2024.
Balance sheet
Property, plant and equipment decreased by £18.6m to £34.4m in the period
(FY 2022: £53.0m) primarily reflecting the write-down of right-of-use assets
and leasehold improvements on onerous properties of £10.7m, primarily
attributable to property leases inherited via the acquisition of Dennis
(included within transaction and integration related costs) and depreciation
of £8.8m, offset by capital expenditure of £2.0m.
Intangible assets decreased by £76.4m to £1,639.4m (FY 2022: £1,715.8m)
driven by amortisation (£71.0m) and an FX headwind of £63.8m. This was
partially offset by the in-year acquisitions of ActualTech and Gardening Know
How (£49.1m) and capitalisation of website development costs (£9.3m).
Trade and other receivables decreased by £10.7m to £123.5m (FY 2022:
£134.3m) primarily due to a £5m reduction in current trading net of the
returns provision and a £10m improvement in cash collection during the period
Trade and other payables decreased by £15.4m to £128.4m (FY 2022: £143.8m)
primarily driven by the payment of the FY 2022 profit pool bonus in the
period, a focus on timely payments as well as the impact of FX. Provisions
decreased by £14.2m, primarily due to payment of £8.9m for settlement of the
provision for historic legal claims recognised on the Dennis opening balance
sheet.
Cash flow and net debt
Net debt at 30 September 2023 was £327.2m (FY 2022: £423.6m) after
reflecting the ActualTech and Gardening Know How acquisitions and share
buyback programme which commenced in August 2023.
The increase in cash is due to the build-up of £22m to finance the share
buyback programme.
During the year, there was a cash inflow from operations of £241.0m (FY 2022:
£268.5m, HY 2022: £138.1m) reflecting strong cash generation. Adjusted
operating cash inflow was £265.4m (FY 2022: £278.8m). A reconciliation of
cash generated from operations to adjusted free cash flow is included below:
FY 2023 FY 2022
£m £m
Cash generated from operations 241.0 268.5
Cash flows related to transaction and integration related costs 15.6 7.1
Cash flows related to exceptional items 13.4 6.6
Settlement of social security costs on share based payments¹ 0.5 2.0
Lease payments following adoption of IFRS 16 Leases (6.0) (5.4)
Adjusted operating cash inflow 264.5 278.8
Cash flows related to capital expenditure (11.3) (11.6)
Adjusted free cash flow 253.2 267.2
¹ Relating to equity-settled share awards with vesting periods longer than
twelve months.
Other significant movements in cash flows include acquisitions totalling
£47.5m (FY 2022: £113.1m), net repayment of bank loans and overdraft (net of
arrangement fees) of £52.3m (FY 2022: £372.3m), acquisition of own shares of
£24.5m (FY 2022: £7.9m), lease payments of £6.0m (FY 2022: £5.4m) and the
balance reflecting the Group's strong cash generation. The Group paid a
dividend in the period of £4.1m (FY 2022: £3.4m). Foreign exchange and other
movements accounted for the balance of cash flows.
Adjusted free cash flow decreased to £253.2m (FY 2022: £267.2m),
representing 99% of adjusted operating profit (FY 2022: 98%), reflecting the
ongoing efficient cash management by the Group.
Going concern
The Group has produced forecasts which have been modelled for different
plausible downside scenarios using the Group's existing £500m RCF which runs
to July 2026 and the £400m UKEF facility which amortises over the next five
years, with a final bullet payment on expiry in November 2027. These
scenarios confirm that even in the most severe but plausible downside
scenarios, the Group is able to generate profits and positive cash flows.
At the year end the Group had net current liabilities of £7.4m (FY 2022:
£115.3m). This is primarily driven by deferred income of £58.5m relating
to subscriptions and the nature of the Group's magazine business where the
profile of cash receipts from wholesalers is often ahead of the payment of
certain magazine related costs. The Group has consistently delivered adjusted
free cash flow conversion of around 100% and is forecast to generate
sufficient cash flows to meet its liabilities as they fall due. The reduction
in net current liabilities since 30 September 2022 is primarily due to the
repayment of the term loan, with the existing UKEF and RCF facilities all
classed as non-current.
After due consideration, the Directors have concluded that there is a
reasonable expectation that the Group has adequate resources to continue in
operational existence for at least twelve months from the date of this report.
For this reason, the Directors continue to adopt the going concern basis in
preparing the consolidated financial statements for the FY 2023 results.
Consolidated income statement
for the year ended 30 September 2023
2023 2022
Note £m £m
Revenue 1,2 788.9 825.4
Net operating expenses 3 (614.4) (636.8)
Operating profit 174.5 188.6
Finance income 6 0.9 0.1
Finance costs 6 (37.3) (18.7)
Net finance costs (36.4) (18.6)
Profit before tax 138.1 170.0
Tax charge 7 (24.7) (47.8)
Profit for the year attributable to owners of the parent 113.4 122.2
Earnings per Ordinary share
Note 2023 2022
pence pence
Basic earnings per share 9 94.7 101.4
Diluted earnings per share 9 94.1 100.9
Consolidated statement of comprehensive income
for the year ended 30 September 2023
2023 2022
£m £m
Profit for the year 113.4 122.2
Items that may be reclassified to the consolidated income statement
Currency translation differences (42.9) 80.8
Gain on cash flow hedge (net of tax) 4.4 -
Other comprehensive (expense)/income for the year (38.5) 80.8
Total comprehensive income for the year attributable to owners of the parent 74.9 203.0
Consolidated statement of changes in equity
for the year ended 30 September 2023
Issued Share Capital redemption reserve £m Cash flow hedge reserve Accumulated exchange differences Retained earnings
Note share premium account Merger reserve Treasury reserve £m £m £m Total
capital £m £m £m equity
£m £m
Balance at 30 September 2021 18.1 197.0 - 581.9 (7.6) - (10.1) 83.0 862.3
Profit for the year - - - - - - - 122.2 122.2
Currency translation differences (net of tax) - - - - - - 80.8 - 80.8
Other comprehensive expense for the year - - - - - - 80.8 - 80.8
Total comprehensive income for the year - - - - - - 80.8 122.2 203.0
Acquisition of own shares - - - - (7.9) - - - (7.9)
Share schemes
- Issue of treasury shares - - - - 7.5 - - (7.5) -
to employees
- Share-based payments - - - - - - - 11.3 11.3
- Current tax on options - - - - - - - 3.1 3.1
- Deferred tax on options - - - - - - - (7.7) (7.7)
Dividends paid to shareholders 8 - - - - - - - (3.4) (3.4)
Balance at 30 September 2022 18.1 197.0 - 581.9 (8.0) - 70.7 201.0 1,060.7
Profit for the year - - - - - - - 113.4 113.4
Currency translation differences - - - - - - (42.9) - (42.9)
Gain on cash flow hedge 16 - - - - - 5.9 - - 5.9
Deferred tax on cash flow hedge - - - - - (1.5) - - (1.5)
Other comprehensive expense for the year - - - - - 4.4 (42.9) - (38.5)
Total comprehensive income for the year - - - - - 4.4 (42.9) 113.4 74.9
Acquisition of own shares (0.3) - 0.3 - (11.4) - - (13.5) (24.9)
Share schemes
- Issue of treasury shares - - - - 4.1 - - (4.1) -
to employees
Share- based payments - - - - - - - 7.6 7.6
- Current tax on options - - - - - - - (0.1) (0.1)
- Deferred tax on options - - - - - - - 0.6 0.6
Dividends paid to shareholders 8 - - - - - - - (4.1) (4.1)
Balance at 30 September 2023 17.8 197.0 0.3 581.9 (15.3) 4.4 27.8 300.8 1,114.7
Consolidated balance sheet
as at 30 September 2023
Note 2023 2022
£m £m
Assets
Non-current assets
Property, plant and equipment 34.4 53.0
Intangible assets - goodwill 10 1,053.6 1,069.6
Intangible assets - other 10 585.8 646.2
Financial asset - derivative 14 6.0 -
Total non-current assets 1,679.8 1,768.8
Current assets
Inventories 1.3 1.2
Corporation tax recoverable 0.3 13.4
Deferred tax 12.8 5.1
Trade and other receivables 123.5 134.3
Cash and cash equivalents 11 60.3 29.2
Finance lease receivable 3.3 6.1
Total current assets 201.5 189.3
Total assets 1,881.3 1,958.1
Equity and liabilities
Equity
Issued share capital 15 17.8 18.1
Share premium account 16 197.0 197.0
Capital redemption reserve 16 0.3 -
Merger reserve 16 581.9 581.9
Treasury reserve 16 (15.3) (8.0)
Cash flow hedge reserve 16 4.4 -
Accumulated exchange differences 16 27.8 70.7
Retained earnings 300.8 201.0
Total equity 1,114.7 1,060.7
Non-current liabilities
Financial liabilities - interest-bearing loans and borrowings 12 387.5 369.0
Lease liability due in more than one year 35.5 55.8
Deferred tax 115.5 131.7
Provisions 13 7.2 21.4
Deferred income 11.9 14.9
Financial liability - derivative 14 0.1 -
Total non-current liabilities 557.7 592.8
Current liabilities
Financial liabilities - interest-bearing loans and borrowings 12 - 83.8
Trade and other payables 128.4 143.8
Deferred income 58.5 55.8
Corporation tax payable - 1.0
Lease liability due within one year 9.3 12.1
Deferred consideration - 4.5
Contingent consideration 14,19 8.2 -
Deferred tax 4.5 3.6
Total current liabilities 208.9 304.6
Total liabilities 766.6 897.4
Total equity and liabilities 1,881.3 1,958.1
Consolidated cash flow statement
for the year ended 30 September 2023
2023 2022
£m £m
Cash flows from operating activities
Cash generated from operations 241.0 268.5
Net interest paid on bank facilities (22.3) (13.7)
Interest paid on lease liabilities (2.3) (2.1)
Tax paid (33.6) (50.1)
Net cash generated from operating activities 182.8 202.6
Cash flows from investing activities
Purchase of property, plant and equipment (2.0) (2.6)
Purchase of computer software and website development (9.3) (9.0)
Purchase of subsidiary undertakings, net of cash acquired (47.5) (113.1)
Settlement of receivable from sellers - 8.0
Net cash used in investing activities (58.8) (116.7)
Cash flows from financing activities
Acquisition of own shares (24.5) (7.9)
Drawdown of bank loans 375.1 95.7
Repayment of bank loans (416.7) (467.1)
(Repayment)/drawdown of overdraft (4.2) 1.0
Bank arrangement fees (6.5) (1.9)
Repayment of principal element of lease liabilities (6.0) (5.4)
Dividends paid (4.1) (3.4)
Net cash used in financing activities (86.9) (389.0)
Net increase/(decrease) in cash and cash equivalents 37.1 (303.1)
Cash and cash equivalents at beginning of year 29.2 324.3
Effects of exchange rate changes on cash and cash equivalents (6.0) 8.0
Cash and cash equivalents at end of year 60.3 29.2
Notes to the consolidated cash flow statement
for the year ended 30 September 2023
A. Cash generated from operations
The reconciliation of profit for the year to cash generated from operations is
set out below:
2023 2022
£m £m
Profit for the year 113.4 122.2
Adjustments for:
Depreciation 8.8 9.1
Impairment charge on tangible assets 10.3 6.6
Gain on exit of leases (10.2) -
Amortisation of intangible assets 71.0 71.3
Share-based payments 7.6 11.3
Net finance costs 36.4 18.6
Tax charge 24.7 47.8
Cash generated from operations before changes in working capital and 262.0 286.9
provisions
(Decrease)/increase in provisions (12.1) 0.5
(Increase) in inventories (0.1) (0.2)
Decrease/(increase) in trade and other receivables 7.6 (3.8)
(Decrease) in trade and other payables (16.4) (14.9)
Cash generated from operations 241.0 268.5
B. Analysis of net debt
1 October Net cash flows On Other non-cash changes Exchange 30 September
2022 £m acquisition £m movements 2023
£m £m £m £m
Cash and cash equivalents 29.2 33.0 4.1 - (6.0) 60.3
Debt due within one year (83.8) 83.8 - - - -
Debt due after more than one year (369.0) (31.6) - (3.7) 16.8 (387.5)
Net debt (423.6) 85.2 4.1 (3.7) 10.8 (327.2)
1 October Net cash flows On Other non-cash changes Exchange 30 September
2021 £m acquisition £m movements 2022
£m £m £m £m
Cash and cash equivalents 324.3 (316.1) 13.0 - 8.0 29.2
Debt due within one year (42.5) (38.3) (2.4) (0.6) - (83.8)
Debt due after more than one year (458.1) 410.8 (296.2) (2.2) (23.3) (369.0)
Net debt (176.3) 56.4 (285.6) (2.8) (15.3) (423.6)
C. Reconciliation of movement in net debt
2023 2022
£m £m
Net debt at start of year (423.6) (176.3)
Increase/(decrease) in cash and cash equivalents 37.1 (303.1)
Decrease in borrowings 52.2 73.9
Amortisation of loan issue costs (3.7) (2.8)
Exchange movements 10.8 (15.3)
Net debt at end of year (327.2) (423.6)
Accounting policies
Compliance statement and basis of preparation
Future plc (the Company) is incorporated and registered in England and Wales
and is a public company limited by shares. The financial statements
consolidate those of Future plc and its subsidiaries (the Group).
The Consolidated Financial Statements have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006 and UK adopted IFRSs. The principal accounting policies
have been applied consistently to all years presented, unless otherwise stated
below. These financial statements have been prepared under the historical cost
convention, except for contingent and deferred consideration and financial
instruments, which are measured at fair value.
The going concern basis has been adopted in preparing these financial
statements.
Status of this preliminary announcement
The financial information contained in this audited preliminary announcement
does not constitute the Company's statutory accounts for the years ended 30
September 2023 or 2022. Statutory accounts for 2022, which were prepared in
conformity with the requirements of the Companies Act 2006 and UK adopted
IFRSs, have been delivered to the registrar of companies, and those for 2023
will be delivered in due course. Full financial statements for the year ended
30 September 2023 will shortly be posted to shareholders.
New or revised accounting standards and interpretations adopted in the year
The following amendments to existing standards became effective in the year:
− IAS 16 Amendments prohibiting a company from deducting from the
cost of property, plant and equipment amounts received from selling items
produced while the company is preparing the asset for its intended use;
− IAS 37 Amendments regarding the costs to include when assessing
whether a contract is onerous;
− IFRS 3 Amendments updating a reference to the Conceptual
Framework;
− IFRS 9 Amendments relating to the fees in the '10 per cent' test
for derecognition of financial liabilities; and
− Annual Improvements to IFRS Standards 2018-2020 Cycle.
The Group has entered into interest rate swaps in the year, with the hedge
accounting requirements of IFRS 9 Financial instruments being applied. The
effective portion of the derivative is recognised in other comprehensive
income and reclassified to profit or loss when the qualifying asset, being the
Group's borrowings, impacts profit or loss.
There has been no material impact from the adoption of new standards,
amendments to standards or interpretations which are relevant to the Group.
New accounting standards, amendments and interpretations that are issued but
not yet applied by the Group
Certain new standards, amendments and interpretations to existing standards
have been published that are mandatory for accounting periods beginning on or
after 1 October 2023 and which the Group has chosen not to adopt early. These
include the following standards which are relevant to the Group:
− IAS 1 Amendments regarding the classification of liabilities,
Amendments regarding the disclosure of accounting policies, and Amendment
regarding the classification of debt with covenants;
− IFRS 7 Amendments regarding supplier financial arrangements;
− IFRS 16 Amendments to clarify how a seller-lessee subsequently
measures sale and leaseback transactions;
− IAS 7 Amendments regarding supplier finance arrangements;
− IAS 8 Amendments regarding the definition of accounting
estimates;
− IAS 12 Amendments regarding deferred tax on leases and
decommissioning obligations and Amendments to provide a temporary exception to
the requirements regarding deferred tax assets and liabilities related to
pillar two income taxes;
− IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Information; and
− IFRS S2 Climate-related Disclosures.
The Group does not expect that the standards and amendments issued but not yet
effective will have a material impact on results or net assets.
Presentation of non-statutory measures
The Directors believe that adjusted results and adjusted earnings per share
provide additional useful information on the core operational performance of
the Group to shareholders, and review the results of the Group on an adjusted
basis internally. The term 'adjusted' is not a defined term under IFRS and may
not therefore be comparable with similarly titled profit measurements reported
by other companies. It is not intended to be a substitute for, or superior to,
IFRS measurements of profit.
During the year the Group has introduced a new Alternative Performance Measure
('APM'): Transaction and integration related costs. Transactions such as
acquisitions are a key part of the Group's strategy and a material amount of
these costs are typically incurred, however the timing and scale will vary
year on year. Transaction and integration costs will also vary depending on
the scale and complexity of corporate transactions and may cross financial
years. Splitting these costs out from the broader category of exceptional
items is intended to allow a user of the financial statements to assess the
impact of these activities on our results. Costs which were included as
exceptional in the comparative period have been included within transaction
and integration related costs on a consistent basis with the current period.
During the period the Board has started to monitor performance using a new
adjusted performance measure, Adjusted EBITDA in line with the Group's
strategy of strengthening its position in the US.
Adjustments are made in respect of:
Adjusting item Explanation
Share-based payments Share-based payment expenses (relating to equity-settled share awards with
vesting periods longer than 12 months), together with associated social
security costs, are excluded from the adjusted results of the Group as the
Directors believe they result in a level of charge that would distort the
user's view of the core trading performance of the Group.
Transaction and integration related costs Although transactions are a key part of the Group's strategy, the Group
adjusts for costs relating to the completion and subsequent integration of
acquisitions and other corporate transactions, initiated within 12 months of
the completion date, as these costs are not related to the core trading of the
Group and not doing so would distort the Group's results, so as to assist the
user of the financial statements to understand the results of the core
underlying operations of the Group. Details of transaction and integration
related costs are shown in note 4.
Exceptional items The Group considers items of income and expense as exceptional and excludes
them from the adjusted results where the nature of the item, or its size, is
material and/or is not related to the core trading of the Group so as to
assist the user of the financial statements to understand the results of the
core underlying operations of the Group. Details of exceptional items are
shown in note 5.
Amortisation of acquired intangible assets The amortisation charge for those intangible assets recognised on business
combinations is excluded from the adjusted results of the Group since they are
non-cash charges arising from non-trading investment activities. As such, they
are not considered to be reflective of the core trading performance of the
Group. This is consistent with industry peers and how certain external
stakeholders monitor the performance of the business.
Amortisation of non acquired intangible assets, depreciation and interest Adjusted EBITDA excludes the amortisation charge for computer software and
website development, as well as amortisation of acquired intangible assets,
depreciation and interest.
Unwinding of discount on contingent consideration The Group excludes the unwinding of the discount on contingent consideration
from the Group's adjusted results on the basis that it is non-cash and the
balance is driven by the Group's assessment of the relevant discount rate to
apply. Excluding this item ensures comparability with prior periods.
Change in the fair value of contingent consideration The Group excludes the remeasurement of these acquisition-related liabilities
from its adjusted results as the impact of remeasurement can vary
significantly. During the year the underlying agreement of the contingent
consideration in relation to ActualTech was changed, resulting in a change in
the fair value (see note 19 for further detail).
The tax related to adjusting items is the tax effect of the items above and
adjustments in respect of the prior year, calculated using the standard rate
of corporation tax in the relevant jurisdiction.
Reference to 'core or underlying' reflects the trading results of the Group
without the impact of amortisation of acquired intangible assets, transaction
and integration related costs, exceptional items, share-based payment expenses
(relating to equity-settled share awards with vesting periods longer than 12
months), together with associated social security costs, unwinding of discount
on contingent consideration and any tax related effects that would otherwise
distort the users understanding of the Group's performance.
A summary table of all measures is included below:
Closest equivalent statutory measure Definition
APM
Adjusted EBITDA Operating profit Adjusted EBITDA represents operating profit before share-based payments
(relating to equity-settled awards with vesting periods longer than 12 months)
and related social security costs, amortisation, depreciation, transaction and
integration related costs and exceptional items.
Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenue.
Adjusting items are shown in the table below and defined in the commentary.
Adjusted operating profit Operating profit Adjusted operating profit represents operating profit before share-based
payments (relating to equity-settled awards with vesting periods longer than
12 months) and related social security costs, amortisation of acquired
intangible assets, transaction and integration related costs and exceptional
items.
This is a key management incentive metric, used within the Group's Deferred
Annual Bonus Plan.
Adjusted operating profit margin is adjusted operating profit as a
percentage of revenue.
Adjusting items are shown in the table below and defined in the commentary.
Adjusted profit before tax Profit before tax Adjusted profit before tax represents profit before tax before share-based
payments (relating to equity-settled awards with vesting periods longer than
12 months) and related social security costs, net finance costs, amortisation
of acquired intangible assets, transaction and integration related costs,
exceptional items, unwinding of discount on contingent consideration and
change in fair value of contingent consideration.
Adjusting items are shown in the table below and defined in the commentary.
Adjusted diluted earnings per share Diluted earnings per share Adjusted diluted earnings per share (EPS) represents adjusted profit after tax
divided by the weighted average dilutive number of shares at the year end
date.
This is a key management incentive metric, used within the Group's Performance
Share Plan.
A reconciliation is provided in note 9.
Adjusted effective tax rate Effective tax rate Adjusted effective tax rate is defined as the effective tax rate adjusted for
the tax impact of adjusting items and any other one-off impacts, including
adjustments in respect of previous years. The tax impact of adjusting items is
provided in note 7.
Adjusted operating cash flow Operating cash flow Adjusted operating cash flow represents cash generated from operations
adjusted to exclude cash flows relating to transaction and integration related
costs, exceptional items and payment of accrual for employer's taxes on
share-based payments relating to equity settled share awards with vesting
periods longer than 12 months, and to include lease repayments following
adoption of IFRS 16 Leases.
Adjusted free cash flow Free cash flow Adjusted free cash flow is defined as adjusted operating cash flow less
capital expenditure. Capital expenditure is defined as cashflows relating to
the purchase of property, plant and equipment and purchase of computer
software and website development.
Net debt The aggregation of cash and debt Net debt is defined as the aggregate of the Group's cash and cash equivalents
and its external bank borrowings net of capitalised bank arrangement fees. It
does not include lease liabilities recognised following the adoption of IFRS
16 Leases.
A reconciliation of adjusted EBITDA and adjusted operating profit to profit
before tax is shown below:
2023 2022
£m £m
Adjusted EBITDA 276.8 293.8
Depreciation (8.8) (9.1)
Amortisation of non-acquired intangibles (11.6) (13.0)
Adjusted operating profit 256.4 271.7
Share-based payments (including social security costs) (7.8) (6.9)
Transaction and integration related costs (note 4) (7.4) (14.5)
Exceptional items (note 5) (7.3) (3.4)
Amortisation of acquired intangibles (59.4) (58.3)
Operating profit 174.5 188.6
Net finance costs (36.4) (18.6)
Profit before tax 138.1 170.0
A reconciliation between adjusted and statutory earnings per share measures is
shown in note 9.
A reconciliation of cash generated from operations to adjusted free cash flow
is shown below:
2023 2022
£m £m
Cash generated from operations 241.0 268.5
Cash flows related to transaction and integration related costs 15.6 7.1
Cash flows related to exceptional items 13.4 6.6
Settlement of social security costs on share based payments¹ 0.5 2.0
Lease payments (6.0) (5.4)
Adjusted operating cash inflow 264.5 278.8
Cash flows related to capital expenditure (11.3) (11.6)
Adjusted free cash flow 253.2 267.2
¹ Relating to equity-settled share awards with vesting periods longer than 12
months.
Reconciliation between revenue and organic revenue at constant currency:
2023 2022
£m £m
Total revenue 788.9 825.4
Revenue from FY 2023 and FY 2022 acquisitions which have not been acquired for (47.1) (13.3)
a full financial year
Organic revenue 741.8 812.1
Impact of FX at constant rates (0.9) 15.1
Organic revenue at constant currency 740.9 827.2
Notes
1. Segmental reporting
The Group is organised and arranged primarily by reportable segment. The
Executive Directors consider the performance of the business from a
geographical perspective, namely the UK and the US. The Australian business is
considered to be part of the UK segment and is not reported separately due to
its size. The Group also uses a sub-segment split of Media (websites and
events) and Magazines for further analysis. The Group considers that the
assets within each geographical segment are exposed to the same risks.
(a) Reportable segment
(i) Segment revenue
Sub-segment 2023 Sub-segment 2022
£m £m
Media Magazines Total Media Magazines Total
£m £m £m £m £m £m
Segment:
UK 280.8 195.8 476.6 284.2 215.3 499.5
US 234.1 78.2 312.3 251.0 74.9 325.9
Total 514.9 274.0 788.9 535.2 290.2 825.4
Transactions between segments are carried out at arm's length.
(ii) Segment adjusted operating profit
Adjusted operating profit is used by the Executive Directors to assess the
performance of each segment. Operating profit for the Media and Magazines
sub-segments is not reported internally, as overheads are not fully allocated
on this basis. The table below shows the impact of intra-group adjustments on
the adjusted operating profit for the UK and US segments:
2023 2022
£m £m
Adjusted operating Intra-group Adjusted Adjusted operating Intra-group Adjusted
profit prior to adjustments operating profit profit prior to adjustments operating profit
intra-group £m £m intra-group £m £m
adjustments adjustments
£m £m
UK 70.6 69.9 140.5 60.5 88.2 148.7
US 185.8 (69.9) 115.9 211.2 (88.2) 123.0
Total 256.4 - 256.4 271.7 - 271.7
Intra-group adjustments relate to the net impact of charges from the UK to the
US in respect of management fees (for back office revenue functions such as
finance, HR and IT which are largely based in the UK) and licence fees for the
use of intellectual property.
A reconciliation of total segment adjusted operating profit to profit before
tax is provided as follows:
2023 2022
£m £m
Adjusted operating profit 256.4 271.7
Share-based payments (including social security costs) (7.8) (6.9)
Amortisation of acquired intangibles (59.4) (58.3)
Transaction and integration related costs (note 4) (7.4) (14.5)
Exceptional items (note 5) (7.3) (3.4)
Net finance costs (36.4) (18.6)
Profit before tax 138.1 170.0
(b) Business segment
(i) Gross profit by business segment
Sub-segment 2023 Sub-segment 2022
£m £m
Media Magazines Other Add back distribution expenses Total Media Magazines Other Add back distribution expenses Total
£m £m £m £m £m £m £m £m £m £m
Segment:
UK 200.0 109.3 (133.0) 27.6 203.9 203.3 127.5 (136.2) 31.1 225.7
US 205.1 55.4 (88.5) 12.4 184.4 224.0 54.3 (80.8) 11.4 208.9
Total 405.1 164.7 (221.5) 40.0 388.3 427.3 181.8 (217.0) 42.5 434.6
'Other' relates mainly to sales, marketing and editorial related costs that
are not directly attributable to Media or Magazines.
No end-customer, or other single customer or group of customers under common
control contributed 10% or more to the Group's revenue in either the current
or prior year. The above analysis excludes the impact of intra-group
adjustments.
2. Revenue
The Group applies IFRS 15 Revenue from contracts with customers. See note 1
for disaggregation of revenue by sub-segment.
Timing of satisfaction of performance obligations
Revenue is recognised in the income statement when control passes to the
customer. If the customer simultaneously receives and consumes the benefits of
the contract, revenue is recognised over time. Otherwise, revenue is
recognised at a point in time.
The table below disaggregates revenue according to the timing of satisfaction
of performance obligations:
2023 2022
£m £m
Over Point in Total Over Point in Total
time time revenue time time revenue
£m £m £m £m £m £m
Total revenue 17.4 771.5 788.9 16.2 809.2 825.4
3. Net operating expenses
Operating profit is stated after charging:
2023 2022
Statutory Statutory
results results
£m £m
Cost of sales (400.6) (390.7)
Distribution expenses (40.0) (42.5)
Share-based payments (including social security costs) (7.8) (7.4)
Transaction and integration related costs (note 4) (7.4) (14.5)
Exceptional items (note 5) (7.3) (3.4)
Depreciation (8.8) (9.1)
Amortisation (71.0) (71.3)
Other administration expenses (71.5) (97.9)
(614.4) (636.8)
4. Transaction and integration related costs
2023 2022
£m £m
Transaction and integration related costs 6.5 4.8
Onerous property costs 0.9 9.7
Total charge 7.4 14.5
Transaction and integration related costs of £6.5m incurred in the year
reflect £5.3m of prospective and executed deal-related fees, £2.0m of
restructuring costs related to recent acquisitions net of £0.8m released
following settlement of a provision for historic legal claims recognised on
the Dennis opening balance sheet, of which £8.9m was paid in the year (FY
2022: £3.6m relating to the Dennis and Who What Wear acquisitions, £1.2m
relating to restructuring and other integration related costs).
£0.9m relates to acquired properties which are onerous (FY 2022: £9.7m).
Deal-related fees include work related to the Group considering its strategic
options regarding its B2B operations. The Group has been supported in its
considerations by external advisers with their associated costs.
Further details in respect of the acquisitions are shown in note 19.
5. Exceptional items
2023 2022
£m £m
Restructuring costs 6.4 2.1
Onerous property costs 0.9 1.3
Total charge 7.3 3.4
Exceptional costs incurred in the period include £6.4m relating to
restructuring costs (FY 2022: £2.1m) and £0.9m relating to onerous
properties (FY 2022: £1.3m).
6. Finance income and costs
2023 2022
£m £m
Interest payable on interest-bearing loans and borrowings (29.7) (13.6)
Amortisation of bank loan arrangement fees (3.7) (2.8)
Interest payable on lease liabilities (2.6) (2.3)
Increase in fair value of contingent consideration (0.6) -
Unwinding of discount on contingent consideration (0.7) -
Total reported finance costs (37.3) (18.7)
Interest receivable on interest-bearing loans and borrowings 0.7 -
Interest receivable on lease liabilities 0.2 0.1
Total reported finance income 0.9 0.1
Net finance costs (36.4) (18.6)
For further information in respect of the Group's debt facilities and changes
during the year see note 12.
7. Tax on profit
The tax charged in the consolidated income statement is analysed below:
2023 2022
£m £m
Corporation tax
Current tax on the profit for the year 49.5 43.6
Adjustments in respect of previous years (5.2) (5.3)
Current tax charge 44.3 38.3
Deferred tax origination and reversal of temporary differences
Current year (credit)/charge (15.0) 7.8
Adjustments in respect of previous years (4.6) 1.7
Deferred tax (credit)/charge (19.6) 9.5
Total tax charge 24.7 47.8
The adjustments in respect of previous years relate to estimation revisions
identified when preparing the current year tax provision due to new
information becoming available when the Group completed its tax returns, as
well as the correction of a number of immaterial items.
The tax assessed in each year differs from the standard rate of corporation
tax in the UK for the relevant year. The differences are explained below:
2023 2022
£m £m
Profit before tax 138.1 170.0
Profit before tax at the standard UK tax rate of 22% (2022: 19%) 30.4 32.3
Expenses not deductible for tax purposes 1.5 1.4
Non-deductible amortisation (0.4) -
Share-based payments 0.1 11.1
Effect of different rates of subsidiaries operating in other jurisdictions 3.4 6.6
Effect of change in tax rate (0.5) -
Adjustments in respect of previous years (9.8) (3.6)
Total tax charge 24.7 47.8
Included below is a reconciliation between the statutory and adjusted tax
charge:
2023 2022
£m £m
Total statutory tax charge 24.7 47.8
Tax effect of adjusting items:
Exceptional items 1.9 1.6
Transaction and integration related costs 0.3 0.1
Share based payments (0.1) (10.9)
Amortisation of acquired intangibles 14.8 12.8
Adjustments in respect of previous years 9.8 3.6
Total adjusted tax charge 51.4 55.0
The Directors have assessed the Group's uncertain tax positions and have
recorded a provision of £5.3m (2022: £3.4m). The provision for uncertain
tax positions has been recognised under IAS 12, taking into account the
guidance published in IFRIC 23.
8. Dividends
Equity dividends 2023 2022
Number of shares in issue at end of year (million) 119.1 120.9
Dividends paid in year (pence per share) 3.4 2.8
Dividends paid in year (£m) 4.1 3.4
Interim dividends are recognised in the period in which they are paid and
final dividends are recognised in the period in which they are approved.
On 6th December the Board proposed a dividend of 3.4p per share, totalling an
estimated £3.9m, in respect of the year ended 30 September 2023, which
subject to shareholder consent at the AGM, will be paid on 13 February 2024 to
shareholders on the register at close of business on 19 January 2024.
A dividend of 3.4p per share totalling £4.1m in respect of the year ended 30
September 2022 was paid on 14 February 2023.
9. Earnings per share
2023 2022
Adjusted results Adjusting items Statutory results Adjusted results Adjusting items Statutory results
pence pence pence pence pence pence
Basic earnings/(loss) per share 141.8 (47.1) 94.7 164.4 (63.0) 101.4
Diluted earnings/(loss) per share 140.9 (46.8) 94.1 163.5 (62.6) 100.9
Basic earnings per share are calculated using the weighted average number of
Ordinary shares in issue during the year. Diluted earnings per share have been
calculated by taking into account the dilutive effect of shares that would be
issued on conversion into Ordinary shares of awards held under employee share
schemes.
Adjusted earnings per share is based on profit after taxation which is then
adjusted to exclude share-based payments (relating to equity settled share
awards with vesting periods longer than 12 months) and associated social
security costs, transaction and integration related costs, exceptional items,
amortisation and impairment of intangible assets arising on acquisitions,
unwinding of discount and change in fair value of contingent consideration,
and any related tax effects. In the prior year, the results were also adjusted
for the impact of the UK tax rate change.
2023 2022
Adjustments to profit after tax:
Profit after tax (£m) 113.4 122.2
Share-based payments (including social security costs) (£m) 7.8 6.9
Transaction and integration related costs (£m) 7.4 14.5
Exceptional items (£m) 7.3 3.4
Amortisation of intangible assets arising on acquisitions (£m) 59.4 58.3
Unwinding of discount on contingent consideration (£m) 0.7 -
Increase in fair value of contingent consideration (£m) 0.6 -
Tax effect of the above adjustments and the impact of tax items relating to (26.7) (7.2)
prior years (£m)
Adjusted profit after tax (£m) 169.9 198.1
Weighted average number of shares in issue during the year:
- Basic 119,786,409 120,505,969
- Dilutive effect of share options 763,756 652,687
- Diluted 120,550,165 121,158,656
Basic earnings per share (in pence) 94.7 101.4
Adjusted basic earnings per share (in pence) 141.8 164.4
Diluted earnings per share (in pence) 94.1 100.9
Adjusted diluted earnings per share (in pence) 140.9 163.5
The adjustments to profit after tax have the following effect:
Basic earnings per share (pence) 94.7 101.4
Share-based payments (including social security costs) (pence) 6.5 5.7
Transaction and integration related costs 6.2 12.1
Exceptional items (pence) 6.1 2.8
Amortisation of intangible assets arising on acquisitions (pence) 49.6 48.4
Unwinding of discount on contingent consideration (pence) 0.6 -
Increase in fair value of contingent consideration (pence) 0.5 -
Tax effect of the above adjustments and the impact of tax items relating to (22.4) (6.0)
prior years (pence)
Adjusted basic earnings per share (pence) 141.8 164.4
Diluted earnings per share (pence) 94.1 100.9
Share-based payments (including social security costs) (pence) 6.5 5.7
Transaction and integration related costs 6.1 12.0
Exceptional items (pence) 6.1 2.8
Amortisation of intangible assets arising on acquisitions (pence) 49.3 48.1
Unwinding of discount on contingent consideration (pence) 0.6 -
Increase in fair value of contingent consideration (pence) 0.5 -
Tax effect of the above adjustments and the impact of tax items relating to (22.3) (6.0)
prior years (pence)
Adjusted diluted earnings per share (pence) 140.9 163.5
10. Intangible assets
Goodwill Publishing rights Brands Customer relationships Subscribers Advertiser relationships Other acquired Other Total
£m £m £m £m £m £m intangibles £m £m
£m
Cost
At 1 October 2021 951.2 90.4 349.7 54.5 15.2 1.7 40.9 46.0 1,549.6
Additions through business combinations 302.6 - 128.4 - 62.0 19.1 - 1.7 513.8
Other additions - - - - - - - 9.0 9.0
Exchange adjustments 86.4 0.5 23.5 3.3 9.2 2.1 2.6 2.5 130.1
At 30 September 2022 1,340.2 90.9 501.6 57.8 86.4 22.9 43.5 59.2 2,202.5
Additions through business combinations 29.2 - 10.5 7.4 - - 2.0 - 49.1
Other additions - - - - - - - 9.3 9.3
Exchange adjustments (49.1) (0.3) (14.9) (1.7) (4.8) (1.8) (1.5) (1.3) (75.4)
At 30 September 2023 1,320.3 90.6 497.2 63.5 81.6 21.1 44.0 67.2 2,185.5
Accumulated amortisation and impairment
At 1 October 2021 (263.0) (22.0) (31.4) (13.6) (5.7) (1.6) (25.5) (32.1) (394.9)
Charge for the year - (7.5) (27.4) (7.8) (9.4) (1.0) (5.2) (13.0) (71.3)
Exchange adjustments (7.6) (0.4) (4.3) (1.3) (2.0) (0.4) (2.4) (2.1) (20.5)
At 30 September 2022 (270.6) (29.9) (63.1) (22.7) (17.1) (3.0) (33.1) (47.2) (486.7)
Charge for the year - (6.4) (28.7) (8.6) (9.7) (1.7) (4.3) (11.6) (71.0)
Exchange adjustments 3.9 0.2 3.0 0.7 1.2 0.2 1.2 1.2 11.6
At 30 September 2023 (266.7) (36.1) (88.8) (30.6) (25.6) (4.5) (36.2) (57.6) (546.1)
Net book value at 30 September 2023 1,053.6 54.5 408.4 32.9 56.0 16.6 7.8 9.6 1,639.4
Net book value at 30 September 2022 1,069.6 61.0 438.5 35.1 69.3 19.9 10.4 12.0 1,715.8
Net book value at 1 October 2021 688.2 68.4 318.3 40.9 9.5 0.1 15.4 13.9 1,154.7
Useful economic lives 5-15 3-20 years 8-10 7-11 9-15 3-10 2
years years years years years years
Acquired intangibles are amortised over their estimated economic lives,
typically ranging between three and ten years. The other acquired intangibles
category in the table above includes assets relating to customer lists,
content and websites.
Any residual amount arising as a result of the purchase consideration being in
excess of the value of acquired assets is recorded as goodwill.
Further details regarding the intangible assets acquired during the year
through business combinations are set out in note 19.
Other intangibles relate to capitalised software costs and website development
costs which are internally generated.
Amortisation is included within administration expenses in the consolidated
income statement.
Impairment assessments for goodwill
The net book value of goodwill at 30 September 2023 consists of £603.0m
(2022: £603.0m) relating to the UK, £438.9m (2022: £453.6m) relating to the
US and £11.7m (2022: £13.0m) relating to Australia.
At 30 September 2023 the Group performed its annual impairment assessment of
goodwill and concluded that no impairment of goodwill was required.
11. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the cash
flow statements:
2023 2022
£m £m
Cash and cash equivalents 60.3 29.2
The increase in cash is due to the build up of £22m as at 30 September 2023
in order to finance the share buyback programme (see notes 15 and 16 for
further detail).
12. Financial liabilities - interest-bearing loans and borrowings
Amounts drawn down on the Group's borrowing facilities, net of unamortised
issue costs are as follows. All borrowings are floating rate with the
applicable rates at 30 September shown below. This excludes the impact of
any interest rate swaps.
Non-current liabilities
Interest rate at Interest rate at 2023 2022
30 September 30 September £m £m
2023 2022
Sterling term loan - 3.99% - 80.0
Export development guarantee term facility 7.04% - 295.2 -
Sterling revolving loan - 4.32% - 115.5
US dollar revolving loan 7.43% 4.98% 81.8 161.5
AU dollar revolving loan 6.06% 4.68% 10.5 12.0
Total 387.5 369.0
Current liabilities
Interest rate at Interest rate at 2023 2022
30 September 30 September £m £m
2023 2022
Multi-currency overdraft - 1.00% - 4.2
Sterling term loan - 3.99% - 79.6
Total - 83.8
The interest-bearing liabilities are repayable as follows:
2023 2022
£m £m
Within one year - 83.8
Between one and two years 20.0 -
Between two and five years 367.5 369.0
Total 387.5 452.8
On 23 November 2022, the Group further extended its committed debt facilities
with a five-year, £400m EDG term facility partially guaranteed by UK Export
Finance. The facility, maturing November 2027, has a twelve-month availability
period and amortises from year three. It was secured at competitive market
rates, on substantially similar terms to, and with the same covenants as, the
Group's Revolving Credit Facility ('RCF'). On signing, the first £160m was
utilised to prepay the Group's previous Term Loan maturing 31 December 2023.
In May 2023 the Group exercised the second one-year extension option on its
£500m RCF, taking the repayment date out to July 2026.
Interest bearing loans are shown net of unamortised issue costs which amounted
to £7.7m (2022: £5.0m).
13. Provisions
Property Other Total
£m £m £m
At 1 October 2022 9.1 12.3 21.4
Charged(released) in the year 0.3 (1.0) (0.7)
Utilised in the year (2.7) (8.9) (11.6)
Foreign exchange movement - (1.9) (1.9)
At 30 September 2023 6.7 0.5 7.2
The provision for property relates to dilapidations and obligations under
short leasehold agreements on vacant property. The majority of the vacant
property provision is expected to be utilised over the next three years. The
reduction in other provisions is primarily due to payment of £8.9m for
settlement of the provision for historic legal claims recognised on the Dennis
opening balance sheet.
14. Financial instruments
The Group applies IFRS 9 Financial Instruments. For the Group's financial
assets and liabilities, the following table shows the measurement categories
under IFRS 9:
Financial asset IFRS 9 classification
Cash and cash equivalents Amortised cost
Trade and other receivables Amortised cost
Interest bearing loans and borrowings Amortised cost
Lease liabilities Amortised cost
Contingent consideration Fair value through profit or loss
Derivative - interest rate swap Fair value through profit or loss
There has not been a significant impact on the carrying amounts of assets
held.
Financial asset - derivative
The Group has exposure to changes in cash flows due to changes in interest
rates. To manage this risk, during the year the Group entered into
floating-to-fixed interest rate swaps to hedge a proportion of its floating
rate exposure to fixed rates. The swaps have similar critical terms to the
floating leg of swaps that form part of the fair value hedges, such as the
reference rate, reset dates, notional amounts, payment dates and maturities.
The full fair value of a hedging derivative is classified as a non-current
asset or liability if the remaining maturity of the hedged item is more than
twelve months and as a current asset of liability, if the maturity of the
hedged item is less than twelve months.
There was no ineffectiveness to be recorded from the use of interest rate
swaps. The Group did not enter into any netting arrangements.
The following table presents the Group's financial assets and liabilities that
are measured at fair value at 30 September 2023:
Financial asset Level 2 Level 3
Fair value Fair value
£m £m
Assets
Financial asset - derivative 6.0 -
Liabilities
Financial liability - derivative (0.1) -
Contingent consideration - (8.2)
All other financial assets and liabilities are classed as level 1.
Contingent consideration
At 30 September 2023 contingent consideration of £8.2m ($10.0m) related to
the acquisition of ActualTech, LLC ("ActualTech") (see note 19 for further
details). During the year the terms of the earn-out agreement were updated.
This resulted in a fair value expense of £0.6m in the year (after discounting
of £0.7m) being recognised in the income statement.
The contingent consideration for ActualTech has been valued using a
scenario-based approach drawing from internal EBITDA projections and weighting
them according to the perceived probability of being achieved. The outcome is
then discounted to reflect the market risk related to the earn-out and
underlying achievement of the EBITDA targets.
The discount rate was determined using a Capital Asset Pricing Model (CAPM)
approach.
The main level 3 inputs used in valuing the contingent consideration were a
discount rate of 13% and EBITDA.
A 10% change in the discount rate, which is considered to be a reasonably
possible alternative assumption, would give rise to less than £0.1m impact on
the quantum of the liability recognised.
The table below sets out the sensitivity of level 3 inputs to a 10% change in
the assumptions, which is considered to be a reasonably possible alternative
assumption:
Assumption Increase/(decrease) Increase/(decrease) in liability (£m)
Discount rate +10% -
Discount rate (10)% -
EBITDA +10% 1.5
EBITDA (10)% (0.2)
15. Issued share capital
2023 2022
Number of Number of
shares £m shares £m
Allotted, authorised, issued and fully paid Ordinary shares of 15p each
At 1 October 120,855,930 18.1 120,624,634 18.1
Share scheme exercises - - 229,113 -
Share buyback (1,784,349) (0.3) - -
Share Incentive Plan matching shares 5,554 - 2,183 -
At 30 September 119,077,135 17.8 120,855,930 18.1
During the year, 5,554 Ordinary shares were issued under the Share Incentive
Plan for a combined total cash commitment of £nil (2022: 2,183 ordinary
shares, total cash commitment of £nil).
Given the retained cash in the business, on 4 August 2023 the Group commenced
a share buyback programme, resulting in a reduction in share capital of 1.8m
shares in the year, at a nominal value of £0.3m and a total cost of £13.1m.
16. Reserves
Share premium account
Share premium represents the excess of proceeds received over the nominal
value of new shares issued.
Treasury reserve
The treasury reserve represents the cost of shares in Future plc purchased in
the market and held by the Employee Benefit Trust ('EBT') to satisfy awards
made by the trustees.
During the year the Company purchased 1,125,000 of its own shares to fund the
future vesting of share options, at a total value of £11.4m and 259,918
shares held by the EBT were used to satisfy the vesting of share options at a
total value of £4.1m (2022: 522,795 shares were purchased, at a total value
of £7.9m).
Capital redemption reserve
A capital redemption reserve of £0.3m was created during the year, being the
nominal value of shares purchased and cancelled as part of the share buyback
programme (see note 15 for further detail).
Merger reserve
During the current year there was no movement on the merger reserve.
Accumulated exchange differences
The reserve for accumulated exchange differences comprises the revaluation of
the Group's foreign currency entities, principally the US and Australia, on
consolidation.
Cash flow hedge reserve
During the year the Group entered into interest rate swaps, in order to hedge
against fluctuations in interest rates. The cash flow hedge reserve represents
the cumulative amount of gains and losses on the interest rate swap deemed
effective.
17. Contingent liabilities
There were no material contingent liabilities as at 30 September 2023 or 30
September 2022.
18. Related party transactions
The Group had no material transactions with related parties in 2023 or 2022
which might reasonably be expected to influence decisions made by users of
these financial statements.
19. Acquisitions
Acquisition of Shortlist
On 18 October 2022, Future completed the acquisition of ShortList Media
Limited (trading as Shortlist.com), a technology website, for consideration of
£0.2m.
Acquisition of ActualTech LLC
On 30 November 2022 the Group acquired ActualTech LLC ("ActualTech"), a
provider of content marketing solutions for B2B marketers, for initial cash
consideration of £32.2m (inclusive of £3.3m cash acquired, representing an
Enterprise Value of $36m). On acquisition a further variable deferred
consideration up to a total value of $24 million could be paid, subject to
meeting certain financial targets based on the twelve-month period ending 31
December 2023. The table below includes £6.9m ($8.3m) as contingent
consideration, which represents its fair value at the date of acquisition. At
the reporting date, the fair value of the contingent consideration had
increased to £8.2m ($10.0m) due to discounting and an increase in its fair
value at 30 September 2023 as a result of a change to the terms of the
earn-out agreement, which increased the maximum earn out payable to $25
million. 100% of the voting equity interest was acquired.
The impact of the acquisition on the consolidated balance sheet was:
Fair value
£m
Intangible assets
- Brand 3.4
- Customer relationships 7.4
- Database 0.3
- Software 0.5
Cash and cash equivalents 3.3
Trade and other receivables 1.4
Trade and other payables (0.6)
Net assets acquired 15.7
Goodwill 23.4
39.1
Consideration:
Cash 32.2
Contingent consideration 6.9
Total consideration 39.1
ActualTech specialises in webinars, white papers, syndication and content
marketing on owned platforms. The acquisition further diversifies the Group by
strengthening its position in the B2B vertical and provides greater scale and
reach in North America to further monetise its highly-valuable B2B audience.
In addition, the Group will be leveraging ActualTech's webinar capabilities
and its US expertise within the Group's existing portfolio.
Goodwill is attributable to the opportunities associated with future returns
from new customer relationships. The intangibles recognised, including
goodwill, are expected to be deductible for tax purposes.
Included within the Group's results for the period are revenues of £11.0m and
a profit before tax of £4.5m from ActualTech (excluding acquired intangible
amortisation).
If the acquisition had been completed on the first day of the financial year,
it would have contributed £13.1m of revenue and a profit before tax of £5.3m
(excluding acquired intangible amortisation) during the period.
Gross trade receivables were £1.4m on acquisition, of which £1.4m were
expected to be recovered.
Acquisition of Gardening Know How
On 7 February 2023, the Group acquired Gardening Know How, a specialist
interest site for gardening based in the US, for total consideration of
£14.8m (inclusive of £0.8m cash acquired, representing an Enterprise Value
of $17m). The Gardening Know How acquisition brings additional expertise to
the Group, strengthening the Group's strategic Homes vertical. 100% of the
voting equity interest was acquired.
The impact of the acquisition on the consolidated balance sheet was:
Fair value
£m
Intangible assets
- Brand 7.1
- Content 1.2
Cash and cash equivalents 0.8
Trade and other receivables 0.3
Trade and other payables (0.1)
Net assets acquired 9.3
Goodwill 5.5
14.8
Consideration:
Cash 14.8
Total consideration 14.8
Goodwill is attributable to future premium advertising relationships and new
evergreen content. The intangibles recognised, including goodwill, are
expected to be deductible for tax purposes.
Included within the Group's results for the period are revenues of £2.3m.
Gardening Know How has been integrated into the Future business, including use
of the Group's shared back office functions, therefore individual profits for
the business cannot be separately identified. The website is expected to be
migrated to our tech platform in H1 2024. The migration will drive better
monetisation of the website and will help recover a challenging FY 2023
performance. The FY 2023 performance was driven by lower online users.
Gross trade receivables were £0.3m on acquisition, of which £0.3m were
expected to be recovered.
Disposal of titles
On 28 April the Group disposed of The Shooting Times & Country, Sporting
Gun, www.shootinguk.co.uk and The Shooting Show for total consideration of
£0.2m, of which £0.1m is deferred for twelve months, resulting in a gain on
disposal of £0.1m.
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