future plc interim report 2011

Future plcInterim Report 2011

HighlightsChief Executive’s statementInterim statementConsolidated income statementConsolidated statement of comprehensive incomeConsolidated statement ofchanges in equityConsolidated balance sheetConsolidated cash flow statementNotes to the consolidated cash flow statementBasis of preparationNotes to the financial informationStatement of Directors’ responsibilitiesIndependent review report to Future plcKey performance indicatorsDirectors and advisersFinancial calendar and contacts

Contents

Highlights

1

Financial summary:H1 11 H1 10

Revenue £68.8m £71.4m

EBITA * £2.4m £4.4m

EBITA margin 3.5% 6.2%

Operating profit £1.8m £3.0m

Reported pre-tax profit £1.2m £2.2m

Earnings per share (p) 0.2p 0.4p

Adjusted ** earnings per share (p) 0.4p 0.7p

Dividends relating to the period (pence per share) 0.5p 0.5p

Future plc Interim Report 2011

Summary:» Revenue: H1 down 4%, flat excluding closures» Profit decline from accelerated investment in growth areas: › Digital: revenue up 30%, profitable in aggregate › Custom publishing: revenue up 27%» Cash generative, net debt: £8.9m, down 23% year-on-year.

Outlook:» Macro environment remains challenging» Mobile developments accelerate adoption of digital consumption» Continuing commitment to New Product Development» Full year expected to be in line with expectations

Dividend:» Interim dividend maintained

Definitions* EBITA represents operating profit before amortisation of intangible assets.

** Adjusted earnings per share are based on statutory results, but exclude amortisation of intangibles and related tax effects.

The most significant foreign currency affecting the Group is the US dollar. The average exchange rate for the period was only marginally different at $1.59=£1 (H1 10: $1.60=£1).

In our 2010 annual results statement, I quoted JFK who, fifty years ago, said “Change is the law of life”.

In our first half-year of 2011, we have seen ample evidence of that.

I am proud that, throughout our Group, our approach to anticipating and managing change continues to be determined, enthusiastic, and focused. We are encouraged by the strong returns on previous investment that we are seeing from some of our digital and partnership products and we believe the Group will benefit from the accelerated investment in our business.

Future’s business is one of engagement with very special-interest audiences who are passionate about particular areas – from computer games to film, from cycling to music-making, from photography to fast cars. Such passions drive our consumers to consume more about their interests – not less – through a variety of platforms and devices and in a multitude of different ways. So whilst parts of our business (print advertising in particular) are in decline, other parts (digital and custom publishing) continue to grow strongly.

Our digitised content revenues grew 30% in H1 and online now represents 34% of our commercial advertising revenues; and, with a tenfold increase in digital edition sales, an increasing percentage of our consumer circulation revenues. Custom publishing – content we produce under contract on behalf of clients – also grew 27% including a doubling of this element of our business in the US.

Our overall position is robust, and we are agnostic as to how our consumers wish to consume content. Customer focus underpins everything we do. And our customers’ almost professional commitment explains why we call them “prosumers”.

Our task is to create, curate, distribute and promote the compelling content that satisfies their interests, whilst at the same time serving commercial opportunities for our partners.

Accelerating changeThe arrival of tablets has finally delivered on the promise of mobile accelerating digital consumption.

We now have a truly hospitable environment for our content with built-in, friction-free payment options. They give a better web-browsing experience, make digital replica magazines a viable addition to print, and open up global commercial opportunities to develop new applications for content whose appeal transcends geography.

Developing new productWe continue to develop our portfolio of print product – but only in adjacent sectors in growth. So far this year we have launched Tap! which targets the exploding Apple iOS market in the UK; Maximum Tech, a broader-based complement to our MacLife and Maximum PC US offers; Knitting Today in partnership with Coats, also in the US; as well as a number of specials and low risk one-offs to test new markets (TechRadar Guides; iCAR; GamesMaster specials; and a number of bookazines). We have also rolled out the successful trial of fan-packs that started with Slash, to pre-launch new albums for Motorhead, Hendrix, Whitesnake, and – next month – Blondie. These premium-priced (£14.99) collectibles use our large magazine distribution footprint to compensate for the reduction in traditional music retail outlets. We’ve also re-designed and re-positioned a number of our established titles – Digital Camera, for example, is this year up 25% on both sales and contribution since re-launch last year; and is now market leader.

We’ve increased our investment in research to support our commercial offer. The Big Game survey showed that 16% of all full price game sales are attributable to our readers. Our Techmonitor study showed how we increasingly influence the influencers; and our new syndicated US audience research has helped to demonstrate our reach to non-endemic advertisers.

But most of our product development focus has been in digital. In making social, sharing, participative, interactive, accessible, relevant and connected new offers. We now have 60 replica magazine editions on iPad, as well as a fully interactive version of T3 – one of only a handful of five-star

Chief Executive’s statement

2 Future plc Interim Report 2011

media apps on the App Store and, with over 100,000 downloads, the biggest-selling paid-for iPad UK magazine.

Digital replica sales have increased more than tenfold year-on-year. And we’re now selling over £100,000 of retail sales per month from a 10m tablets base (predicted to reach 400m in just three years). We’ve had two apps – Guitar World’s Lick of the Day and MacLife – both exceed 500,000 downloads; and we have experimented with content, price, service and frequency across a range of 20 app tests, both own brand and for our clients.

On the web, we’ve upgraded all our Radar properties – particularly GamesRadar. We’ve improved mobile browsing and developed a new content management system for a continuous production and feedback cycle (not just monthly). We’ve invested further in short-form video production (where our new UK CEO, Mark Wood, has particular expertise); in e-commerce; in digital syndication capabilities; and in training our dedicated and talented team to create once and publish everywhere.

The short-term effect of these investments is to depress profits, but we’re already seeing revenue growth from them ahead of expectation.

UK tradingOur portfolio, as ever, enjoyed mixed results as it reflected host sector fortunes as much as macro-economic factors: sales were up in photography, cycling and music – and, importantly, games ad revenue decline halted. But overall, revenues fell 3%.

Our online advertising growth in the UK – some 44% – more than compensated for the continued decline in demand for print advertising. Overall advertising revenues grew year-on-year, with online’s proportion up from 22% to 31%.

Our fastest-growing websites are now delivering over 30% contribution levels: our highest is 47%. TechRadar exceeded 2m UK monthly uniques for the first time and delivered revenues up 51% over the immediately preceding six months, and the UK music websites’ revenues were also up 53%.

Newsstand sales remained challenging although our efficiency levels (copies sold as a proportion of copies printed) were two full percentage points ahead of the market. And our subscribers – by definition our most loyal readership, now at 30% of circulation – are again at an all-time high on all key measures: yield, revenue and retention rates.

US tradingThe US market is changing even more rapidly and revenues declined by 7%. The 10% further decline in our underlying circulation revenue reflected three things: fewer issues

3

produced (not least the closure as planned of our Pregnancy titles); the active phasing-out of our low-yield subscribers; and a reduced retail footprint driven by bookstore closures and an increasing number of independents no longer stocking any magazines. This, coupled with a nearly 25% print advertising decline (notwithstanding fewer issues), has accelerated our commitment to transitioning to digital, where we have enjoyed some real success.

Music digital revenues were up 56% and GamesRadar ad revenues increased 31% (helped by the more than doubling of our non-endemic clients, attracted by engagement scores and dwell times which exceeded those of IGN, Gamespot and UGO).

Digital is now running at 36% of our ad revenues, and a substantial proportion of our FuturePlus custom publishing contribution.

FuturePlus doubled revenue in this half-year thanks to the launch of Knitting Today as well as growth from Best Buy’s @Gamer launch and Blizzard’s World of Warcraft. We also developed bespoke apps for both Best Buy and Coats and Clark.

OutlookWe will continue to review and develop our content, the platforms we deliver on, frequency, pricing and interactivity, throughout the second half even though our expectation remains that the outlook for 2011 will continue to be challenging and we maintain a cautious outlook.

Like all publishers, Future is managing fundamental structural changes in the print market but active portfolio management is mitigating the worst effects of those shifts. In terms of transformation to new business models, we are gaining traction with new products and making progress at a speed that puts us in the vanguard of those publishing businesses which are adapting most successfully to the new digital marketplaces.

A realistic outlook, a focused business, a strong balance sheet and a talented, dedicated and creative team, all support the Board’s confidence that we remain on plan for 2011 and as well-positioned to take advantage of the fast-changing media and technology landscape as we can be.


Stevie Spring Chief Executive, Future plc 20 May 2011

Interim statement

4

Statutory results for half-year to 31 March 2011First half-year revenue was £68.8m (2010: £71.4m) and the business generated EBITA of £2.4m (2010: £4.4m). The resultant EBITA operating margin was 3.5% (2010: 6.2%). The half-year income statement includes a reduced charge for amortisation of intangible assets of £0.6m (2010: £1.4m), reflecting fully written-down acquired intangible assets and a reduction in 2010 of spend on web development costs which are amortised in the following year. The period also benefited from lower net finance costs of £0.6m (2010: £0.8m), leading to a pre-tax profit of £1.2m (2010: £2.2m) for the period.

Review of operationsThe review of operations is based primarily on a comparison of our half-year results for the six months ended 31 March 2011 with those for the six months ended 31 March 2010. Unless otherwise stated, change percentages relate to a comparison of these two periods. There has been no significant change to the geographical scope of the Group’s activities; the Group continues to manage the structural shift in demand for content to be delivered on multiple platforms.

Analysis of revenue for half-year to 31 March

Fifty-eight per cent of the Group’s revenue is generated from consumer (predominantly circulation revenue) and forty-two per cent from client companies (primarily advertising).

Geographical analysis of revenue for half-year to 31 March

In the UK, revenue fell by 3%. In the US, dollar revenue fell by 7% reflecting weakness in print advertising revenue and the closure of our Pregnancy group, which was not completely offset by growth in digital and custom publishing revenue.

The Group is managed primarily on a geographical basis.

Group revenue fell 4%, and also 4% in constant currency reflecting only a minimal change in the average exchange rate with the US dollar. Analyses of revenue are provided below.

Group EBITA of £2.4m was lower than H1 2010. In the UK, growth in contribution from digital activities largely compensated for decline in contribution from print. In the narrower US portfolio, the decline in print advertising of 25% significantly impacted margin, as we maintained investment in growth areas to compensate. Central costs remain firmly under control, after excluding one-off costs of project due diligence. The impact of these factors is reflected in the following table:

Analysis of EBITA for half-year to 31 March

Results for the period2011

£m2010

£mRevenue 68.8 71.4EBITA 2.4 4.4EBITA margin 3.5% 6.2%Amortisation of intangible assets (0.6) (1.4)Operating profit 1.8 3.0Net finance costs (0.6) (0.8)Pre-tax profit 1.2 2.2

Earnings per share (p) 0.2p 0.4pAdjusted earnings per share (p) 0.4p 0.7pDividends relating to the period (pence per share) 0.5p 0.5p

Group%

2011£m

2010£m

Change %

Circulation 58% 40.0 43.0 - 7%Advertising 29% 20.4 21.2 - 4%Custom publishing 9% 6.1 4.8 + 27%Licensing, events & other 4% 2.6 2.7 - 4%Intra-group (0.3) (0.3)Total revenue 100% 68.8 71.4 - 4%

Group

%2011 £m

2010£m

Change%

UK 71% 49.4 50.7 - 3%US 29% 19.7 21.0 - 6%Intra-group (0.3) (0.3)Total revenue 100% 68.8 71.4 - 4%

2011£m

2010£m

Change£m

UK 5.5 6.1 (0.6)US (1.5) (0.4) (1.1)Central costs (1.6) (1.3) (0.3)Total EBITA 2.4 4.4 (2.0)


2011£m

2010£m

Change%

Circulation revenue 31.2 32.5 - 4%Advertising revenue 13.3 13.0 + 2%Custom publishing 2.9 3.2 - 9%Licensing, events & other 2.0 2.0 -Total revenue 49.4 50.7 - 3%EBITA 5.5 6.1EBITA margin 11% 12%

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Growth in profit contribution from digital activities was £1.1m, whilst the corresponding decline from print activities was £1.2m. A £0.3m lower contribution from custom publishing phasing and a £0.2m increase in provision for ageing receivables explain the reduction in EBITA.

We have maintained our control of operating costs.

In the US the growth in profit contribution from digital activities was $0.8m but the decline from print was $3.1m, consequent to the $5.2m decrease in print-derived revenue.

We have maintained our control of operating costs.

UK performance in half-year US performance in half-year (shown in US dollars)

Overall, UK revenue for the half-year fell by 3%.

Circulation revenue fell by 4% but within this subscription revenue grew by 2%. Domestic newsstand revenue declined 9% and export revenue was up 2%.

Advertising revenue grew 2%, because growth in online advertising exceeded the decline in print advertising.

The movements in other sources of revenue are shown in the table above.

The following table shows performance by sector. During the period, the strongest performance came from Technology, driven by TechRadar.

US revenue for the half-year fell by 7%, reflecting the closure of our Pregnancy group, a 25% further decline in print advertising, and an underlying 10% reduction in sales at newsstand.

Total advertising revenue fell by 15% for the half-year, as the growth in digital advertising was less than the reduction in print advertising.

Custom publishing revenue has once again recorded strong growth.

The following table shows performance by sector.

2011Revenue

£m

2011Contrib’n

£m

2011Margin

%

2011 % of

revenue

2010Revenue

£m

2010Contrib’n

£m

2010Margin

%

Games 9.9 2.7 27% 20% 10.1 2.7 27%Music & Movies 11.9 2.8 24% 24% 12.2 3.4 28%Technology 14.8 4.8 32% 30% 15.4 4.6 30%Active 12.8 3.2 25% 26% 13.0 3.2 25%

Overheads 49.4 13.5

(8.0)27% 100% 50.7 13.9

(7.8)27%

EBITA 49.4 5.5 11% 50.7 6.1 12%

2011$m

2010$m

Change%

Circulation revenue 14.0 16.8 - 17%Advertising revenue 11.2 13.2 - 15%Custom publishing 5.2 2.6 + 100%Licensing, events & other 0.9 0.9 –Total revenue 31.3 33.5 - 7%EBITA (2.3) (0.6)EBITA margin - 7% - 2%

2011Revenue

$m

2011Contrib’n

$m

2011Margin

%

2011 % of

revenue

2010Revenue

$m

2010Contrib’n

$m

2010Margin

%

Games 15.8 2.3 15% 51% 15.3 2.2 14%Music & Movies 6.5 – – 21% 7.6 0.9 12%Technology 7.0 0.7 10% 22% 8.3 1.4 17%Active 2.0 (0.4) - 20% 6% 2.3 (0.2) - 9%

Overheads 31.3 2.6

(4.9)8% 100% 33.5 4.3

(4.9)13%

EBITA 31.3 (2.3) - 7% 33.5 (0.6) - 2%


Interim statement (continued)

6

DigitalThe UK and US segmental figures above include digital revenue and operating costs. Digital development continues as a key focus for the business and Group digital revenue increased by 30% from £6.1m to £7.9m for the half-year. The Group’s digital operations are, in aggregate, profitable and growth in digital contribution is increasingly compensating for weakness in print.

Net finance costsNet finance costs were £0.6m, 25% lower than the corresponding figure last year, reflecting a reduction of 25% in the average level of month-end net debt during the period.

TaxationThe tax charge for the half-year was £0.4m (2010: £0.7m) which represents an estimated effective tax rate of 34% (2010: 33%) applied to profit before tax. This is the effective rate estimated to apply to taxable profits of the Group for the full financial year.

Cash flow and net debt Net debt at 30 September 2010 was £7.4m. During the period cash generated from operations amounted to £2.1m (2010: £5.9m) reflecting phasing of cash collection at half-years. During the period, cash outflows totalled £3.4m (2010: £1.6m) in respect of the following items: £1.6m (2010: £Nil) in dividends, £1.4m (2010: £0.7m) in respect of capital expenditure, £0.6m (2010: £0.8m) in net interest payments, and net tax receipts of £0.2m (2010: net tax payments of £0.1m). Exchange and other movements accounted for the balance of cashflows.

Net debt at 31 March 2011 was £8.9m, a reduction of 23% since 31 March 2010.

Bank covenantsFuture funds its operations through a mixture of operating cash flow generated by the business and bank debt. Since 2001 the Group has complied at all times with all covenants under its banking facilities. The position at 31 March 2011 is within the bank covenants as set out in the following table.

The Group’s credit facility was renewed in May 2009, and amended in October 2010 and May 2011. The most recent amendment deleted the cashflow cover covenant from the Credit Agreement altogether, and reduced the maximum ratio of Net debt / EBITDA from 2.5 to 2.0 times for the remaining life of the Agreement, which is due to mature on 30 November 2012. The Board considers that the level of the Group’s net bank debt is acceptable.

Interim dividendThe Group remains profitable and has chosen to continue investing in the business to ensure it is well positioned to exploit digital developments. Taking account of these factors, and the fact that the Group continues to be cash generative, the Board has decided on an unchanged interim dividend of 0.5p per share (2010: 0.5p) to be paid on 3 October 2011 to all shareholders on the register on 19 August 2011. The ex-dividend date is 17 August 2011.

Key performance indicatorsAn updated set of key performance indicators is presented on page 26 of this report.


31 March 2011 Bank covenant

Net debt / EBITDA 0.96 times Less than 2.0 times

EBITDA / interest 7.88 times More than 4.0 times

Cashflow cover Not tested (see below)

7

RisksThe principal risks and uncertainties that affect the Group on an ongoing basis are described in our Annual Report 2010 (on page 24), which is available at www.futureplc.com.

The three risks that may impact the Group’s performance during the second half of the financial year are highlighted immediately below. The impact of these risks could cause actual results to differ from expected and historical results.

Risks that may impact the second half of the financial year

(a) Macro-economic environmentThe macro-economic environment during 2009 and 2010 was the worst in the Company’s history. Both the UK and the US have emerged from recession but as explained earlier, general recovery has been patchy and 2011 trading conditions have remained tough. Future has continued to prove remarkably resilient due to the Group’s focus on areas of special-interest. Nonetheless, the Group may be exposed to any significant or renewed downturn in consumer confidence.

(b) Consumer behaviourConsumers’ propensity to spend money on magazines, digital editions, online shopping, events and other products is influenced by a number of economic factors, including general economic indicators.

58% of the Group’s revenue is dependent on consumers actively purchasing magazines. Such purchases depend on the normal, competitive publishing environment, which has been challenging since 2009, and on the macro-economic environment. However, the out-of-pocket cost of magazines (print or digital) is low in comparison with many other items of consumer expenditure and research shows that magazines are often regarded by consumers as a low-cost treat.

Future believes that while its consumers are likely to seek information about their chosen area of interest through a variety of media, an increasing number of consumers are spending more time online, particularly on mobile devices. This shift creates both a threat (in terms of potentially reducing magazine revenues) and opportunities.

(c) Advertiser behaviourAdvertising patterns continue to change and in the UK, internet advertising now accounts for a greater share of advertising expenditure than is allocated to television, radio, billboards, magazines or newspapers.

Advertising represents less than one-third of the Group’s revenue and is subject to variation not only in relation to the strength of the Group’s products but also in relation to shifts in macro-advertising trends. However, over 90% of the Group’s advertising revenue is tailored to areas of special-interest and is arguably, therefore, less susceptible to changes in levels of mainstream advertising, reflecting the advertising health of each sub-sector.

Other risks disclosed in the Annual Report 2010

(d) Risk managementWe operate a continuous process of identifying, evaluating and managing risk. There are a number of general business risks to which Future is naturally exposed in the UK and US. The range of risks faced by Future has not increased since last year. Our internal controls seek to minimise the impact of such risks, as explained in our Corporate Governance report on page 39 of the Annual Report 2010.

(e) Distribution and magazine costsFuture contracts out printing and distribution and is therefore reliant on the efficiency of suppliers of these services. The cost of paper and printing generally reflects market conditions. A significant minority of Future’s magazines are sold with cover-mounted CDs or DVDs and these too are purchased from external suppliers. Magazines are distributed by nominated distributors and there are many links in the chain to ensure that magazines, once printed, reach retail outlets on a timely basis. The cost and efficiency of postal arrangements affects magazines sold by subscription, which is particularly significant for Future in the US, and increasingly so for the UK.


Interim statement (continued)

8

Other risks disclosed in the Annual Report 2010(continued)

(f) RegulatoryIn addition to legislative constraints applicable to any business in the UK and US, Future is potentially constrained by competition regulation, and by other regulations affecting the content of our publications.

(g) Sources of Intellectual PropertyThe majority of our Group revenues are built on our own brands (currently 77%). A proportion of the Group’s revenue and profits is derived from magazines which are branded ‘Official’ in accordance with contracts with major companies including Microsoft, Sony and Nintendo. Although the loss of any such contract would constitute a loss of revenue, the Group has a long history of successful publishing partnerships with these and other companies.

(h) Protection of Intellectual PropertyAs an English-language content provider, protecting and enforcing our intellectual property rights, particularly in an increasingly digital world where piracy is easier, is key. We are developing best practice within our businesses and we are actively involved in the industry, Government and European efforts to protect and enforce these rights against worldwide piracy. From time to time, the Group may be subject to disputes relating to these rights. Any such disputes are contested vigorously.

(i) FinancialThe Group is exposed to interest rate and foreign exchange risk, which it manages where appropriate by hedging arrangements. Taxation and VAT arrangements impacting the business are different in each country and any adverse change in such arrangements could impact our business.

The BoardDuring the period we appointed two new Directors to succeed two who stood down at the 2011 AGM, after having served more than nine years, as previously announced.

In October 2010 we were delighted to welcome Mark Whiteling as a non-executive Director: he now chairs the Audit Committee, succeeding Patrick Taylor.

In February 2011 we were delighted to welcome Manjit Wolstenholme as a non-executive Director: she is now our senior independent Director, succeeding Michael Penington.

Following more than a decade on the Board, Future’s Chairman, Roger Parry, has informed the Board that he intends to stand down as a Director. Accordingly, we have started a process to identify a new Chairman with the intention of their being in place ahead of the next AGM.


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Current trading and outlookTrading in the first half was challenging, yet we’ve seen six months of an accelerating pace of change as the arrival of powerful mobile devices increases digital content consumption. The decline in profits includes maintained planned investment, particularly in digital, as we continue to transition our business for the future.

Our digitised content revenues grew 30% in H1 and online now represents 34% of our commercial advertising and, with a tenfold increase in digital edition sales, an increasing percentage of our consumer circulation revenues. Significantly, our digital activities were profitable for the first time this half.

Encouraged by that progress, the Board has maintained the interim dividend despite an expectation that the trading conditions for the rest of 2011 will remain challenging.

Roger ParryChairmanStevie SpringChief ExecutiveJohn BowmanGroup Finance DirectorManjit WolstenholmeSenior independent non-executive DirectorSeb BishopIndependent non-executive DirectorMark WhitelingIndependent non-executive Director

20 May 2011


Consolidated income statement for the six months ended 31 March 2011

Note

6 months to 31 March

2011£m


2010£m

12 months to 30 September

2010£m

Revenue 1, 2 68.8 71.4 151.5

Operating profit before amortisation of intangible assets 1 2.4 4.4 10.1

Amortisation of intangible assets 3 (0.6) (1.4) (2.7)

Operating profit 3 1.8 3.0 7.4

Net finance costs 5 (0.6) (0.8) (1.8)Profit before tax 1 1.2 2.2 5.6Tax on profit 6 (0.4) (0.7) (0.1)Profit for the period 0.8 1.5 5.5

10

Note


2011pence


2010pence


2010pence

Basic earnings per share 8 0.2 0.4 1.7Diluted earnings per share 8 0.2 0.4 1.6

Earnings per 1p Ordinary share


Consolidated statement of comprehensive incomefor the six months ended 31 March 2011


2011£m


2010£m


2010£m

Profit for the period 0.8 1.5 5.5

Currency translation differences (0.2) 0.6 0.1Cash flow hedges 0.1 (0.1) 0.1Other comprehensive income for the period (0.1) 0.5 0.2

Total comprehensive income for the period 0.7 2.0 5.7

11Future plc Interim Report 2011

Consolidated statement of changes in equityfor the six months ended 31 March 2011

12

Sharecapital

Sharepremium

Mergerreserve

Treasuryreserve

Cash flow hedge

reserve Retained earnings

Totalequity

Note £m £m £m £m £m £m £m

Balance at 1 October 2010 3.3 24.5 109.0 – (0.1) (50.5) 86.2Profit for the period – – – – – 0.8 0.8Currency translation differences – – – – – (0.2) (0.2)Cash flow hedges – – – – 0.1 – 0.1Other comprehensive income for the period – – – – 0.1 (0.2) (0.1)Total comprehensive income for the period – – – – 0.1 0.6 0.7Interim dividend relating to 2010 7 – – – – – (1.6) (1.6)Final dividend relating to 2010 7 – – – – – (2.0) (2.0)Share schemes – Value of employees’ services 4 – – – – – 0.2 0.2Deferred tax on share schemes – – – – – (0.1) (0.1)Treasury shares acquired – – – (0.2) – – (0.2)Balance at 31 March 2011 3.3 24.5 109.0 (0.2) – (53.4) 83.2

Balance at 1 October 2009 3.3 24.5 109.0 (0.1) (0.2) (55.0) 81.5Profit for the period – – – – – 1.5 1.5Currency translation differences – – – – – 0.6 0.6Cash flow hedges – – – – (0.1) – (0.1)Other comprehensive income for the period – – – – (0.1) 0.6 0.5Total comprehensive income for the period – – – – (0.1) 2.1 2.0Final dividend relating to 2009 7 – – – – (1.6) (1.6)Share schemes – Value of employees’ services 4 – – – – – 0.3 0.3Balance at 31 March 2010 3.3 24.5 109.0 (0.1) (0.3) (54.2) 82.2

Balance at 1 October 2009 3.3 24.5 109.0 (0.1) (0.2) (55.0) 81.5Profit for the year – – – – – 5.5 5.5Currency translation differences – – – – – 0.1 0.1Cash flow hedges – – – – 0.1 - 0.1Other comprehensive income for the period – – – – 0.1 0.1 0.2Total comprehensive income for the period – – – – 0.1 5.6 5.7Final dividend relating to 2009 7 – – – – – (1.6) (1.6)Share schemes – Value of employees’ services 4 – – – – – 0.5 0.5Deferred tax on share schemes – – – – – 0.1 0.1Transfer between reserves – – – 0.1 – (0.1) –Balance at 30 September 2010 3.3 24.5 109.0 – (0.1) (50.5) 86.2


Consolidated balance sheetas at 31 March 2011

13

Note

31 March2011

£m

31 March2010

£m

30 September2010

£m

AssetsNon-current assetsProperty, plant and equipment 9 3.0 3.6 3.2Intangible assets – goodwill 110.6 111.9 110.9Intangible assets – other 1.7 1.8 1.2Deferred tax 1.4 0.4 0.9Total non-current assets 116.7 117.7 116.2

Current assetsInventories 4.6 4.4 3.4Corporation tax recoverable – 0.3 0.3Trade and other receivables 20.8 20.7 23.8Cash and cash equivalents 12.1 13.7 13.3Total current assets 37.5 39.1 40.8Total assets 154.2 156.8 157.0

Equity and liabilitiesEquityIssued share capital 10 3.3 3.3 3.3Share premium account 24.5 24.5 24.5Merger reserve 109.0 109.0 109.0Treasury reserve (0.2) (0.1) –Cash flow hedge reserve – (0.3) (0.1)Retained earnings (53.4) (54.2) (50.5)Total equity 83.2 82.2 86.2

Non-current liabilitiesFinancial liabilities – interest-bearing loans and borrowings 6.3 9.3 7.8Financial liabilities – derivatives 0.3 0.6 0.4Deferred tax 2.0 4.0 2.0Provisions 0.4 1.0 0.8Other non-current liabilities 2.5 2.6 2.4Total non-current liabilities 11.5 17.5 13.4

Current liabilitiesFinancial liabilities – interest-bearing loans and borrowings 14.7 15.9 12.9Financial liabilities – derivatives 0.3 0.5 0.3Trade and other payables 40.1 40.5 40.8Corporation tax payable 4.4 0.2 3.4Total current liabilities 59.5 57.1 57.4Total liabilities 71.0 74.6 70.8Total equity and liabilities 154.2 156.8 157.0


Consolidated cash flow statementfor the six months ended 31 March 2011

14


2011£m


2010£m


2010£m

Cash flows from operating activitiesCash generated from operations 2.1 5.9 12.0Tax received 0.3 – 1.4Interest paid (0.6) (0.8) (1.4)Tax paid (0.1) (0.1) (0.2)Net cash generated from operating activities 1.7 5.0 11.8

Cash flows from investing activitiesPurchase of property, plant and equipment (0.3) (0.3) (0.8)Purchase of magazine titles, websites and trademarks – (0.1) (0.2)Purchase of computer software and website development (1.1) (0.3) (0.8)Net cash used in investing activities (1.4) (0.7) (1.8)

Cash flows from financing activitiesPurchase of own shares by Employee Benefit Trust (0.2) – –Draw down of bank loans 3.9 – –Repayment of bank loans (3.6) (5.6) (9.9)Equity dividends paid (1.6) - (1.6)Net cash used in financing activities (1.5) (5.6) (11.5)

Net decrease in cash and cash equivalents (1.2) (1.3) (1.5)Cash and cash equivalents at beginning of period 13.3 14.6 14.6Exchange adjustments – 0.4 0.2Cash and cash equivalents at end of period 12.1 13.7 13.3


Notes to the consolidated cash flow statementfor the six months ended 31 March 2011

15

6 months to31 March

2011£m


2010£m

12 months to30 September

2010£m

Operating profit for the period 1.8 3.0 7.4Adjustments for:Depreciation charge 0.6 0.8 1.6Amortisation of intangible assets 0.6 1.4 2.7Share schemes– Value of employees’ services 0.2 0.3 0.5Operating profit before changes in working capital and provisions 3.2 5.5 12.2Movement in provisions (0.4) (0.1) (0.3)Increase in inventories (1.2) (0.9) (0.1)Decrease/(increase) in trade and other receivables 2.9 2.6 (0.7)(Decrease)/increase in trade and other payables (2.4) (1.2) 0.9Cash generated from operations 2.1 5.9 12.0

A Cash generated from operationsThe reconciliation of operating profit to cash flows generated from operations is set out below:


B Analysis of net debt

C Reconciliation of movement in net debt

1 October2010

£m

Cash flows

£m

Non-cash changes

£m

Exchange movements

£m

31 March 2011

£m

Cash and cash equivalents 13.3 (1.2) – – 12.1Debt due within one year (12.9) (0.3) (1.6) 0.1 (14.7)Debt due after more than one year (7.8) – 1.5 – (6.3)Net debt (7.4) (1.5) (0.1) 0.1 (8.9)

6 months to31 March

2011£m

6 months to31 March

2010£m

12 months to30 September

2010 £m

Net debt at start of period (7.4) (15.6) (15.6)Decrease in cash and cash equivalents (1.2) (1.3) (1.5)Movement in borrowings (0.3) 5.6 9.9Non-cash changes (0.1) (0.1) (0.3)Exchange movements 0.1 (0.1) 0.1Net debt at end of period (8.9) (11.5) (7.4)

Basis of preparation

16

This unaudited condensed interim financial information for the six months ended 31 March 2011 has been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’ as adopted by the European Union, and in accordance with the Disclosure and Transparency Rules of the Financial Services Authority.

The interim financial information contained in the Interim Report should be read in conjunction with the Annual Report for the year ended 30 September 2010.

The Interim Report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 and has not been audited. A copy of the statutory financial statements for the year ended 30 September 2010 has been filed with the Registrar of Companies. The auditors’ report on those accounts was unqualified; it did not contain an emphasis of matter and did not contain any statements under section 498(2) or section 498(3) of the Companies Act 2006. The auditors have carried out a review of the Interim Report and their review report is set out on page 25.

The accounting policies adopted, methods of computation and presentation are consistent with those set out in the Group’s statutory accounts for the financial year ended 30 September 2010.


17

The following standards, interpretations and amendments to published standards are effective but not relevant for the Group’s operations:

» Amendment to IFRS2 ‘Share-based Payment’ on group cash-settled share-based payment transactions.

» Amendment to IAS32 ‘Financial Instruments: Presentation’ on classification of rights issues.

» IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’.




2011£m


2010£m


2010£m

UK 49.4 50.7 105.9US 19.7 21.0 46.2Revenue between segments (0.3) (0.3) (0.6)Total segment revenue 68.8 71.4 151.5

6 months to31 March

2011£m

6 months to31 March

2010£m


2010£m

UK 5.5 6.1 12.9US (1.5) (0.4) 0.2Central costs (1.6) (1.3) (3.0)Total segment EBITA 2.4 4.4 10.1

6 months to31 March

2011£m

6 months to31 March

2010£m


2010£m

Total segment EBITA 2.4 4.4 10.1Amortisation of intangible assets (0.6) (1.4) (2.7)Net finance costs (0.6) (0.8) (1.8)Profit before tax 1.2 2.2 5.6

1 Segmental reportingThe Group is organised and arranged primarily by geographical segment. The Board of Future plc considers 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 separately reported.

Segment revenue

Segment EBITA

EBITA is used by the Board to assess the performance of each segment. Segment EBITA represents the EBITA earned by each segment without the allocation of central administration costs.

A reconciliation of total segment EBITA to profit before tax is provided as follows:

Revenue from external parties is measured in a manner consistent with that in the income statement. Transactions between segments are carried out at arm’s length.

Notes to the financial informationfor the six months ended 31 March 2011

19

6 months to31 March

2011£m

6 months to31 March

2010£m


2010£m

Revenue 68.8 71.4 151.5Cost of sales (48.1) (49.0) (104.2)Gross profit 20.7 22.4 47.3Distribution expenses (5.6) (5.8) (12.0)Administration expenses (12.7) (12.2) (25.2)Amortisation of intangible assets (0.6) (1.4) (2.7)Operating profit 1.8 3.0 7.4

3 Operating profit

6 months to31 March

2011£m

6 months to31 March

2010£m


2010£m

Circulation 40.0 43.0 88.7Advertising 20.4 21.2 45.4Custom publishing 6.1 4.8 11.6Licensing, events & other 2.3 2.4 5.8Total 68.8 71.4 151.5

2 RevenueAn additional analysis of the Group’s revenue is shown below:


20

Notes to the financial information (continued)


6 months to31 March

2011£m

6 months to31 March

2010£m


2010£m

Wages and salaries 22.3 21.2 44.2Social security costs 2.2 2.8 5.7Other pension costs 0.5 0.5 1.1Share schemes– Value of employees’ services 0.2 0.3 0.5Total 25.2 24.8 51.5

6 months to31 March

2011£m

6 months to31 March

2010£m


2010£m

Salaries and other short-term employee benefits 0.4 0.4 1.1Post-employment benefits 0.1 0.1 0.1Share schemes – Value of employees’ services 0.1 0.1 0.3Total 0.6 0.6 1.5

4 Employees

Key management personnel compensation

IFRS 2 ‘Share-based Payment’ requires an expense for equity instruments granted to be recognised over the appropriate vesting period, measured at their fair value at the date of grant.

The Group has used the Black-Scholes model to value instruments with non market-based performance criteria such as earnings per share. For instruments with market-based performance criteria, notably total shareholder return, the Group has used a Monte Carlo model to determine the fair value.

The expense for the six months ended 31 March 2011 of £0.2m (2010: £0.3m) has been credited to reserves.

Key management personnel are deemed to be the members of the Board of Future plc. It is this Board which has responsibility for planning, directing and controlling the activities of the Group.

21

5 Net finance costs

In line with the Board’s policy of hedging interest rate risk, the Group entered into interest rate swaps. The valuation of these interest rate swaps at 31 March 2011 resulted in a gain for the six months ended 31 March 2011 of £0.2m (2010: £nil).

6 Tax on profitThe tax charge for the six months ended 31 March 2011 is based on the estimated effective rate of tax for the Group for the full year to 30 September 2011. The estimated effective rate is applied to the profit before tax.

6 months to31 March

2011£m

6 months to31 March

2010£m


2010 £m

Interest payable on interest-bearing loans and borrowings (0.6) (0.8) (1.4)Fair value gain/(loss) on interest rate derivatives 0.2 – (0.1)Exchange gains – 0.1 0.1Amortisation of bank loan arrangement fees (0.2) (0.1) (0.3)Other finance costs – – (0.1)Net finance costs (0.6) (0.8) (1.8)

7 Dividends

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.

The dividends totalling £3.6m paid and payable during the period ended 31 March 2011 relate to the interim dividend paid for the six-month period to 31 March 2010 of 0.5 pence per share (£1.6m) and the final dividend declared for the year ended 30 September 2010 of 0.6 pence per share (£2.0m), which was approved on 9 February 2011 and paid on 1 April 2011.

For the period ended 31 March 2010 and the year ended 30 September 2010 the dividend payable/paid of £1.6m was the final dividend of 0.5 pence per share declared for the year ended 30 September 2009.

An interim dividend in respect of the six months ended 31 March 2011 of 0.5 pence per share, amounting to £1.6m, has been declared by the Board but is not reflected in this interim statement.

Equity dividends

6 months to31 March

2011

6 months to31 March

2010


2010

Number of shares in issue at end of period (million) 328.8 327.9 328.0Dividends paid and payable in period (pence per share) 1.1 0.5 0.5Dividends paid and payable in period (£m) 3.6 1.6 1.6


22

Notes to the financial information (continued)


The adjustments to profit have the following effect:

6 months to31 March

2011pence


2010pence


2010pence

Basic earnings per share 0.2 0.4 1.7Amortisation of intangible assets 0.2 0.4 0.8Tax effect of the above adjustment – (0.1) (0.1)Adjusted basic earnings per share 0.4 0.7 2.4

Diluted earnings per share 0.2 0.4 1.6Amortisation of intangible assets 0.2 0.4 0.8Tax effect of the above adjustment – (0.1) (0.1)Adjusted diluted earnings per share 0.4 0.7 2.3

8 Earnings per shareBasic earnings per share are calculated using the weighted average number of Ordinary shares in issue during the period. 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.

The adjusted earnings per share removes the effect of the amortisation of intangible assets and any related tax effects from the calculation as follows:


2011£m


2010£m


2010£m

Profit after tax 0.8 1.5 5.5Add: amortisation of intangible assets 0.6 1.4 2.7Tax effect of the above adjustment (0.1) (0.5) (0.3)Adjusted profit after tax 1.3 2.4 7.9

Adjustments to profit after tax

6 months to31 March

2011


2010


2010

Weighted average number of shares outstanding during the period:– Basic 327,649,671 327,122,804 327,314,532– Dilutive effect of share awards 7,810,104 8,497,514 8,442,387– Diluted 335,459,775 335,620,318 335,756,919Basic earnings per share (in pence) 0.2 0.4 1.7Adjusted basic earnings per share (in pence) 0.4 0.7 2.4Diluted earnings per share (in pence) 0.2 0.4 1.6Adjusted diluted earnings per share (in pence) 0.4 0.7 2.3

23

9 Property, plant and equipmentDuring the six months ended 31 March 2011, property, plant and equipment additions totalled £0.4m (31 March 2010: £0.3m). The £0.4m is attributable to: land and buildings £0.1m (2010: £nil); plant and machinery £0.2m (2010: £0.3m); equipment, fixtures and fittings of £0.1m (2010: £nil).

There were no commitments for capital expenditure contracted for but not provided at 31 March 2011 (31 March 2010: £nil).

The depreciation charge for the period totalled £0.6m (31 March 2010: £0.8m). The £0.6m is attributable to: land and buildings £0.1m (2010: £0.2m); plant and machinery £0.4m (2010: £0.5m); equipment, fixtures and fittings £0.1m (2010: £0.1m).

10 Issued share capitalDuring the period, 806,369 Ordinary shares (31 March 2010: 676,647) with a nominal value of £8,064 (2010: £6,766) were issued by the Company for a total cash commitment of £6,375 (2010: £nil), pursuant to share scheme exercises.

As at 31 March 2011 there were 328,786,172 Ordinary shares in issue (31 March 2010: 327,873,915).

11 Contingent assets and contingent liabilitiesAt 31 March 2011 there were no material contingent assets or contingent liabilities.



The Directors confirm that to the best of their knowledge the condensed interim financial information contained in the Interim Report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and that the Interim Management Report herein includes a fair review of the information required by the Disclosure and Transparency Rules.

The Directors of Future plc are as listed in the Future plc Annual Report for 30 September 2010, with the exception of the following changes in the period: Mark Whiteling was appointed on 8 October 2010; Patrick Taylor and Michael Penington resigned on 9 February 2011, and Manjit Wolstenholme was appointed on 9 February 2011. On behalf of the Board

John BowmanGroup Finance Director

20 May 2011

Directors


Company Secretary and General CounselMark Millar

The maintenance and integrity of the Future plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Statement of Directors’ responsibilities

25

Independent review report to Future plc

IntroductionWe have been engaged by the Company to review the condensed interim financial information in the half-yearly financial report for the six months ended 31 March 2011, which comprises the Consolidated income statement, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, Consolidated balance sheet, Consolidated cash flow statement, Notes to the consolidated cash flow statement, Basis of preparation and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed financial information.

Directors’ responsibilitiesThe half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority.

As disclosed in the Basis of preparation, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed interim financial information included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.

Our responsibilityOur responsibility is to express to the Company a conclusion on the condensed interim financial information in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of reviewWe conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the condensed interim financial information in the half-yearly financial report for the six months ended 31 March 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority.

PricewaterhouseCoopers LLP Chartered Accountants 20 May 2011 London



Key performance indicatorsfor the six months ended 31 March 2011

Notes1 The majority of magazines printed by the Group are sold, and those unsold are mainly recycled and used for newspaper production. The precise proportion sold at newsstand is a detailed KPI each month for every title. However, the Group believes that it is commercially sensitive to disclose these percentages, since competitors typically do not release this information. Magazines printed for subscription have no wastage.

2 In the UK 71% of magazines (by volume) are sold at newsstand. Our overall UK average newsstand efficiency has remained the same as the first half of 2010. Future has increased the proportion of magazine volume sales derived from subscription rather than newsstand, from 26% to 29%. The majority of UK revenues for magazines are derived from cover price.

3 In the US 30% of magazines (by volume) are sold at newsstand. The majority are sold by subscription at heavily discounted prices. Newsstand efficiency decreased by 4% in 2011 compared with the first half of 2010.

4 Partnership publishing represents 23% of Group revenue for the first half of 2011. This category includes business from our Official magazines and programmes published for Microsoft (Xbox 360 and Windows), Sony (PlayStation, FirstPlay and Qore), Nintendo, plus custom publishing activities. The majority of the Group’s revenue is generated from our own brands.

5 For each of our websites we know the number of page impressions and the number of unique visitors to that website. We do not know how many unique visitors visit more than one of our websites. The number presented here is the simple total of each website’s average monthly number of unique visitors. The figures for March 2010 included 7m unique users relating to our aggregation websites (since closed).

6 Human capital is the Group’s most important resource, with 1,213 employees (at 31 March 2011). In the running of our business, we focus on retention of key employees and on refreshment of the team with new people and new ideas.

6 months to31 March

2011

6 months to31 March

2010


2010

Annual growth in revenue (at constant currency) - 4% - 5% - 1%EBITA operating margin (as a %) 3.5% 6.2% 6.7%Absolute EBITA (in sterling) £2.4m £4.4m £10.1mChange in adjusted earnings per share (as a %) - 43% + 17% + 33%

Number of magazines sold per month 2.9m 3.3m 3.4mProportion of magazines sold from total number printed See notes 1-3 See notes 1-3 See notes 1-3Proportion of Group’s business derived from our brands compared with partnership publishing 77:23 (note 4) 77:23 (note 4) 76:24 (note 4)

Number of unique users logging on to our websites per month 25m (note 5) 27m (note 5) 23m (note 5)

Growth in total advertising revenue (as a % at constant currency) - 4% - 11% - 5%Proportion of advertising revenue that is online (as a %) 34% 24% 25%

Human capital See note 6 See note 6 See note 6Net bank debt £8.9m £11.5m £7.4m

27

Directors and advisers

Directors


Company Secretary and General CounselMark Millar

London office2 Balcombe StreetLondon NW1 6NATel: +44 (0)20 7042 4000

Registered officeFuture plcBeauford Court30 Monmouth StreetBath BA1 2BWTel: +44 (0)1225 442244

Company registration number 3757874

www.futureplc.com

AuditorsPricewaterhouseCoopers LLP1 Embankment PlaceLondon WC2N 6RH

BrokerNumis Securities Ltd10 Paternoster SquareLondon EC4M 7LT

Principal bankersBarclays Bank plc1 Churchill PlaceLondon E14 5HP

RegistrarsComputershare Investor Services plcThe PavilionsBridgwater RoadBristol BS99 6ZY

SolicitorsAllen & Overy LLPOne Bishops SquareLondon E1 6AD



Financial calendar and contactsfor the six months ended 31 March 2011

Financial calendarHalf-year end 31 March 2011Half-year results announced 20 May 2011Half-year results mailed to shareholders 9 June 2011

Financial year end 30 September 2011Annual results announced 24 November 2011Annual results mailed to shareholders December 2011

Future plcwww.futureplc.com

2 Balcombe StreetLondon NW1 6NW+44 (0)20 7042 4000

Beauford Court30 Monmouth StreetBath BA1 2BW+ 44 (0)1225 442244

Where to contact us

Future Publishing Ltdwww.futureplc.com

Beauford Court30 Monmouth StreetBath BA1 2BW+ 44 (0)1225 442244

2 Balcombe StreetLondon NW1 6NW+44 (0)20 7042 4000

Future US, Incwww.futureus.com

4000 Shoreline Court Suite 400 South San Francisco CA 94080+ 1 650 872 1642

149 Fifth Avenue 9th FloorNew YorkNY 10010+ 1 212 768 2966

Relations with shareholders and Company websiteThe Company’s website, www.futureplc.com, contains up-to-date information on the Group’s activities and the investor relations section includes a full copy of the interim and annual results, presentations provided to analysts, and an audio recording of the most recent such presentation on 20 May 2011. Copies of these presentations are also available from the Company’s registered office.

Future plcwww.futureplc.com

2 Balcombe StreetLondon NW1 6NWUnited KingdomTel: +44 (0)20 7042 4000

Beauford Court30 Monmouth StreetBath BA1 2BWUnited KingdomTel: +44 (0)1225 442244

future plc interim report 2011

Documents