The publishing business is a risky one to be in right now, but will either of these two companies prove to be a winner?
A promising upstart?
Media group and publisher Future (LSE: FUTR) today released full-year results for the year to September.
Overall revenue fell a little, to £59m from £59.8m, but reported EBITDAE (before exceptionals) was up 31% to £4.7m, and operating cash inflow jumped to £6.5m, from £2.3m in 2015. But the bottom line showed a £14.9m pre-tax loss and a loss per share of 3.9p.
The Future share price was 20% down on the year before these results, but regained 3.3% to 9.1p on the day.
The reason for the lacklustre share price seems obvious, as 59% of the firm’s 2016 revenue came from magazine publishing, and that’s a business that many see as being in terminal decline — I can’t remember the last time I bought a magazine, now that I’m inundated by all the online content I can devour.
But on the upside, media division revenues are up, by 14% to £23.9m to account for 41% of this year’s total revenue, and that’s a trend that will hopefully continue.
Chief executive Zillah Byng-Thorne pointed to “increasingly diversified revenue streams, which include e-commerce, event sponsorship, digital advertising, licensing, content publishing, subscriptions, newstrade sales and event ticketing” as the future for, erm, Future, and stressed the firm’s recent acquisitions aimed at taking it in those directions.
It’s hard to value this £49m company at this stage, with no earnings per share to measure. Forecasts for next year suggest a significant profit which would provide a P/E of 12.5, but I think it’s way to early to judge that just yet — so I’m firmly on the fence on this one.
The mighty fallen
If you want to see how much suffering there’s been in this industry, look no further than the Trinity Mirror (LSE: TNI) share price. At 80p today, it’s crashed by 89% since a high back at the end of February 2005, and is down 51% over the past 12 months despite a blip in August after the Daily Mirror publisher released first-half results.
Back then we heard of a 42% rise in adjusted pre-tax profit leading to a 25% boost to adjusted earnings per share, with the firm’s digital publishing offerings attracting a growing number of eyeballs. Net cash inflows allowed Trinity Mirror to slash net debt by nearly half, to £48m, and it had cash of £85.3m at the end of the half — enough to announce a 2.1p interim dividend and a share buyback programme.
Whether buying back shares is a good idea is debatable, but the firm does seem to be pretty keen to see its share price gain a bit of ground. The shares are currently on a forward P/E of only a little over two (yes, two!) and there’s a 7.7% dividend yield forecast for the full year (which would be very well covered by earnings).
That looks screamingly cheap, but the big problem is that managing the slow death of printed publications is not going to be easy. Trinity Mirror believes it can do it, but the market lacks the confidence to invest in a very risky sector that’s almost certain to see some significant casualties.