Future H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
December 5, 2024

There are 8 speakers on the call.

Operator

Good morning, everyone. I'm delighted to be here this morning to present our FY 'twenty four full year results. I will start with some opening remarks before handing it over to Sharjeel to cover the financials. I will then come back to present an update on our strategic progress before opening up to Q and A. Turning to slide 3.

Operator

Before diving in, I just want to address my intention to step down. It was a very difficult decision for me to make, but it was the right one for my family. I'm relocating to Florida for the next school year. With 75% of our employees in the UK, I believe the CEO needs to be here. This was a tough decision, but what I really want you to get from this presentation is that my commitment is intact.

Operator

I'm going to continue to focus on the growth acceleration strategy and I'm very enthused by the early signs of success. How you come is how you go. So my involvement and commitment have not changed. But what is also important is that future is bigger than just me. There are 3,000 people on our team.

Operator

They are led by a strong and engaged executive leadership team. While the Board has already started the process of a search, I am not going away just yet. And with that, let's turn to the purpose of today's presentation, FY 'twenty four results. Turning to slide 4. A year ago, I stood in the same spot and promised a return to organic growth.

Operator

We are very pleased to have returned the group to growth and the H2 momentum. This was supported by the growth acceleration strategy which I presented in December 'twenty three. Gas is starting to deliver, and I am so pleased with the progress so far. The group has demonstrated once again its ability to generate cash with an excellent cash conversion, and we've returned £69,000,000 back to shareholders through 2 buybacks in our progressive dividend. And today, we announce a new share buyback program for up to £55,000,000 Sharjeel has hit the ground running and is already having an impact on the organization.

Operator

We are lucky to have him and I personally enjoy working with him each day. And with that, I will hand it over to Sharjeel to cover the results and then I'll come back and do strategy. Floor is yours.

Speaker 1

Thank you, John, for the warm welcome. Before I cover the FY 'twenty four results, I'd like to take a moment to introduce myself and to highlight why I'm excited to have Joint Future. I've been in the media industry for over 20 years now, having gained in-depth financial and operational experience across the value chain, including management of content, brands and formats, monetization through advertising and distribution, as well as acquisitions and disposal businesses. So why future? Well, 2 key attributes attracted me.

Speaker 1

Future's unique assets and operations and its strong margins and cash generation. Firstly, the assets. As a consumer of future myself, retro gamer and edge, I know firsthand the power of specialist content that ignites your passion. Right now, there's a lot of content in the market competing for eyeballs. The key to engaging passionate audiences is that they trust the content being presented to them.

Speaker 1

Future has more than 200 well known brands that people trust across digital media, print magazines and price comparison. And in conjunction with its efficient operations and strong tech, Future is well positioned to create, distribute and monetize. Secondly, the finances. Future has a compelling business model, one that produces high profit margins, converting the vast majority of those into cash. The assets, along with the financials, provide a solid foundation to create shareholder value.

Speaker 1

I have now been at Future for just over 2 months, and I wanted to share my first impressions. It has been great to meet my colleagues across the group and to understand the finances of the business in detail. In terms of the business itself, the strategy is clear. And as you'll see today, the strategy is working. There's always more to do and to continuously improve.

Speaker 1

But future strong assets and operations, coupled with the focus and disciplined investments made in the past year, mean there is a solid foundation to grow from. A talented leadership team who are focused on strategic and operational execution, more content creators in key brands and a larger social media presence and a renewed U. S. Sales team with increased digital ad skills, a stronger organization with more engaged employees. In a content company, the key ingredient is often its people, success coming from strong talent and a positive culture across the organization, which future has.

Speaker 1

With this momentum, future can drive results. I wanted to share my confidence with you and to highlight that I will have a very strong focus on cash generation and driving shareholder value. Right. Let's move to the FY 'twenty four business performance and financial results. We are pleased to deliver financial results in line with expectations and ones that show that the growth acceleration strategy is working.

Speaker 1

We have invested in the business with discipline in the past year, and it is really pleasing to see that the financials are starting to reflect the benefits of these investments as H2 momentum shows. We are on track across all of the key measures on this slide. Revenue of $788,200,000 was flat year on year on a reported basis, but on an organic basis, it was up 1%. Importantly, in the second half of the year, the group showed organic growth of 5%. Adjusted operating profit of $222,200,000 reflects the expected margin of 28%.

Speaker 1

The group continued to generate cash flows with a robust cash conversion at 100 percent of adjusted operating profit. And the balance sheet remained strong, with net debt leverage at 1.1, after having returned €69,000,000 to shareholders. So my top line message is that the strategy is working and the business has returned to organic growth. Slide 10 shows our businesses by geography. The U.

Speaker 1

K./U. S. Split is how the business has been managed to date. The slide highlights how the diversification of our group has helped us manage the difficult market conditions. In the UK, revenue grew by 6% on an organic basis as a result of the very strong performance of go.compared during the year.

Speaker 1

Importantly, the UK revenue was stronger in the second half of the year at 8% with better performance from e commerce affiliates. The U. S. Declined by 6% on an organic basis as our U. S.

Speaker 1

Business was impacted by market conditions. It is important to note we saw U. S. Digital ads growth in the second half of the year of 2% and an acceleration to 6% in Q4. The growth in digital ads shows that the investment in the U.

Speaker 1

S. Sales capability is working. This is a good start and will be an ongoing focus given the size of the U. S. Digital ad market.

Speaker 1

The next three slides show our business, but this time broken down by division. This is how the business will be managed and reported on going forward. Starting with B2C. This represents 66% of the group with £523,000,000 of revenue in the period. B2C is made up of circa 50% from magazines, 35% from digital ads and other media and the remainder from e commerce.

Speaker 1

Over the year, B2C declined by 6% on an organic basis with challenging market conditions in advertising and consumer pressures on e commerce. Within B2C, we also saw the continued secular decline in magazines. It is worth highlighting that this full year performance reflects that there was a significant improvement in the second half, only declining by 1%. Going a bit deeper in terms of the 3 revenue streams within B2C. Firstly, Digital Ads and Other Media.

Speaker 1

We saw growth in audience sessions of 2%, which was driven by the planned investment in expert content with more editorial and video. Across the portfolio, our digital ad deals were stable year on year, both in the UK and in the U. S. With more direct client revenues. U.

Speaker 1

S. Digital ad saw a year on year decline of 6%, but had good momentum in Q4, exiting the quarter up 7%. The U. S. Sales team investment is translating into green shoots.

Speaker 1

The U. K. Digital ad market continued to experience difficult conditions during the year. However, we are now leveraging the U. S.

Speaker 1

Playbook in the U. K. And more on this from John later. A focus in the coming year will be to increasingly optimize our inventory mix between 1st party, premium programmatic, 3rd party and open auction. The group has also focused on branded content deals and this area saw good growth during the year.

Speaker 1

Again, John will cover this in a bit. Moving on to e commerce affiliates. Overall, e Commerce revenues were down 9% year on year with a continued volatile environment. However, in the second half of the year, we saw e Commerce grow 12% with an improvement in basket size, such that basket was flat year on year. Recent peak trading was in line with our expectations with year on year growth.

Speaker 1

Last but not least, magazines. Our magazines business is a well diversified portfolio and remains a significant part of the B2C at circa 260 of revenue. Our premium titles and weeklies both performed well. These saw less than anticipated decline as a result of improved content and price increases. Despite this, the business saw a secular decline of around 5%.

Speaker 1

Within the Magazines business, subscription based revenues are about 50%. Going forward, subscription will remain a focus as we seek to mitigate the secular decline. Turning to go. Compare on Slide 12. At 203,000,000 dollars go.

Speaker 1

Compare now represents a quarter of the group's revenues. The performance across the year was very strong with a growth of 28% as consumers look to reduce their costs following increases in car insurance premiums. Importantly, we have grown market share. Go. Compare is now number 2 in the car vertical, which is 64% of the business.

Speaker 1

As well as car, Go. Compare saw growth in market share across home, van, life and pet, which all represent further growth opportunities. Additionally, the tech replatforming is now complete. As part of gas, we have proactively invested in the business and it is now well positioned to take advantage of further growth initiatives. And finally, B2B on Slide 13.

Speaker 1

B2B represents 8% of the group with $62,000,000 of revenue. B2B is made up of 58 percent of digital ads, dollars 28 from demand generation and webinars and the remainder for magazines and media. During the year, we have refocused the portfolio, exiting loss making businesses and unified the organization to drive growth going forwards. Overall, B2B grew 2% year on year despite a challenging market backdrop, especially within the Tech segment. There is more detail on the revenue and profit performance of the 3 divisions in the appendix.

Speaker 1

In the future, we will continue to drive the clarity of our reporting and seek to add more color in terms of our key measures. Moving on to the P and L on Slide 15. The group's gross margin remained relatively stable at 71%, down 1 percentage point. This slight dilution reflects the change in revenue mix during FY 2024, with more revenue from go. Compare, which is dilutive at the gross margin level.

Speaker 1

During the year, sales, marketing and editorial costs increased by 11%. This reflects the planned gas investments, such as more spend on editorial and video plus U. S. Sales capability. Within this line, we also had increased marketing costs in go.

Speaker 1

Compare, which enabled us to drive share in the strong car market. Admin and other overhead costs saw an 8% increase. This was driven by the 5% average pay rise to colleagues from January 24 and the gas investments in areas such as Organizational Health. There was a reduction in depreciation and amortization year on year as a result of lower lease and some CapEx being fully amortized. Overall, this meant the group's AOP profit was 222,200,000 dollars Across the P and L, there was about £20,000,000 of gas related spend during the year as planned.

Speaker 1

We expect £5,000,000 to £10,000,000 incremental gas costs for FY 2025 as previously guided. We will remain disciplined on where this is spent. The next slide brings these P and L drivers together and shows our margin change. FY 'twenty three margin stood at 32% with the following key drivers taking us to 28% by the end of FY 'twenty four. The planned gas investments reduced margin by 2 percentage points.

Speaker 1

Inflation and increases in salaries reduced margin by further 2 percentage points. Future remains a strong margin business. As we progress through the plan, our expectations are FY 2025 margin will remain around 28%. In the medium term, we expect to be in our stated range of 28% to 30%. Moving on to the net debt bridge on Slide 18.

Speaker 1

Cash is my personal favorite topic, and it is good to see that Future has continued its strong cash performance. Our opening net debt position of $327,200,000 and the leverage of 1.3 times. Future had a net cash generation of around $150,000,000 after CapEx, tax, interest and exceptionals. We used this cash generation to pay down $93,000,000 of debt and to return $69,000,000 to shareholders. And even after those uses of cash, the group still reduced its net debt to $256,500,000 and a leverage of $1,100,000 With continued cash conversion expected to remain strong, this highlights the group's solid financial position.

Speaker 1

On to capital allocation. In line with our framework, this morning, we have announced a further 55,000,000 share buyback and have maintained our annual dividend at 3.4p. I wanted to highlight a few specific points regarding the framework going forwards. Our first allocation will continue to be organic investment. However, future is relatively light in terms of CapEx requirements and can grow without needing significant working capital.

Speaker 1

Secondly, while strategic M and A is not a current focus, as highlighted by the gray box, If we do acquire small bolt ons, they will be for a specific capability or technology requirement. For any small bolt ons, I can assure you that we will have a strict financial criteria. Thirdly, we will continue to maintain a strong balance sheet. And if we have excess cash, we will return it to shareholders such that the group maintains a floor leverage of 1x. Overall, the framework remains the same.

Speaker 1

However, this should give you more clarity on how we will apply our framework and how we will maximize value creation for our shareholders. Finally, turning to the outlook on Slide 22. Our return to revenue growth in H2 puts the group in a good position to achieve current market expectations for FY 2025 with a slight weighting to the second half. From a profit standpoint, we expect to maintain an adjusted operating margin of 28%. As always, the group would continue to generate strong cash flow at around 95% plus of adjusted operating profit.

Speaker 1

Looking beyond FY 2025, we now expect to be able to deliver accelerating revenue growth in line with market expectations. This is a call on the rate of recovery of the macro and on the media market, which we now anticipate will take longer. As I said at the start, the strategy is clear and the strategy is working. And the business is set to benefit from the gas investment program. And with the end of my very first opening spell, I will now hand over to John.

Operator

Thanks so much, Sergio. I will now kick off the strategic update. You would have heard me talk about this slide before many times, so just a quick recap. Our strategy is simple. As I've said many times, I believe simplicity fosters alignment, which is paramount for flawless execution.

Operator

In the first column, we have 3 strategic objectives, reaching valuable audiences, diversifying and growing revenue per user, and optimizing the portfolio, which we announced a year ago. These objectives are supported by 4 enablers in the middle column, which we believe create a competitive advantage. By driving these objectives, we have 3 outcomes, revenue growth, cash conversion, and rigorous application of our capital allocation framework. With that context set, let's turn to slide 25. Before covering our strategic progress in FY24, I just wanted to come back to a fundamental aspect of our business, our audiences.

Operator

The ecosystem in which we evolve is constantly changing, from Google algo changes to AI. But one thing does not change, and that is the value and quality of our audiences. This morning, we are pleased to announce a partnership with Open AI, the financial impact of which is not material. However, across futures brands, we are focused on growing engaged audiences and building global communities. Our partnership with OpenAI helps us achieve this goal by expanding the range of platforms where our content is distributed.

Operator

Chat GPT provides a whole new avenue for people to discover our incredible specialist content. Our audiences have intent, whether it is about discovering the best running headphones or spring fashion looks. Intent is valuable for advertisers, given where users are in the funnel. Whether users are looking for a buying guide, news or how to type content, what they are looking for is expertise. We believe the quality of our editorial content is paramount, with brands acting as strong leading indicators.

Operator

Our brands and expertise constitute a competitive advantage. Our audiences are platform agnostic. They come to us through social media, email newsletters, events, organic search, as well as the potential for emerging new channels of AI powered search, like ChatGPT. As a result, the unique and intentional characteristics of our audience present opportunities, opportunities for our content to reach new platforms, emergent or ones that are not even there yet. I hope you will take from this slide that our foundations are strong with audiences at the heart of everything that we do.

Operator

We entered FY24 with 5 objectives. Invest in content to ensure, as I just mentioned, that we uphold our quality standards, depth of coverage, and relevancy. Diversify audience and revenue to ensure consistent delivery. Fuel revenue growth through a strong focus on US digital advertising, portfolio optimization, which is a continuous process to ensure that we position the portfolio for consistent growth, all while maintaining the strong financial characteristics of cash and margin that Shargeel has covered, as well as a rigorous application of our capital allocation framework to create additional value. Let me now give you an update on the progress of each of them, turning to slide 27.

Operator

I mentioned earlier the importance of content. To ensure we remain relevant and keep our high editorial standards, we needed to invest in editorial creation and talent, while making sure that we position these resources where they matter the most. During the year, we hired 50 net new editorial heads, focusing on key brands to create the greatest outcome. This allows us to create more and better content, which is paramount for our audience. The teams are focusing on balancing editorial efforts between buying guides, how tos and news to ensure that our sites remain relevant.

Operator

The benefit of our investment has paid off with an increase of editorial output by 15% during the year, as well as continued stabilization of audience. Moving on, I always think that theory comes to life through an example. Let me briefly explain the work that happened with TechRadar, the number one UK consumer tech website. TechRadar is a well known tech brand that was launched in 2008, initially focused on phones. Post COVID, it suffered from a lack of identity, and we were losing website users.

Operator

We decided to invest in the brand to give it a second life. We redesigned the website, cleaner, better organized, easier to navigate, focused on a mobile first approach. A revised taxonomy of content to make it easier for Google to navigate the site. Focusing on content creation and new editorial franchises. Diversification of audience sources, more social, more email visits, all with the goal of improving the user experience and driving traffic.

Operator

This focus has paid off with a 5,500,000 monthly average session increase in FY24. Moving to slide 28. Our second priority was to diversify our audience and revenue, starting with B2C. The reason why this is important is because it removes the risk of being overly reliant on any one revenue stream and enables us to manage group performance. We have progressed our reach outside of website users and sessions by increasing our social media followers, Apple News readers, and our email newsletter subscribers, a very valuable cohort.

Operator

And we have progressed on new or newer monetization routes, such as Vouchers, which is now £13,000,000 of revenue, thanks to a combination of strong SEO traffic and the rollout and annualization of some of our proprietary technology on some of our websites. Branded content is another route of monetization. It grew by 9% overall, led by the US. Let me just pause for a moment to lift the hood on branded content. During the year, we launched Future Creative, our branded content center of excellence.

Operator

Future Creative unifies the scale and expertise of who, what, where to the rest of the portfolio. The way to be effective and lead to high customer engagement and branded content is to have full integration from planning to post sales. The reason why this is key is that branded content often leads to packaged sales, which include 1st party direct display campaigns. So having this capability is not only important to our clients, but also for us to generate what I call 3 60 degree packages that bring many of our advertising products onto a single client plan. This example showcases how we lean into areas of opportunities, but also embodies how we adapt to advertising trends.

Operator

Turning to GoCo. Sharjeel has already covered the fantastic performance from Go dot Compare during the year. This performance, combined with market share gains, is a testament to the work that has been conducted in 2024 from making sure our advertising spend is delivering the right outcome through content and mix of spend, to the completion of the re platforming, and anyone involved in a full re platforming knows how much work goes into that, which enables us to push innovation and improve the user experience. As a result, we have made progress on diversification of revenue, with now 36% of revenue coming from outside of car. Turning to slide 30, driving US Digital Advertising.

Operator

This was an objective close to my heart because it's my background. This has been a key area of focus, and I am pleased with the progress. US digital advertising is in growth in H2 with an accelerating exit rate. We have implemented a lot of actions to drive this. I've already mentioned the launch of Future Creative to drive branded content growth.

Operator

We have reorganized the US sales force, aligned incentive schemes, and created a one future approach where a salesperson can sell all of the future inventory rather than just a single vertical. And we have complemented this with new talent. For example, during the year, the team won a tech client who wanted to reach a woman's audience for a new product launch, showcasing the benefit of the platform. And that's just one example. I am very pleased with the momentum in US Digital Ads with plenty of energy in the team.

Operator

Number 4, portfolio optimization. This is a new pillar of the strategy launched a year ago. We mentioned at our half year results that the Board's view is that the businesses making up the group are significantly undervalued, and this view has not changed. The Board continues to keenly appraise performance and actively looks at further options to accelerate value creation across the group's business units. During the year, we carried out the work to build optionality for the group's divisions if it was right for shareholders.

Operator

At the heart of this strategic pillar is our philosophy of being rigorous buyers but also sellers. Price matters. We have also reviewed our portfolio and exited a number of assets in B2C and B2B to position the portfolio for growth. These decisions are not easy, but necessary when assets are dilutive to revenue and profit growth. As announced in September, we exited $15,000,000 of revenue.

Operator

This process is continuous to ensure that we are well positioned to deliver on the strategy. We've done a huge amount of work in FY24 to lay a strong foundation and position the group for growth. And we will carry on in FY25. Our priorities for the next year resonate with the work we did in FY24, but we want to go further. 1st is yielding the editorial investment.

Operator

We have invested in FY24, and some investment will annualize in FY25. Audience and editorial will continue to work closely together to drive traffic and continue to write quality, expert content. Secondly, we will improve monetization. In digital advertising, we will deploy the learnings from the US sales transformation to the UK, focusing on modernizing product and a one future sales approach. We will continue to drive hard future creative to increase our sales of branded content.

Operator

We will deliver on the B2B strategy by diversifying our customer mix and offering innovative products. In magazines and in subscriptions in particular, we will be focused on pricing and marketing efficiency to improve subscriber acquisition and retention. Importantly, these priorities will be delivered by a strong and engaged team. As always, we will do this while driving portfolio optimization, maintaining our strong financial characteristics, and applying capital allocation, as evidenced by this morning's 3rd buyback program. And to conclude on slide 33, I hope what you will take from this morning is that gas is driving momentum, and that we are seeing encouraging green shoots of the effectiveness of the strategy.

Operator

We have delivered on our promise to return to organic revenue growth. We have positioned the portfolio for growth through the closure of low to no growth assets, combined with a change in structure to be more agile. There is more to do in FY 25. The plans are in place and the teams are engaged. And importantly, the exit rate is giving us confidence to meet FY 'twenty five expectations.

Operator

Thank you. And with that, let's do some Q and A.

Speaker 2

Good morning. Gareth Davis from Deutsche Numis. Maybe kick off with 2 for me. The first, e commerce affiliate revenue, plus 12% in the second half is an impressive performance. Certainly, I wasn't modeling that.

Speaker 2

Can you just talk through the volatility there, maybe dig into it a little bit in terms of what's going particularly well, which categories are doing well and sort of how you're feeling in the exit? And sort of tied to that, any first thoughts on Black Friday and the trade in there? And then secondly,

Speaker 1

sort

Speaker 2

of interesting comments on GoCo and clearly diversification going well in terms of the 36% already coming from non car. Could you talk a little bit sort of strategically about execution in terms of how are you thinking about the further expansion? Is it right, we're going to target mortgages, we go out, find all the product we possibly can and then we specifically market at it? Or just any color you can give there on sort of what that execution looks like?

Operator

Good. Let's do it. I think what I'll do is I'll answer and then you should chime in with any additional color commentary. Okay, e commerce affiliate revenue. There's 2 factors that are at play there.

Operator

The first is, the vouchers performance really helped that. And what we've seen in vouchers is that people that did 3rd party partnerships for vouchers were significantly impacted negatively by algorithm changes. Google, in fact, had a specific algorithm change targeting people who were effectively outsourcing vouchers and e commerce. We do it all in house. Our people review the products.

Operator

Our people do the e commerce shopping guides. Our people compile the voucher savings and put them on their own voucher pages. We've deployed that to multiple sites now as well, too. So we benefited from that significantly. The category that's doing well is tech, And tech definitely feels like it's bottomed out.

Operator

And, you know, as I presented at the half year results, we had seen e commerce, trowing and rebounding. The negative rates had improved in the half year. And we had felt like there was some momentum. So this is a continuation of that trend, Black Friday. They are literally up on the 4th floor right now, furiously trying to tabulate the output, given that Monday was Cyber Monday this year, which is pretty late.

Operator

What I will say is this, it was positive and it was in growth. And it's within our expectations to meet the full year consensus as part of having Black Friday perform how we had it perform. So initially, pleased, and, we will see the final numbers and kind of go from there. GoCo execution, the replatforming is complete. And I don't see us imminently entering new categories.

Operator

We have a lot of opportunity and work, and low hanging fruit in categories like home, where we're number 4 as compared to car, where we're number 2. What I'm particularly excited about there is a few enhancements. The first is we've now created, if you forget your password, you can put your email in and automatically get a log in link. That may sound trivial, but given that Go Compare is a once a year activity, people forgetting their passwords is a big problem. We will roll that out to all users so that people will be able to all log in with just their email address and a magic link, if they don't want to have to try to find their password.

Operator

The second area of development I'm particularly excited about is called indicative quote, which is where if you ask for a car insurance quote, we automatically send you a suggested home insurance quote, so cross selling. So really, it's cross selling, UI improvements, driving that 36 percent to even higher levels of diversification, and of course, continuing to be best in class in car. What did I leave out?

Speaker 1

Not much, John. I mean, you've got a lot of it done. Look, the only thing I'd add is, look, it's going to have tougher comparators. But the thing I would say, it doesn't mean you can't get market share. And all the things that John described, whether it's car or whether it's home, you can get more market share.

Speaker 1

So that's the only thing to add.

Speaker 3

Thank you. Morning. It's Lara Simpson from JPMorgan. Just a first follow-up on the outlook that you've given. I think you said top line would be H2 weighted.

Speaker 3

So just wanted to follow-up on that and the moving parts, what's sort of underpinning that acceleration towards the end of the year? And then just a follow-up on Go. Compare. Clearly, a lot of things to get excited about. I know the government has set up a task force to sort of look at the rising cost of car insurance in the U.

Speaker 3

K. Just interested in first thoughts on that, any implications particularly around sort of switching price discovery, how are you thinking that scenario could play out? And then just last question on portfolio optimization. I mean, clearly, a strong message from the board that you'll continue to look at the portfolio rigorously. We've seen the $50,000,000 disposals already.

Speaker 3

Do you think over the next 12 months, there's still a bit more pruning of the portfolio to do? Or how are you looking at that? Just different considerations. And if so, where would you be looking for some of the low hanging fruit on those exits?

Operator

You take the first one and I'll do

Speaker 1

the second one. Sounds good. In terms of the H2 weighting, the way to look at it is in the first half maybe 48%, 49% in terms of the weighting of the revenue and the rest in the second half roughly. The reason being, look, the gas investments, we ran out about £20,000,000 this year, but you'll see the benefit of those coming into next year. And then I've said, we expect another £5,000,000 to £10,000,000 this year.

Speaker 1

So the time taken to show those investments will probably be a little bit more in the second half of the year. And that's the way to think of it. It's the investments, It's the time taken. It'll be slightly more H2 weighted.

Operator

On the GoCo regulatory point, first of all, let me begin by saying that we take consumer duty and treating the consumer with excellence to be one of our highest values. It probably is our highest value in GOCO. We take, the Board and the GOCO Board take that unbelievably seriously. With that said, our understanding of the policy, the committee discussion, it was targeting insurers that were charging exceptionally high rates. And so we don't see that as part of the problem in the market that we cover.

Operator

We also think that quite frankly, Go Compare has been an exceptional value to the consumer during the past year where there were significant increases in premia. And Go Compare served as a place where people could go to save money. And so it's very much in the service of the consumer, and we will continue to abide by that. On your portfolio optimization point, we use the language that it's a continual process. And we're always looking at it.

Operator

And if brands fall out of profitability or get close to falling out of profitability, we will close them and we will probably do it in batches, similar to what we've done in the past. So I would expect that to be always something that's going on in the business, but I can't point to specific titles or closures that will occur with specific dates.

Speaker 4

Yes. Hi. It's Nick Dempsey from Barclays. Just first of all, on the OpenAI announcement. So content companies like Reuters, Informa, Wiley, they've been paid tens of 1,000,000 of dollars for AI groups to train models on their content.

Speaker 4

Here, we're talking about something that's immaterial. So can you reassure us that you're not underselling yourselves in terms of this relationship? Second question, beyond Black Friday, which we've heard about, what other indications do you have right now about your growth in digital advertising and e commerce commissions in the coming months, which is, I guess, the key thing that we need to see to get your guidance? And the yes, third question, just sort of following up on Lara's question about the first half, second half. I guess I'm interested in organic revenue growth.

Speaker 4

Do you mean that organic revenue growth will be better in the second half than the first half? And if so, could we see a decline in the first half? Or are we talking about some growth in the first half, better organic growth in the second

Speaker 1

half?

Operator

On the first two, you can do the H and Hs again. Okay. OpenAI, Nick, I worked so hard on this, you have no idea. I like chased these guys for a year and a half. And I really wanted us to have a partnership.

Operator

And I will get to the answer to your question, I promise. It's really important that we have a relationship with this, it's the most important company on earth right now. I mean, it's important that we have a relationship from a traffic perspective, a dialogue so that we're able to give them feedback on products, a close working relationship so that we can make sure that when linking an attribution is done in the product, we have the best opportunity to be featured. And so I said at the half year, and I said in all of our investor meetings that I expected the financial economics of it to be relatively modest and the traffic and ongoing relationship to be the key and to be the important piece. With that said, Nick, you have pointed out a few people that got enormous checks, right.

Operator

However, I would point to the number of people, like Time, like others, like Conde Nast, like Hearst, who have not cited a dollar amount. Most of those companies are private, so they don't have the obligation to kind of give a steer on it. Best we could. I don't think we sold ourselves short. I closely involved the board in it because it is sort of an extraordinary and unique transaction.

Operator

The board was highly supportive of doing it. We have a partner manager now at OpenAI who works closely with us. We didn't have that before. And we are getting some money, even though it's non material. So that would be my answer on that.

Operator

On e commerce, commission rates have been stable. In fact, commission rates were up slightly. Where we're really challenged and we need to continue to do the work is the UPVs, the unique shoppers, the volume part of the equation coming in. We've seen stabilization of audience. With stabilization of audience, we were able to achieve the 14% growth in the back half of the year.

Operator

Black Friday was positive. And we think that we will continue to have the audience that we need to achieve the e commerce revenue that factors into our full year guidance of the roughly 1% organic growth. Okay, Sharjeel, on the 2 halves.

Speaker 1

Yes. Just on digital ads and e commerce, in terms of the funnel, it's the users, John. We were talking about this the other day. I mean, when you look at the rest of it, it's remained relatively stable in terms of average order value, like I said. So it goes back to the top of the funnel and trying to get more people through it.

Speaker 1

And that, to a large degree, will depend on consumer confidence, especially in the tax area. In terms of organic growth, look, as I found out in the last 10 weeks, there's a lot of moving parts at Future. And when I look at B2C, you've got digital ads with relatively low visibility looking forward. You've got the magazines print, which is in a secular decline. You can see that progressing and you've got the e commerce, which you referred to.

Speaker 1

But then you've also got Go. Compare, which is going to come up against tough comparators in the first half of the year. And then you've got B2B as well with the tech market segment under pressure there. I think the best way to look at it is consensus is between 1% 2% roughly of organic growth. So we expect organic growth across the whole year.

Speaker 1

Exactly how it pans out, look, it will depend on the visibility, it will depend on go. Compare. From what I can see at the moment, slight weighting to the second half.

Speaker 5

Thanks. Will Lauren from Berenberg. Just firstly, in the remaining €10,000,000 of or €5,000,000 to €10,000,000 of the gas program, can you just detail also how is that apportioned across Go Compare and the B2C side? And then secondly, just in terms of cookies, obviously, Google's decision, are you seeing any sort of changes in behavior? And then finally, just on Go Compare, what are your sort of expectations in terms of revenue growth for that business in FY 'twenty five?

Operator

Okay. Let's do the thing where I answer and then you fill in anything

Speaker 1

out. Sounds a good plan.

Operator

Okay, good. All right. Okay, the gas program. So $5,000,000 to $10,000,000 We all I can use is guidance for what we did with the $20,000,000 which was we came pretty close to hitting the buckets as we outlined when we originally launched Guess. We ended up putting a little more spend into Go Compare because why wouldn't you spending into a favorable market.

Operator

The breakout, I imagine, will be pro rata on the 5% to 10%, similar to what we did on the 20%. In other words, editorial will continue to be a large focus, maybe spend a little more on a proportional basis in U. S. Ad sales and U. K.

Operator

Ad sales because quite frankly, we didn't do as much hiring there as we did. And you can tell from the numbers, 50 editorial heads, 100 heads added roughly a bunch of those went into sales and sales support, but not as many into sellers as I would have liked. So I would say if you use the assumption of pro rata relative to how we spent the 20, you'll be in good shape on that. Cookies, thanks for bringing it up. No one's talking about it anymore.

Operator

I mean, basically, where we're at with it is, Google is, Google said in the blog post where they said they weren't deprecating cookies, that they were gonna roll out some change to Chrome that was going to allow people, to turn cookies off effectively. They've been completely silent on the topic since that announcement however many months ago. We are going with the assumption and continuing to go with the assumption that we will have to adapt to a post cookie world. So that means all the stuff I talked about in the half year in terms of first party data, using the Aperture platform, selling more direct and first party. We moved 2 percentage points into more premium forms of inventory out of open auction.

Operator

So we're ready for it and we're preparing for it. The challenge is that until it gets turned off, advertisers are slow to move out of cookie based buying. Because quite frankly, everybody loves cookie based buying. It's just a Google thing that they want to turn it off, basically. We do think that there are advantages to being able to use 1st party audience data, and that's why we do the 1st party sales.

Operator

But we're ready and we're prepared. We just have to wait for this change to happen. GoCo expectations. Growth, that's the expectation that I can give you basically. Coming off of 28% and trying to time a market and figure out how much growth we will have in the next year is remarkably difficult.

Operator

Single digit percentage organic growth feels right, low, okay. What I will say overall is we expect each of the divisions to participate in organic growth in FY 'twenty five. But to Sharjil's point, given that we're talking about 1%, it's obviously very low growth numbers that get you to that 1%. What did I leave out?

Speaker 1

Not much. Just on the thing, look, the comparative, a lovely problem to have, by the way, when you've got tough comparators. But it will depend on how the car market looks this year as people go for the renewals. Do prices increase, decrease and how many people come back? But going back to the market share, that's what we're concentrating on.

Speaker 1

All the things that John talked about in terms of the Quick Quote, in terms of Magic Link, in terms of one time password, the ease of use of the website, that's to try to gain market share regardless of what happens in terms of the car market itself. And then Home, number 4, we've talked about it quite a bit. So when I look at that, probably it ebbs out to low single digits is our current view of go.compare.

Speaker 6

This is Oli from Jefferies. Well done on the results. You had a strong exit in 4Q for digital ads. Could you help us understand how much of that is from the U. S.

Speaker 6

Sales force and how much is potentially from some sort of macro uplift? You emphasized that tech has bottomed out. And I think from looking at ad agencies, you can see that broadly tech is somewhat coming back. On the additional hires that you've made, as a second question, can you help us understand, are these going to be cut at any point? Or are these indefinitely staying as part of the group?

Speaker 6

Given that I assume some of them have come from the CHF20 1,000,000 to CHF30 1,000,000 that you've invested, which you've allocated over 2 years. Can you just help me understand that? And then you also gave us a good showcase of TechRadar and the investments in the website. I was wondering if you could provide us with any other examples. I appreciate TechRadar is a large share of your users, but are there any other websites, particularly in the top 10, which you've done something similar with, so we can help understand how the broader portfolio is?

Speaker 6

Thanks.

Operator

Sure. Okay. Let me just take one note. Okay. The perennial question, how much is macro, how much is self help?

Operator

The perennial question that I can't answer, that I get asked in every single investor meeting, and I always feel bad when I don't have an answer because I feel kind of silly. Let me give you some more color. The macro has improved in the US, and we have always seen the US lead first with the UK following. The UK goes into bad times first, the UK then goes into bad times. The US comes out of bad times, and then the UK follows.

Operator

So I definitely think that there's a macro benefit that we're having in the US right now. And you can read the same stuff I read about the US economy versus the UK economy. I also think the president election, having that out of the way, is particularly helpful just now in the US as well. What I will say on self help is we do need to take the learnings from the US to the UK. We do need to do this one future sale that I've talked about that we did in the US.

Operator

We need to move that here as well, too. It doesn't work right now that we have a Country Life salesperson who sells Country Life in the UK. That person should be selling luxury. That person should be selling Cartier and Omar Piguet to Country Life and Wallpaper and Horse and Hound and all the luxury properties. That's what we should be doing.

Operator

And we will do that and we will get that done. Okay, on to your next question. The heads stay. The money goes in, the heads stay, and it anniversaries, and we've always been completely clear about that. And we need the heads to be able to maintain that increase in editorial output.

Operator

Finally, on other examples, I'll give you a cross site example, which actually is translated with results. We did a project we call Tip of the Spear. I'm not exactly sure what that analogy means, but that's what the team called it, okay? What that meant was they picked several categories that were particularly exciting, like wireless headphones, for example, where we felt like we could have good search ranks and improve. And across all the technology properties, they dramatically enhanced in set categories like that, mattresses being another category where they invested significant resources as well, because techies are super interested in what mattress is best, apparently.

Operator

So that was another area. That was a cross site area choosing particular product verticals. And we have the results now in e commerce to be able to show the tip of the spear worked and we will roll it out to additional product categories.

Speaker 1

Just one thing to add, just on the €25,000,000 to €30,000,000 Look, it's in our guidance, right? It's in our guidance for FY 'twenty eight 'twenty five in terms of 28%. And then going forward, we said we'll operate between 28% to 30%. Those costs stay in there. And look, one of the great things, the reason one of the reasons I joined is the compelling business model.

Speaker 1

If the macro improves in the U. K. And we keep those heads, the upside goes to the bottom line. So that's how you get to the 28% to 30%. But those heads are in in our guidance.

Speaker 7

Good morning. It's Jonathan Barratt from Panmure Liberum. Three questions, if I may. First of all, just on the price comparison market. Was it we've seen Direct Line take a relatively make a relatively big move on in strategy in terms of joining the PC market.

Speaker 7

I wondered if you can give us your perspective on what your the pricing power is of price comparison sites. I think a lot of people thought the price takers, are you actually going to be the price setters from here? Does that give you a positive feel for where you're going to go with your pricing power in that market? 2nd question, just on the U. S.

Speaker 7

Advertising playbook, 2 elements to this. First of all, your deployment in the U. S, is that giving you the optimism that you cannot just close to U. K. Level yields, but actually to U.

Speaker 7

S. Level yields, so another step up from what you're kind of looking at? And then secondly, have you already started deploying the playbook in the U. K. Because I've noticed some things in your sites, which made me think you've already actually started doing that, but I might be wrong.

Speaker 7

And then thirdly, just on the capital allocation strategy. I noticed the delay to the buyback till January, if I've understood that correctly. Just perhaps give us a little bit of color on why that is and maybe there's something we should understand on that? And then just also just will you consider increasing the dividend as part of your capital allocation strategy as well, the payout ratio that is? Thank you.

Operator

Number 3 has your name all over. All over. I've always started thinking about that. Okay. Good.

Operator

All right. I we are not a straight price taker in insurance comparison. We have the ability to put through inflationary increases and successfully put through inflationary increases every year. It's a competitive space. There are 4 players.

Operator

But I do not think it is one-sided. I think it is a negotiation between the providers and GoCo on what the take rate is going to be on those transactions. You want to add something to that? Underlying economic. It does not have to do, we've gotten asked this question before, which is our take rate, our take on it is not tied to the premium increase.

Operator

So when I say that we're putting through inflationary increases, I mean macro, a few percent a year, we're able to push through a price increase on, with the suppliers basically. On US ads, thank you for noticing. Yes, in the U. K, we're making a big branded content push. And future creative is cross border.

Operator

It does exist, and we have a lead for it in the U. K. And a lead for it in the U. S. So we've pushed that through.

Operator

But the sales force reorganization, to be fair, we need to do that. That one future approach has not yet come to the U. K. Okay, capital allocation.

Speaker 1

Yes. So the first question was on why is it in January. I wouldn't read anything into that whatsoever. It's just that the markets are quite quiet in December. I think it's better if we just start in January.

Speaker 1

And the logic is as simple as that. There's nothing to read into that. In terms of the dividend payout, look, I've made it very clear, we'll do a floor at one times. And if we've got excess cash, we'll make the decision with the Board, whether that's a buyback or whether that's a progressive dividend. We'll make that decision at the time.

Speaker 7

Thank you. Sorry, just to follow-up with you, Jon, if that's okay. On the U. S. Playbook, can you close the extra gap from U.

Speaker 7

K. To U. S. To U. S?

Speaker 7

Okay,

Operator

yields. I think a lot about U. S. Yield. And the issue is we're probably not pushing yield.

Operator

I mean, yields were flat in the U. S. And the U. K. During period.

Operator

We're probably not pushing price aggressively in the US because we're trying to win deals right now, we're trying to win new clients. So over time, I think over time, yields should improve in both markets. Not really sure about GAAP, so to speak, but that's how I'd answer it. When I looked back at the US and I looked at where the yield was, and I tried to figure out why the US yield had not increased, even in the premium areas during the period. It was because they're selling, they're aggressively pricing to be able to win deals and take market share right now.

Operator

So which I think is the right thing to do, which is akin to putting rocket fuel in the rocket and not depriving it while you're trying to break through the atmosphere.

Speaker 7

Yeah.

Operator

Okay, thank you so much everybody. Really a pleasure as always.

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Earnings Conference Call
Future H2 2024
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