Preliminary Results

RNS Number : 6986W

Future PLC

24 November 2010

 



24th November 2010

FUTURE PLC

Preliminary results for the year ended 30 September 2010

Future plc (LSE: FUTR), the international special-interest media group, today announces its preliminary results for the year ended 30 September 2010.  An analyst presentation will be held today at 10.00am at the offices of Numis, 10 Paternoster Square, London EC4M 7LT.

Financial Summary:	2010	2009	Change
Revenue	£151.5m	£153.1m	-1%
EBITA*	£10.1m	£10.1m	Flat
EBITA margin	6.7%	6.6%
Reported Pre-tax profit	£5.6m	£3.7m	+51%
Adjusted ** Pre-tax profit	£8.3m	£7.6m	+9%
Reported earnings per share (p)	1.7p	0.9p	89%
Adjusted** earnings per share (p)	2.4p	1.8p	+33%
Dividend relating to the year (pence per share)	1.1p	0.9p	+22%
Net debt	£7.4m	£15.6m	Reduced 53%

Financial and operating headlines: 

·        US business returns to profit*

·        Group EBITA ahead of expectations, adjusted pre-tax profit up 9%

·        Continued progress in strategy:

o  Commercial partnerships strengthened with customer publishing revenue up 43%

o  Digital revenue up 14%

·        Net debt more than halved to £7.4m

·        Dividend restored to 2008 levels, up 22%

Stevie Spring, Future's Chief Executive said:

'After an exceptionally tough 2009, we've delivered a set of results in 2010 that demonstrates we're back on track.    

We've returned our US business to profit - a key goal for the year. And made good progress against our strategic priorities - adapting and investing in our business to meet the needs of a rapidly changing content landscape.

Consumer confidence is still fragile on both sides of the Atlantic, so our outlook for 2011 must remain cautious even though we've seen an encouraging 5% growth in the second half of 2010.'

- ends -

Enquiries:

Future plc

Stevie Spring, Chief Executive                                                 Tel: [phone]

John Bowman, Group Finance Director                                 Tel: [phone]

Vicky Bacon, Head of Group Communications                     Tel: [phone]

Financial Dynamics:
Charles Palmer /Tim Spratt /Nicola Biles                                Tel: [phone]

Notes

* EBITA represents operating profit before amortisation of intangible assets.

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

About Future:

Future plc is an international special-interest media group, listed on the London Stock Exchange (symbol FUTR).  Founded in 1985 with one magazine, today we have operations in the UK, US and Australia creating over 180 special-interest publications, websites and events.  We hold market-leading positions in games, film, music, technology, cycling, automotive and crafts.  Our biggest-selling magazines include T3, Total Film, Classic Rock, Guitar World and Official Xbox Magazine.  Our websites include gamesradar.com, bikeradar.com, and techradar.com.  Future sells more than three million magazines each month; we attract 23 million unique visitors to our websites; and we host 27 annual live events.  In addition, Future exports, licenses or syndicates publications to 90 countries, making us the UK's number one exporter and licensor of monthly magazines.

Summary

Trading patterns stabilised during 2010 and our financial position has significantly improved.  Our US business returned to profit this year and in our UK business our portfolio spread helped us to achieve revenues just 1% below those for 2009. Overall, EBITA profit was flat.  The pursuit of the same strategy since 2006 has particularly helped us to withstand the tough trading environment of the past two years.

Strategy

Future provides English-language content for communities of enthusiasts: clusters of like-minded individuals whose interests range from computer games to guitars, from cycling to film.  We are multi-platform, producing magazines, websites, events and multimedia services for commercial partners and we export and license that content to more than 90 countries.

Financial performance

Our 2010 results show Group revenue of £151.5m (2009: £153.1m) and EBITA of £10.1m (2009: £10.1m).  In the UK, 2009 profits benefited from £1.3m of foreign exchange gains.  In the US, we returned to profitability.  More detail is provided in the Chief Executive's statement and the Financial Review.

After reduced charges for amortisation of intangibles: £2.7m (2009: £3.9m) and net financing costs: £1.8m (2009: £2.5m), pre-tax profit was £5.6m (2009: £3.7m).  Cash generation remains strong and we reduced net debt by 53% to £7.4m.

Basic earnings per share were 1.7p (2009: 0.9p).  Adjusted earnings per share for the year were 2.4p (2009: 1.8p), helped by a significantly reduced tax charge. 

Dividend

Despite tough trading conditions, the Board has been encouraged by operational improvements in the US and by half-yearly revenue trends.  The Board is also encouraged by the increase in adjusted earnings per share and the reduction in net debt.

The Board therefore recommends increasing the final dividend to 0.6p (2009: 0.5p).  Together with the interim dividend of 0.5p (2009: 0.4p), this brings total dividends for the year to 1.1p (2009: 0.9p) per share in line with our dividend policy.  This restores the size of total dividends to the level declared for 2008.

If approved at the Annual General Meeting to be held on 9 February 2011, the final dividend of 0.6p per share will be paid on 1 April 2011 to all shareholders on the register on 18 February 2011.  The ex-dividend date is 16 February 2011.

Current trading outlook

Consumer confidence is still fragile on both sides of the Atlantic, so our outlook for 2011 must remain cautious even though we've seen an encouraging improvement in second over first half performance. 

In the US, Government stimulus measures included a change to tax rules resulting in a $2.5m tax receipt which we will use to invest in our business next year. In 2011 we expect that this increased US investment - inter alia to improve our digital production capabilities - will hold back results for the first half-year.  Across the Group, we continue to invest appropriately in our brands, in new products and in our people: because this predominantly organic approach has served us well during the last four years.

Chief Executive's Statement (Extract from Annual Report)                                                      

Introduction

Fifty years ago, JFK said: 'time and the world do not stand still.  Change is the law of life.' Never has this held more true than during the last two years for the global economy and, closer to home, the media industry.

After an exceptionally tough 2009, our focus during the past year has been on changing our business to fit that changed environment. We've made good progress. And can now move forward.

Overview

Despite continued investment in developing both new products and improving existing ones for the new content landscape, and despite not having the significant positive foreign exchange advantage we enjoyed last year, we saw a return to profit for our US business and Group EBITA for the year was therefore held at £10.1m (2009: £10.1m).

For the full-year, copy sales and advertising were both down only low single digits as quarter on quarter trends improved. We also enjoyed some market-busting performances across the Group: our customer publishing sales were up 43%; digital revenues were up 14% and we saw some of our more established web properties delivering margins in excess of 30%.

We continue to be strongly cash generative. This has allowed us to pay down our bank debt significantly, and still pay an appropriate dividend to shareholders whilst we experiment with new types of content and content delivery.

And we now have 'A' list digital country leadership in post in both the US and the UK to help us better exploit the new technologies that are retraining the way consumers access (and pay for) content.

UK business update

Our UK business, which comprises 70% of Group revenue, delivered EBITA of £12.9m (2009: £15.9m) on revenue of £105.9m (2009: £106.5m) (£12.8m EBITA on revenue of £105.2m at constant currency). Second half performance was stronger than first half and Q1 2011 advertising is already pacing ahead of 2010. We saw increases in both revenue and contribution in 16 of our largest print titles from all parts of the portfolio except games, where we did see revenue growth in our digital products both online and on-console with the launch of FirstPlay.

Videogaming still accounts for 21% of our UK revenues and remains one of the world's most popular leisure pursuits. Stepchange improvements in storytelling, production values and consoles (for motion and 3D) should help increase our reach as increasing numbers of casual gamers evolve into our core target: over 1.5 million votes in our annual Golden Joystick Awards this year: a 25% increase over last year's all time high.

Subscriptions were up again in revenue, volume, yield and retention. So our most loyal and valuable consumers continue to prove their loyalty and value as 'prosumers' despite the economic backdrop. And, importantly, 25% are from overseas. During the year, we moved supplier for direct-to-customer marketing to enable us to better serve international and overseas subscriptions and ecommerce customers.

We continue to innovate and push new products - FirstPlay on-console for Sony and Guitar Aficionado magazine both moved into profitability. Comic Heroes has been contribution positive in year one. We're launching Tap! for all things Apple in Q1 2011 and we launched several apps in the year, with many more in the pipeline.

Every single product is part of our 'do and learn' approach and with each development we refine and improve our commercial thinking.

In the summer we were delighted to welcome a new UK Chief Executive, Mark Wood, who is one of the UK's most experienced and talented leaders of content-focused companies, and a digital-business pioneer. His primary task over the coming year is to maximise our revenue opportunities from digital formats.

US business update

Our US business experienced a truly 'annus horribilis' in 2009 and we made it a priority for 2010 to fix the issues within our control, and return it to profit. 

With a new management team in place, we've succeeded in turning the £3.3m reported loss in 2009 to a £0.2m contribution in 2010, helped in part by normalising newsstand, and an improved ratio of copies sold to copies distributed.

On an underlying basis, our trading has improved following a root and branch review of every product and operational division in the business.  Like-for-like newsstand sales for our regular magazines were up against a market down 6%. Advertising declines have also now slowed, and we have reduced the number of volatile special issues by 36% which has had a positive effect on contribution. Again, our second half results saw an improvement over last year with revenues up 8%.

Our customer publishing division enjoyed substantial revenue growth - up 55% - following important launches for Coats, Blizzard and Best Buy but it was an investment year for those products so contribution declined. We expect that investment to pay off during our 2011 fiscal.

We also continue to invest in developing our online properties. We learnt much about audience patterns, search, content discovery and social sharing from our standalone aggregation Blips sites  which we closed earlier this year because, in common with most aggregators, it was proving unaffordable to deliver a valuable and valued user experience. We have used that learning in expanding our 'narrow and deep' Radar properties, and in launching new digital products for tablets.

Finally, some good news from the post-Lehman fall-out: as part of the US government fiscal stimulus policy, we enjoyed a tax refund of $2.5m which we intend, inter alia, to invest in developing Future Studios in San Francisco to enable us to exploit new technologies and the opportunities for digital customer publishing as they expand over the next three years.

Digital Transformation

In a year when the market has seen an explosion in interest in mobile platforms and e-readers - accelerated by the launch of Apple's iPad - and when the debate on paid-for versus free content has raged, I'm very excited about the progress Future is making in digital.

Digital is integral to the way we do business: whether that's the way we develop content through our multimedia teams; the way we deliver it through websites, consoles or mobile devices; the way we optimise it through search and social networking; the way we package and sell commercial opportunities to our partners; or the way we protect and enforce our intellectual property. Digital revenue increased 14% year-on-year, up 30% in the second half after a flat first half. 

Encouragingly, we're seeing our new digital revenue streams begin to gain traction.  Take TechRadar, for example.  We launched this website from scratch three years ago and it is now the UK's biggest consumer technology news and reviews website with over 3.5m unique visitors every month.  It has grown revenues by 58% year-on-year, which has pushed gross margin above 30%, and is heading for a record-breaking next quarter. TechRadar best illustrates how we're creating content informed by data on consumer need; searchable and shareable by the communities it serves; and attractive to clients who wish to trade with those communities.

Increasingly, content is being consumed on the move. And, again, we've made real progress in developing content for mobile platforms. This is an area of huge potential: sales of digital versions of our magazines have increased tenfold in the six months to July 2010.  We launched bespoke interactive iPad editions for MacLife and T3.  Within days, MacLife's iPad edition topped the Apple charts on both sides of the Atlantic and went on to exceed 400,000 downloads. T3 was number one in the UK at launch. We now have nine phone apps bringing us closer to our readers. And we're upgrading our websites to make them more mobile friendly.

Strategic update

Throughout the business we've moved forward on all of our strategic priorities. 

Portfolio: Content

Future is a federation of micro businesses. One of Future's strengths is that we're not reliant on any single host sector or revenue stream.  We can adapt our investment focus and our product mix according to the fortunes of our host sectors.   In 2010 our games business continued to be dampened by a sluggish release schedule.  However, we've seen strong performances in other parts of the portfolio, most notably in technology, music and sports. 

We've been perfectly placed to tap into a renewed consumer interest in cycling in the last 12 months.  Cycling Plus achieved its tenth year of growth in the last round of ABCs and won 'Specialist Consumer Magazine of the Year' at the PPA Awards beating Radio Times and Lonely Planet. Our cycling websites, cyclingnews.com and bikeradar.com, together broke four million unique monthly visitors during the year. And most importantly we've translated this success into top and bottom line growth: revenues up 28% to make cycling our second biggest web revenue and contribution generator.

Prosumers: Community

Future, at its heart, is a company focused on creating or curating content for communities of enthusiasts who are passionate about their interests.  So deeply engaged are our consumers that we call them 'prosumers' - because they're closer to being 'professional' consumers. 

This consumer-centric approach gives us two advantages: it enables us to focus our expertise on areas in which we truly excel, whether that's photography, film or fast cars; and it enables us to build very powerful relationships with our consumers that we can extend across different platforms, in print, in digital, face-to-face.

We understand that our customers want different content in different formats. In print, it's increasingly about collectable artefacts. So we constantly strive to improve the quality and collectability of our print content - which passionate consumers will commit their money and time to. Our special 'Classic Rock presents Slash' fanpack, sold out at a cover price of £14.99.  Online, musicradar.com's visitors spend on average about eight minutes on the site; twice MTV.com's average dwell time.  And at our live music events - The Golden Gods in both UK and US were seen by two million fans.

Partnerships: Commerce

We've continued our focus on developing and strengthening our commercial partnerships during the year. 

For the second time in three years our sales team won the Association of Online Publisher's Digital Sales Team of the Year Award, beating a shortlist that included the FT, Telegraph Media Group, Channel 4 and ITV.   The team were recognised for their outstanding business development and integrated sales approach across different platforms (print and digital) and different niches: something all of our media industry peers are striving to achieve.

FuturePlus, our custom publishing agency, has grown its revenue on both sides of the Atlantic and attracted some exciting new partnerships.  Partnership publishing overall now represents 17% of UK revenues and 39% of those in US.

In foreign-language markets, after another year inevitably impacted by global recession, our international licensing business has been aggressively developing new product, adding 21 new licences including T3.com into the Middle East, Portugal and Scandinavia; T3 into Iran and Total Film into Indonesia. 

Managing the business

Despite all the positive examples of strategic progress around the business, I said at the end of 2009 that I expected the economic and structural pressures on our business to continue into 2010 and, in aggregate, that has proved to be the case. 

Consumer confidence is still fragile on both sides of the Atlantic, so our outlook for 2011 must remain cautious even though we've seen an encouraging improvement in second over first half performance.  

In 2011 we will be aggressively pursuing opportunities for growth and, on behalf of the Board and our shareholders, I'd like to thank everyone at Future for their continued creativity and commitment to building a business that takes full advantage of the new technology landscape.

Stevie Spring

Chief Executive

24 November 2010

Financial Review

This financial review is based primarily on a comparison of our IFRS results for the year ended 30 September 2010 with those for the year ended 30 September 2009. Unless otherwise stated, change percentages relate to a comparison of these two years. There has been no significant change to the scope of the Group's activities.

In running the business, Future management focuses on earnings before interest, tax and amortisation. For convenience we refer to this as EBITA.

Statutory results for year ended 30 September

Revenue was £151.5m (2009: £153.1m) and the business generated EBITA of £10.1m (2009: £10.1m) representing an EBITA margin of 6.7% (2009: 6.6%).

The income statement includes reduced charges for amortisation of intangible assets: £2.7m (2009: £3.9m) and net financing costs: £1.8m (2009: £2.5m). Pre-tax profit was £5.6m (2009: £3.7m) for the year.

Year ended 30 September	2010 £m	2009 £m
Revenue	151.5	153.1
EBITA	10.1	10.1
EBITA margin	6.7%	6.6%
Amortisation of intangible assets	(2.7)	(3.9)
Operating profit	7.4	6.2
Net finance costs	(1.8)	(2.5)
Pre-tax profit	5.6	3.7
Earnings per share (p)	1.7p	0.9p
Adjusted earnings per share (p)	2.4p	1.8p
Dividends relating to the year (p)	1.1p	0.9p

Half-yearly performance

The table below analyses the business results during the last two years into first half and second half performance.

	First half-year to March £m	Second half-year to September £m	Total £m
Revenue
Year to 30 September 2009	76.6	76.5	153.1
Year to 30 September 2010	71.4	80.1	151.5
EBITA
Year to 30 September 2009	4.6	5.5	10.1
Year to 30 September 2010	4.4	5.7	10.1

Dividend

Despite tough trading conditions, the Board has been encouraged by operational improvements in the US and by half-yearly revenue trends.  The Board is also encouraged by the increase in adjusted earnings per share and the reduction in net debt.

The Board recommends increasing the final dividend to 0.6p (2009: 0.5p).  Together with the interim dividend of 0.5p (2009: 0.4p), this brings total dividends for the year to 1.1p (2009: 0.9p) per share in line with our dividend policy.  This restores the size of total dividends to the level declared for 2008.

If approved at the Annual General Meeting to be held on 9 February 2011, the final dividend of 0.6p per share will be paid on 1 April 2011 to all shareholders on the register on 18 February 2011.  The ex-dividend date is 16 February 2011.

Review of operations

Group revenue decreased by 1% to £151.5m and Group EBITA was £10.1m, the same figure as for 2009. 

Currency effect of US Dollar

The most significant foreign currency affecting the Group is the US Dollar. The average exchange rate for the year was $1.56 = £1, compared with $1.55 for the previous year. 

The Group results are best understood by reviewing UK and US results separately.

Analysis of EBITA for year ended 30 September

	2010 £m	2009 £m	Change %
UK	12.9	15.9	- 19%
US	0.2	(3.3)	Profit from loss
Central costs	(3.0)	(2.5)	+ 20%
Total EBITA	10.1	10.1	Flat

Central costs in 2009 benefited from £0.3m of provision releases and a lower IFRS2 charge.

Analysis of revenue for year ended 30 September

The tables below analyse Group revenues in Sterling.

By country	% of Group	2010 £m	2009 £m	Change %
UK	70%	105.9	106.5	- 1%
US	30%	46.2	47.0	- 2%
Intra-group	-	(0.6)	(0.4)	-
Group revenue	100%	151.5	153.1	- 1%

By type	% of Group	2010 £m	2009 £m	Change %
Circulation	58%	88.7	90.7	- 2%
Advertising	30%	45.4	47.8	- 5%
Customer publishing	8%	11.6	8.1	+ 43%
Licensing, events & other	4%	5.8	6.5	- 11%
Group revenue	100%	151.5	153.1	- 1%

Advertising revenue	% of Group	2010 £m	2009 £m	Change %
Magazines	75%	33.9	37.2	- 9%
Online	25%	11.5	10.6	+ 8%
Advertising revenue	100%	45.4	47.8	- 5%

Proportion of Group	UK	US	Group
Games	14%	14%	28%
Music & Movies	16%	7%	23%
Technology	20%	7%	27%
Active	20%	2%	22%
Total	70%	30%	100%

UK performance for year ended 30 September

	2010 £m	2009 £m	Change %
Circulation revenue	66.5	69.3	- 4%
Advertising revenue	27.9	26.8	+ 4%
Customer publishing	6.7	4.9	+ 37%
Licensing, events & other	4.8	5.5	- 13%
Total revenue	105.9	106.5	- 1%
EBITA	12.9	15.9
EBITA margin	12.2%	14.9%

Future's UK business (comprising 70% of Group revenue) remained resilient.  Following a decline in first half revenues of 3%, revenues in the second half grew so that revenue for the year was down 1% compared with 2009.

EBITA for the year was £12.9m representing a margin of 12.2% of revenue. 

This performance is encouraging in a media sector that continues to experience very significant advertising and newsstand challenges and reflects the underlying strength of our special-interest business, our continuing focus on operating performance in each sector and our ability to mitigate revenue disappointments swiftly.

Circulation revenue fell by 4% and within this subscription revenue grew by 3%, domestic newsstand revenue declined 11% and export revenue grew by 3%.

Advertising revenue grew by 4% for the year.  First half advertising revenue was flat while second half advertising revenue grew by 9%.

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

The table below shows performance by sector.

	2010 Revenue £m	2010 Contribution £m	2010 Margin %	2010 % of revenue	2009 Revenue £m	2009 Contribution £m	2009 Margin %
Games	21.5	6.0	28%	21%	23.9	8.2	34%
Music & Movies	24.5	6.4	26%	23%	23.4	6.8	29%
Technology	31.0	9.1	29%	29%	31.2	10.0	32%
Active	28.9	7.4	26%	27%	28.0	7.6	27%
	105.9	28.9	27%	100%	106.5	32.6	31%
Overheads*		(16.0)				(16.7)
EBITA		12.9	12.2%			15.9	14.9%
Amortisation		(1.3)				(1.7)
Operating profit		11.6				14.2

* 2010 EBITA includes foreign exchange gains of £0.1m (2009: £1.3m) which are included in overheads.

US performance for year ended 30 September

	2010 $m	2009 $m	Change %
Circulation revenue	34.6	33.2	+ 4%
Advertising revenue	27.3	32.6	- 16%
Customer publishing	7.6	4.9	+ 55%
Licensing, events & other	2.5	2.3	+ 9%
Total revenue	72.0	73.0	- 1%
EBITA	0.3	(5.1)	-
EBITA margin	0.4%	(7.0%)

After a very challenging year in 2009, we ended 2010 with revenue down 1% and a return to EBITA profit. 

Reductions in revenue for the year reflect a planned reduction in the number of products published during the year and a 16% reduction in advertising revenue. 

Reported circulation revenue grew by 4% as a result of a return to more normalised trading following last year's industry-wide newsstand disruption.

Advertising revenue fell by 16% for the year.  First-half advertising revenue was down 23% while second half advertising revenue was down by 8%.  Advertising is a significantly greater portion of our US business than is the case in the UK.

Total US revenue fell 10% in the first half but grew 8% in the second half.

The table below shows performance by sector. We have maintained our focus on operating and other costs.

	2010 Revenue $m	2010 Contribution $m	2010 Margin %	2010 % of revenue	2009 Revenue $m	2009 Contribution $m	2009 Margin %
Games	33.5	4.9	15%	47%	36.2	3.8	10%
Music & Movies	16.2	2.5	15%	22%	16.2	0.3	2%
Technology	16.3	3.0	18%	23%	15.6	2.2	14%
Active	6.0	(0.3)	(5%)	8%	5.0	(0.1)	(2%)
	72.0	10.1	14%	100%	73.0	6.2	8%
Overheads		(9.8)				(11.3)
EBITA		0.3	0.4%			(5.1)	(7.0%)
Amortisation		(2.1)				(3.4)
Operating (loss)		(1.8)				(8.5)

Digital

The 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 14% from £11.9m to £13.6m.

Group performance for year ended 30 September

	2010 Revenue £m	2010 Contribution £m	2010 Margin %	2010 % of revenue	2009 Revenue £m	2009 Contribution £m	2009 Margin %
Games	43.0	9.1	21%	28%	47.2	10.7	23%
Music & Movies	34.9	8.0	23%	23%	33.8	7.0	21%
Technology	41.5	11.0	27%	27%	41.3	11.4	28%
Active	32.7	7.2	22%	22%	31.2	7.5	24%
	152.1	35.3	23%	100%	153.5	36.6	24%
Less: intra-group	(0.6)	-			(0.4)	-
	151.5	35.3			153.1	36.6
Overheads		(25.2)				(26.5)
EBITA		10.1	6.7%			10.1	6.6%
Amortisation		(2.7)				(3.9)
Operating profit		7.4				6.2

Leasehold property and related balance sheet provisions

All of the Group's property is either occupied or assigned, sub-let or the lease surrendered. Property provisions carried at 30 September 2010 totalled £0.1m (2009: £0.2m).

Intangible assets

The annual charge for amortisation of intangible assets was £2.7m (2009: £3.9m), the decrease reflecting lower additions in the previous year.  No impairment charge against intangible assets has been required since 2006.

Taxation

The Group's tax strategy is to minimise its liabilities to taxation, having regard to commercial circumstances, tax history, the risk of changing legislation, and delays in agreeing matters in certain territories.

The tax charge for the year amounted to £0.1m (2009: £0.9m), representing an abnormally low effective tax rate of 2% as applied to profit before tax.  The standard rates of corporation tax are 28% (UK) and 40% (US).  US Government stimulus measures included a change to tax rules which permitted some tax losses to be set against tax payments in earlier years. This resulted in a $2.5m tax refund (of which $2.0m was received in September 2010 and the balance in October), thus lowering the effective group tax rate from 30% to 2%.

The Group benefits from the structuring of certain acquisitions and other planning steps.

Earnings per share

Basic earnings per share for the total group were 1.7p (2009: 0.9p). Adjusted earnings per share were 2.4p (2009: 1.8p) and these are based on the audited results which are then adjusted to exclude amortisation of intangibles and related tax effects. Adjusted profit after tax amounted to £7.9m (2009: £5.8m). The weighted average number of shares in issue was 327.3m (2009: 326.3m). Full details are set out in note 9.

Balance sheet

As is common in media companies, Future has a low capital base and its value is better measured from its strong cash flows rather than by returns on capital employed. The Group's net assets at 30 September 2010 amounted to £86.2m (2009: £81.5m) of which £112.1m (2009: £113.6m) related to intangible fixed assets. While the Group's net assets increased as shown above, the Group reduced its net debt by 53% from £15.6m to £7.4m. The Group's balance sheet is therefore stronger than a year ago.

The Company's accumulated distributable profits at 30 September 2010 were £50.3m.

Cash flow and net debt

Net debt at 30 September 2010 was £7.4m. Future continues to be cash-generative and the largest cash inflow during the year was cash generated from operations of £12.0m.

During the year the Group paid out £1.6m in dividends, £1.8m in respect of capital expenditure and £1.4m in net interest payments; net tax receipts were £1.2m.

Net finance costs

These were as follows:

	2010 £m	2009 £m
Net interest payable	1.8	1.8
Fair value adjustment on interest rate swaps	0.1	0.5
Exchange (gains)/losses	(0.1)	0.2
Net finance costs	1.8	2.5

Credit facility

Future funds its operations through a mixture of operating cash flow generated by the business and bank debt. The banking facility was renewed in May 2009 and matures in November 2012.  Arrangement and other fees related to the new facility totalled £1.0m (to be amortised over the term). Interest payable is to be calculated as the cost of three-month LIBOR (currently approximately 0.7%) plus an interest margin of between 2.5% and 3.25%, dependent on covenant ratio (i). The key bank covenants are that: (i) net debt is not to exceed 2.5 times Bank EBITDA; (ii) net interest payable is to be covered at least four times by Bank EBITDA; (iii) cashflow is to cover the cost of debt service costs by specified ratios. These covenants are tested quarterly on the basis of rolling figures for the preceding 12 months.

Bank covenants

The position at the year-end is well within the bank covenants as set out in the following table.

	Year-end	Bank covenant
Net debt/EBITDA	0.7 times	Less than 2.5 times
EBITDA/interest	8.6 times	More than 4.0 times
Cashflow cover	2.0 times	More than 1.0 times

Additionally, based on the calculation of 2010 Bank EBITDA, the Group has headroom of £17m, over and above the level of bank debt at 30 September 2010. The Board therefore considers that the Group's net bank debt is acceptable.

Approximately two-thirds of Future's net bank debt is in Sterling; year-end net debt denominated in US Dollars amounted to $4.2m.

Consistent with policy published in previous years, the Group hedges between 25% and 50% of the gross bank debt above £10m. As at 30 September 2010 the Group had hedged (a) £5m subject to an interest rate collar such that the interest rate cannot fall below 4.65% and cannot exceed 6%. This collar lasts for seven years from October 2007 and is cancellable by the bank after four years; (b) £5m at an interest rate of 1.91% for two years from October 2009.

Key performance indicators

An updated set of key performance indicators is presented at the end of this document.

Risks

Risk management

We 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.

Macro-economic environment

The macro-economic environment during 2009 was the worst in the Company's history.  Both the UK and US have emerged from recession but as explained earlier, general recovery has been patchy and 2010 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.

Consumer behaviour

Consumers' 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 during 2009 and 2010, and on the macro-economic environment. However, the out-of-pocket cost of magazines 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. Advertising 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.

Advertiser behaviour

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 more the advertising health of each sub-sector.

Distribution and magazine costs

Future 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. Approximately half 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.

Regulatory

In 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.

In September 2009 the UK's Office of Fair Trading announced that it would not refer the newspaper and magazine distribution sector to the Competition Commission.

Sources of Intellectual Property

The majority of our Group revenues and profits are built on our own brands. A proportion of the Group's revenues 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.

Protection of intellectual property

As 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 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.

Financial

The 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.

Business outlook for 2011

Although it has been announced that the recession has ended in the UK, as well as in the US, general economic recovery has been patchy and consumer confidence remains fragile. 

In 2010, second half revenues in the UK grew modestly, reversing their first-half decline.  In the US, we saw stability returning to revenues and a return to profit.

Since 30 September, general trading conditions continue to be challenging and so we still take a cautious view.  The impact of the UK Government's spending review, announced on 20 October, has yet to fully manifest in consumer confidence.  In the US, Government stimulus measures included a change to tax rules resulting in a $2.5m tax receipt which we will use to invest in our business next year.

In 2011, we anticipate modest revenue growth, although profits will be held back by the increased US investment explained above, particularly in the first half-year.  Across the Group, we continue to invest appropriately in our brands, in new products and in our people: because this predominantly organic approach has served us well during the last four years.

Directors' Responsibility Statement

We confirm to the best of our knowledge that:

        a)  the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole; and

        b)  the management report includes a fair review of: (i) the important events that have occurred during the financial year and their impact on the condensed set of financial statements; and (ii) the principal risks and uncertainties that the Company faces.

By order of the Board

John Bowman

Finance Director

Consolidated income statement

for the year ended 30 September 2010

		2010	2009
Continuing operations	Note	£m	£m
Revenue	1,2	151.5	153.1
Operating profit before amortisation of intangible assets		10.1	10.1
Amortisation of intangible assets	4,11	(2.7)	(3.9)
Operating profit	3	7.4	6.2
Finance income	6	-	0.1
Finance costs	6	(1.8)	(2.6)
Net finance costs	6	(1.8)	(2.5)
Profit before tax	4	5.6	3.7
Tax on profit	7	(0.1)	(0.9)
Profit for the year		5.5	2.8

Earnings per 1p Ordinary share

	Note	2010	2009
	Note	Pence	pence
Basic earnings per share	9	1.7	0.9
Diluted earnings per share	9	1.6	0.8

Consolidated statement of comprehensive income

for the year ended 30 September 2010

		2010	2009
		£m	£m
Profit for the year		5.5	2.8
Currency translation differences		0.1	2.3
Cash flow hedges		0.1	(0.2)
Other comprehensive income for the year		0.2	2.1
Total comprehensive income for the year		5.7	4.9

Consolidated statement of changes in equity

for the year ended 30 September 2010		Share capital	Share premium	Merger reserve	Treasury reserve	Cash flow hedge reserve	Retained earnings	Total equity
	Note	£m	£m	£m	£m	£m	£m	£m
Balance at 1 October 2008		3.3	24.5	109.0	(0.3)	-	(56.9)	79.6
Profit for the year		-	-	-	-	-	2.8	2.8
Currency translation differences		-	-	-	-	-	2.3	2.3
Cash flow hedges	21	-	-	-	-	(0.2)	-	(0.2)
Other comprehensive income for the year		-	-	-	-	(0.2)	2.3	2.1
Total comprehensive income for the year		-	-	-	-	(0.2)	5.1	4.9
Final dividend relating to 2008	8	-	-	-	-	-	(2.0)	(2.0)
Interim dividend relating to 2009	8	-	-	-	-	-	(1.3)	(1.3)
Share schemes
- Value of employees' services	5	-	-	-	-	-	0.4	0.4
Treasury shares acquired	21	-	-	-	(0.1)	-	-	(0.1)
Transfer between reserves	21	-	-	-	0.3	-	(0.3)	-
Balance at 30 September 2009		3.3	24.5	109.0	(0.1)	(0.2)	(55.0)	81.5
Profit for the year		-	-	-	-	-	5.5	5.5
Currency translation differences		-	-	-	-	-	0.1	0.1
Cash flow hedges	21	-	-	-	-	0.1	-	0.1
Other comprehensive income for the year		-	-	-	-	0.1	0.1	0.2
Total comprehensive income for the year		-	-	-	-	0.1	5.6	5.7
Final dividend relating to 2009	8	-	-	-	-	-	(1.6)	(1.6)
Share schemes
- Value of employees' services	5	-	-	-	-	-	0.5	0.5
- Deferred tax on share schemes	12	-	-	-	-	-	0.1	0.1
Transfer between reserves	21	-	-	-	0.1	-	(0.1)	-
Balance at 30 September 2010		3.3	24.5	109.0	-	(0.1)	(50.5)	86.2

Consolidated balance sheet

as at 30 September 2010

		2010	2009
	Note	£m	£m
Assets
Non-current assets
Property, plant and equipment	10	3.2	4.1
Intangible assets - goodwill	11	110.9	110.8
Intangible assets - other	11	1.2	2.8
Deferred tax	12	0.9	0.4
Total non-current assets		116.2	118.1
Current assets
Inventories	13	3.4	3.3
Corporation tax recoverable		0.3	0.2
Trade and other receivables	14	23.8	23.1
Cash and cash equivalents	15	13.3	14.6
Total current assets		40.8	41.2
Total assets		157.0	159.3
Equity and liabilities
Equity
Issued share capital		3.3	3.3
Share premium account		24.5	24.5
Merger reserve	21	109.0	109.0
Treasury reserve	21	-	(0.1)
Cash flow hedge reserve	21	(0.1)	(0.2)
Retained earnings		(50.5)	(55.0)
Total equity		86.2	81.5
Non-current liabilities
Financial liabilities - interest-bearing loans and borrowings	17	7.8	10.8
Financial liabilities - derivatives	18	0.4	0.5
Deferred tax	12	2.0	3.4
Provisions	19	0.8	1.1
Other non-current liabilities	20	2.4	2.5
Total non-current liabilities		13.4	18.3
Current liabilities
Financial liabilities - interest-bearing loans and borrowings	17	12.9	19.4
Financial liabilities - derivatives	18	0.3	0.2
Trade and other payables	16	40.8	39.8
Corporation tax payable		3.4	0.1
Total current liabilities		57.4	59.5
Total liabilities		70.8	77.8
Total equity and liabilities		157.0	159.3

 Consolidated cash flow statement

for the year ended 30 September 2010

			2010		2009
			£m		£m
Cash flows from operating activities
Cash generated from operations			12.0		14.5
Interest received			-		0.2
Tax received			1.4		0.9
Interest paid			(1.4)		(1.5)
Tax paid			(0.2)		(0.2)
Net cash generated from operating activities			11.8		13.9
Cash flows from investing activities
Purchase of property, plant and equipment			(0.8)		(1.1)
Purchase of magazine titles, websites and trademarks			(0.2)		(0.2)
Purchase of computer software and website development			(0.8)		(1.8)
Net cash used in from investing activities			(1.8)		(3.1)
Cash flows from financing activities
Purchase of own shares by Employee Benefit Trust			-		(0.1)
Draw down of bank loans			-		17.9
Repayment of bank loans			(9.9)		(18.7)
Rearrangement fees for bank loans			-		(0.8)
Equity dividends paid			(1.6)		(3.3)
Net cash used in from financing activities			(11.5)		(5.0)
Net (decrease)/increase in cash and cash equivalents			(1.5)		5.8
Cash and cash equivalents at beginning of year			14.6		8.4
Exchange adjustments			0.2		0.4
Cash and cash equivalents at end of year			13.3		14.6

Notes to the cash flow statement

for the year ended 30 September 2010

A. Cash generated from operations

The reconciliation of operating profit to cash flows generated from operations is set out below:

		2010		2009
		£m		£m
Operating profit for the year		7.4		6.2
Adjustments for:
Depreciation charge		1.6		1.8
Amortisation of intangible assets		2.7		3.9
Share schemes
- Value of employees' services		0.5		0.4
Operating profit before changes in working capital and provisions		12.2		12.3
Movement in provisions		(0.3)		(0.2)
(Increase)/decrease in inventories		(0.1)		1.0
(Increase)/decrease in trade and other receivables		(0.7)		6.9
Increase/(decrease) in trade and other payables		0.9		(5.5)
Cash generated from operations		12.0		14.5

B. Analysis of net debt

	1 October 2009	Cash flows	Non-cash changes	Exchange movements	30 September 2010
	£m	£m	£m	£m	£m
Cash and cash equivalents	14.6	(1.5)	-	0.2	13.3
Debt due within one year	(19.4)	9.9	(3.3)	(0.1)	(12.9)
Debt due after more than one year	(10.8)	-	3.0	-	(7.8)
Net debt	(15.6)	8.4	(0.3)	0.1	(7.4)

 C. Reconciliation of movement in net debt

		2010		2009
		£m		£m
Net debt at start of year		(15.6)		(21.9)
(Decrease)/increase in cash and cash equivalents		(1.5)		5.8
Movement in borrowings		9.9		1.7
Non-cash changes		(0.3)		-
Exchange movements		0.1		(1.2)
Net debt at end of year		(7.4)		(15.6)

Accounting Policies

Basis of preparation

This preliminary statement of annual results for the year ended 30 September 2010 is unaudited and does not constitute statutory accounts. The information contained in this statement is based on the statutory accounts for the year ended 30 September 2010. The statutory accounts have not yet been delivered to the Registrar of Companies nor have the auditors yet reported on these.

The statutory accounts are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee's (IFRIC) interpretations as adopted by the European Union (EU) applicable at 30 September 2010, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The accounting policies adopted are consistent with those set out in the Group's statutory accounts for the year ended 30 September 2009.

Basis of consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.  Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.  The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.  Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.  The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated.  Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred.  Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Notes to the financial statements

1.     Segmental reporting

The 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. The Group has adopted IFRS 8 'Operating Segments' with effect from 1 October 2009.  IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board of Future plc in order to allocate resources to the segment and to assess its performance.  The identification of the Group's reportable segments has not changed.

(a)  Geographical segment

(i)    Segment revenue

	2010	2009
	£m	£m
UK	105.9	106.5
US	46.2	47.0
Revenue between segments	(0.6)	(0.4)
Total	151.5	153.1

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.

(ii)  Segment EBITA

	2010	2009
	£m	£m
UK	12.9	15.9
US	0.2	(3.3)
Central costs	(3.0)	(2.5)
Total segment EBITA	10.1	10.1

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. This differs from the disclosure in the notes to the financial statements for the year ended 30 September 2009 where segment operating profit was disclosed.  However, segment EBITA was disclosed in the Annual Report in the financial review.

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

	2010	2009
	£m	£m
Total segment EBITA	10.1	10.1
Amortisation of intangible assets	(2.7)	(3.9)
Net finance costs	(1.8)	(2.5)
Profit before tax	5.6	3.7

(iii) Segment assets and liabilities

	Segment assets		Segment liabilities		Segment net assets
	2010	2009	2010	2009	2010	2009
	£m	£m	£m	£m	£m	£m
UK	121.4	123.5	(49.7)	(55.5)	71.7	68.0
US	35.6	35.8	(21.1)	(22.3)	14.5	13.5
Total	157.0	159.3	(70.8)	(77.8)	86.2	81.5

(iv)  Other segment information

	Capital expenditure		Depreciation and amortisation
	2010	2009	2010	2009
	£m	£m	£m	£m
UK	0.8	1.3	2.3	2.8
US	0.9	1.2	2.0	2.9
Total	1.7	2.5	4.3	5.7

Other than the items disclosed above and a share-based payments charge of £0.5m (2009: £0.4m) there were no other significant non-cash expenses during the year.

(b) Business segment

After geographical location, the Group is managed into four principal business segments. Each business segment comprises groups of individual magazines, websites, and events, combined according to the market sector in which they operate. The Group considers that the assets within each segment are exposed to the same risks.

(i) Revenue by segment

	2010	2009
	£m	£m
Games	43.0	47.2
Music & Movies	34.9	33.8
Technology	41.5	41.3
Active	32.7	31.2
Revenue between segments	(0.6)	(0.4)
Total	151.5	153.1

(ii) Gross profit by segment

	2010	2009
	£m	£m
Games	9.1	10.7
Music & Movies	8.0	7.0
Technology	11.0	11.4
Active	7.2	7.5
Add back: distribution expenses	12.0	12.5
Total	47.3	49.1

2.  Revenue

An additional analysis of the Group's revenue is shown below:

	2010	2009
	£m	£m
Circulation	88.7	90.7
Advertising	45.4	47.8
Customer publishing	11.6	8.1
Licensing, events and other	5.8	6.5
Total	151.5	153.1

3.  Operating profit

	2010	2009
	£m	£m
Revenue	151.5	153.1
Cost of sales	(104.2)	(104.0)
Gross profit	47.3	49.1
Distribution expenses	(12.0)	(12.5)
Administration expenses	(25.2)	(26.5)
Amortisation of intangible assets	(2.7)	(3.9)
Operating profit	7.4	6.2

4.  Profit before tax

	2010	2009
	£m	£m
Profit before tax is stated after charging/(crediting):
Employee costs (note 5)	51.5	50.8
Depreciation of owned assets (note 10)	1.6	1.8
Amortisation of intangible assets (note 11)	2.7	3.9
Hire of machinery and equipment	0.2	0.2
Other operating lease rentals	3.3	3.2
Net exchange differences on foreign currency balances	(0.1)	0.2

5.  Employees

	2010	2009
	£m	£m
Wages and salaries	44.2	43.6
Social security costs	5.7	5.7
Other pension costs	1.1	1.1
Share schemes
- Value of employees' services	0.5	0.4
Total staff costs	51.5	50.8

	2010	2009
Average monthly number of people (including executive Directors)	No.	No.
Production	978	990
Administration	216	221
Total	1,194	1,211

At 30 September 2010, the actual number of people employed by the Group was 1,199 (2009: 1,189).  In respect of our primary segments 964 (2009: 991) were employed in the UK and 235 (2009: 198) in the US.

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 year of £0.5m (2009: £0.4m) has been credited to reserves.

6.   Finance income and costs

	2010	2009
	£m	£m
Interest receivable	-	0.1
Total finance income	-	0.1
Interest payable on interest-bearing loans and borrowings	(1.4)	(1.6)
Fair value loss on interest rate derivatives	(0.1)	(0.5)
Exchange gains/(losses)	0.1	(0.2)
Amortisation of bank loan arrangement fees	(0.3)	(0.2)
Other finance costs	(0.1)	(0.1)
Total finance costs	(1.8)	(2.6)
Net finance costs	(1.8)	(2.5)

7.  Tax on profit

The tax charged in the consolidated income statement is analysed below:

	2010	2009
	£m	£m
UK corporation tax
Current tax at 28% (2009: 28%) on the profit for the year	1.9	1.1
Adjustments in respect of previous years	(1.3)	0.3
	0.6	1.4
Foreign tax
Current tax on the loss for the year	-	-
Adjustments in respect of previous years	(1.6)	-
Current tax	(1.0)	1.4
Deferred tax origination and reversal of timing differences
Current year (credit)/charge	(0.1)	2.4
Adjustments in respect of previous years	1.2	(2.9)
Deferred tax	1.1	(0.5)
Total tax charge	0.1	0.9

In 2009, the Group recognised a portion of its historical losses resulting in a tax credit of £2.9m. The Group recognised these losses because it is considered more likely than not that the value will be realised.

The tax assessed in each period differs from the standard rate of corporation tax in the UK for the relevant period. The differences are explained below:

	2010	2009
	£m	£m
Profit before tax	5.6	3.7
Profit before tax at the standard UK tax rate of 28% (2009: 28%)	1.6	1.0
Different tax rates applicable overseas	(0.2)	(0.7)
Intangible assets: differences relating to amortisation	(0.5)	-
Tangible assets: differences relating to depreciation	-	0.2
Losses created or utilised	0.9	2.2
Other net disallowable items	-	0.8
Impact of prior year adjustments	(1.7)	(2.6)
Total tax charge	0.1	0.9

A number of changes to the UK corporation tax system were announced in the June 2010 Budget Statement.  These are referred to in more detail in note 12.

8.  Dividends

Equity dividends	2010	2009
Number of shares in issue at end of year (million)	328.0	327.2
Dividends paid in year (pence per share)	0.5	1.0
Dividends paid in year (£m)	1.6	3.3

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.

A final dividend in respect of the year ended 30 September 2010 of 0.6 pence per share, amounting to a total dividend of £2.0m, is to be proposed at the Annual General Meeting on 9 February 2011. The interim dividend for the six month period to 31 March 2010 of 0.5 pence per share, amounting to £1.6m, was paid on 1 October 2010. The financial statements do not reflect these dividends.

The dividend totalling £1.6m paid during the year ended 30 September 2010 relates to the final dividend declared for the year ended 30 September 2009 of 0.5 pence per share.

The dividends totalling £3.3m paid during the year ended 30 September 2009 relate to the interim dividend for the six month period to 31 March 2009 of 0.4 pence per share (£1.3m) and the final dividend declared for the year ended 30 September 2008 of 0.6 pence per share (£2.0m).

9.  Earnings per share

Basic earnings per share are calculated using the weighted average number of Ordinary shares in issue during the year.  Diluted earnings per share have been calculated by taking into account the dilutive effect of shares that would be issued on conversion into Ordinary shares of options 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:

Adjustments to profit after tax

	2010	2009
	£m	£m
Profit after tax	5.5	2.8
Add: amortisation of intangible assets	2.7	3.9
Tax effect of the above adjustment	(0.3)	(0.9)
Adjusted profit after tax	7.9	5.8

	2010	2009
Weighted average number of shares in issue during the year:
- Basic	327,314,532	326,261,814
- Dilutive effect of share options	8,442,387	7,528,758
- Diluted	335,756,919	333,790,572
Basic earnings per share (in pence)	1.7	0.9
Adjusted basic earnings per share (in pence)	2.4	1.8
Diluted earnings per share (in pence)	1.6	0.8
Adjusted diluted earnings per share (in pence)	2.3	1.7

The adjustments to profit have the following effect:

	2010	2009
	pence	pence
Basic earnings per share	1.7	0.9
Amortisation of intangible assets	0.8	1.2
Tax effect of the above adjustment	(0.1)	(0.3)
Adjusted basic earnings per share	2.4	1.8
Diluted earnings per share	1.6	0.8
Amortisation of intangible assets	0.8	1.2
Tax effect of the above adjustment	(0.1)	(0.3)
Adjusted diluted earnings per share	2.3	1.7

10. Property, plant and equipment

	Land and buildings	Plant and machinery	Equipment, fixtures and fittings	Total
	£m	£m	£m	£m
Cost
At 1 October 2008	3.7	6.2	2.3	12.2
Additions	0.1	0.6	0.1	0.8
Disposals	-	(1.1)	-	(1.1)
Exchange adjustments	0.1	0.3	0.2	0.6
At 30 September 2009	3.9	6.0	2.6	12.5
Additions	-	0.6	0.1	0.7
Disposals	-	(0.5)	-	(0.5)
At 30 September 2010	3.9	6.1	2.7	12.7
Depreciation
At 1 October 2008	(1.5)	(4.3)	(1.5)	(7.3)
Charge for the year	(0.3)	(1.2)	(0.3)	(1.8)
Disposals	-	1.1	-	1.1
Exchange adjustments	-	(0.3)	(0.1)	(0.4)
At 30 September 2009	(1.8)	(4.7)	(1.9)	(8.4)
Charge for the year	(0.4)	(0.9)	(0.3)	(1.6)
Disposals	-	0.5	-	0.5
At 30 September 2010	(2.2)	(5.1)	(2.2)	(9.5)
Net book value at 30 September 2010	1.7	1.0	0.5	3.2
Net book value at 30 September 2009	2.1	1.3	0.7	4.1

Asset lives and residual values are reviewed annually.

Land and buildings at net book value comprise:

	2010	2009
	£m	£m
Leasehold:
Over 50 years unexpired	0.9	0.9
Under 50 years unexpired	0.8	1.2
Total	1.7	2.1

11. Intangible assets

	Goodwill	Magazine  and website	Other	Total
	£m	£m	£m	£m
Cost
At 1 October 2008	309.8	14.2	5.4	329.4
Additions	-	0.2	1.5	1.7
Disposals	-	-	(0.1)	(0.1)
Exchange adjustments	3.4	0.6	0.3	4.3
At 30 September 2009	313.2	15.0	7.1	335.3
Additions	-	0.1	0.9	1.0
Exchange adjustments	0.2	0.1	-	0.3
At 30 September 2010	313.4	15.2	8.0	336.6
Amortisation
At 1 October 2008	(201.5)	(11.6)	(3.3)	(216.4)
Charge for the year	-	(1.6)	(2.3)	(3.9)
Disposals	-	-	0.1	0.1
Exchange adjustments	(0.9)	(0.5)	(0.1)	(1.5)
At 30 September 2009	(202.4)	(13.7)	(5.6)	(221.7)
Charge for the year	-	(1.2)	(1.5)	(2.7)
Exchange adjustments	(0.1)	-	-	(0.1)
At 30 September 2010	(202.5)	(14.9)	(7.1)	(224.5)
Net book value at 30 September 2010	110.9	0.3	0.9	112.1
Net book value at 30 September 2009	110.8	1.3	1.5	113.6

Magazine and website related assets relate mainly to trademarks, advertising relationships and customer lists.  These assets are amortised over their estimated economic lives, typically ranging between one and five years.

Any residual amount arising as a result of the purchase consideration being in excess of the value of identified magazine related assets is recorded as goodwill.  Goodwill is not amortised under IFRS, but is subject to impairment testing either annually or on the occurrence of some triggering event.  Goodwill is recorded and tested for impairment on a territory by territory basis.

Other intangibles relate to capitalised software costs and website development costs.

Impairment tests for goodwill and other intangibles

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired.

Other intangible assets with a finite life are tested for impairment only where there is an indication that an impairment may have occurred. The Group does not have any other intangible assets with infinite lives.

For the purpose of impairment testing, goodwill is allocated to the Group's cash generating units (CGUs) which is the lowest level at which results are reported to the Board and at which cash flows can be separately identified..

	2010	2009
	£m	£m
UK	89.1	89.1
US	21.8	21.7
Total	110.9	110.8

The recoverable amount of a CGU is based on value-in-use calculations. These calculations use cash flow projections based on financial forecasts, using expectations of market developments covering a five year period, which are approved by management. EBITDA margins of between 1% and 12% from years one to six have been used. Cash flows beyond five years are assumed to be at a zero growth rate. An appropriate discount rate of 11.4% (2009: 13.6%), representing the Group's current pre-tax cost of capital, has been applied to these projections.

At 30 September 2010 the Group performed its annual impairment test on goodwill using the above discount rate for value-in-use calculations. These tests concluded that no impairment is required (2009: nil). Recoverable amounts for the UK and US businesses exceeded the carrying values by £32.6m and £0.7m respectively.

The value-in-use calculations are sensitive to changes in the discount rate and cash flows. The value in use of the UK and US businesses would be equal to the carrying value of assets if the discount rate were 4.9% and 0.3% higher respectively or if forecast cash flows were 30.0% and 3.9% lower respectively.

12.  Deferred tax assets and liabilities

The following are the major deferred tax assets and liabilities recognised by the Group, and the movements thereon, during the current and prior years.

	Intangible assets	Share-based payments	Depreciation vs tax allowances	Tax losses	Provisions and other timing differences	Total
	£m	£m	£m	£m	£m	£m
At 1 October 2008	(2.2)	0.2	1.2	-	-	(0.8)
(Charged)/credited to income statement	(0.2)	-	(0.5)	2.7	(1.5)	0.5
Transfers	-	-	(0.2)	-	(2.7)	(2.9)
Exchange adjustments	-	-	0.1	0.1	-	0.2
At 30 September 2009	(2.4)	0.2	0.6	2.8	(4.2)	(3.0)
Credited/(charged) to income statement	0.2	(0.1)	-	(2.2)	1.0	(1.1)
Credited to equity	-	0.1	-	-	-	0.1
Transfers	0.2	-	-	-	2.7	2.9
Exchange adjustments
At 30 September 2010	(2.0)	0.2	0.6	0.6	(0.5)	(1.1)

A number of changes to the UK corporation tax system were announced in the June 2010 Budget Statement. The Finance (No 2) Act 2010, which was substantively enacted on 20 July 2010, includes legislation reducing the main rate of corporation tax from 28% to 27% from 1 April 2011.

The change in rate had no material impact on the Group's deferred tax assets and liabilities.

Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014 which are expected to be enacted separately each year. The changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements. The overall effect of the further changes from 27% to 24%, if these were applied to the deferred tax balances at 30 September 2010, would be to reduce the deferred tax liability by approximately £0.2m and reduce the deferred tax asset by approximately £0.1m, spread evenly between 2011, 2012 and 2013.

Certain deferred tax assets and liabilities have been offset against each other where they relate to the same jurisdiction. The following is the analysis of deferred tax balances after offset for balance sheet purposes:

	2010	2009
	£m	£m
Deferred tax assets	0.9	0.4
Deferred tax liabilities	(2.0)	(3.4)
Net deferred tax liability	(1.1)	(3.0)

The deferred tax asset of £0.9m (2009: £0.4m) is disclosed as a non-current asset of which the assets due within one year total £0.3m (2009: £0.4m).  The deferred tax liability of £2.0m (2009: £3.4m) is disclosed as a non-current liability of which the liabilities due within one year total £nil (2009: £nil).

As at 30 September 2010 the Group has:

·      unprovided deferred tax assets on tax losses totalling £10.8m (2009: £12.6m).

·      unprovided deferred tax assets on other temporary differences totalling £0.9m (2009: £1.0m).

Deferred tax assets have been recognised in respect of tax losses and other temporary differences where it is probable that these assets will be recovered.

No deferred tax is recognised on the unremitted earnings of overseas subsidiaries as any remitted earnings would not give rise to a tax liability in the foreseeable future.

13.  Inventories

	2010	2009
	£m	£m
Raw materials	1.2	0.8
Work in progress	1.9	2.1
Finished goods	0.3	0.4
Total	3.4	3.3

Inventory is stated after impairment of £0.1m (2009: £0.1m).

The cost of raw material inventories recognised as an expense and included within cost of sales amounted to £12.8m (2009: £13.9m).

14.  Trade and other receivables

		2010		2009
		£m		£m
Current assets:
Trade receivables		19.5		20.8
Provisions for impairment of trade receivables		(0.5)		(1.3)
Trade receivables net		19.0		19.5
Amounts owed by Group undertakings		-		-
Other receivables		0.1		0.2
Prepayments and accrued income		4.7		3.2
		23.8		22.9
Non-current assets:
Other receivables		-		0.2
Total		23.8		23.1

15.  Cash and cash equivalents

		2010		2009
		£m		£m
Cash at bank and in hand		13.3		14.6
Cash and cash equivalents		13.3		14.6

The effective interest rate on short-term deposits was 0.2% (2009: 0.8%). These deposits have an average maturity period of one day (2009: one day). The carrying amount of these assets approximates their fair value.

The Group has a number of authorised counterparties with whom cash balances are held in the countries in which the Group operates.  Credit risk is minimised by considering the credit standing of all potential bankers before selecting them by the use of external credit ratings. At 30 September 2010 all short term deposits were rated according to Standard and Poor's as A-1 (2009: A-1+).

16.  Trade and other payables

		2010		2009
		£m		£m
Trade payables		15.7		15.6
Amounts owed to Group undertakings		-		-
Other taxation and social security		1.2		1.1
Other payables		1.3		1.3
Accruals and deferred income		22.6		21.8
Total		40.8		39.8

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period for trade purchases is 42 days (2009: 42 days). The Group has financial risk management policies in place to ensure all payables are paid within the agreed credit terms.

The Directors consider that the carrying amount of trade payables approximates their fair value.

17.  Financial liabilities - interest-bearing loans and borrowings

Non-current liabilities

	Interest rate
	at 30 Sept		2010		2009
	2010		£m		£m
Sterling term loan - unsecured	3.4%		7.8		10.8
Total			7.8		10.8

Current liabilities

	Interest rate
	at 30 Sept		2010		2009
	2010		£m		£m
Sterling term loan - unsecured	3.4%		3.0		3.5
Sterling revolving loan - unsecured	3.4%		2.9		7.8
US Dollar revolving loan - unsecured	3.1%		7.0		8.1
Total			12.9		19.4

The interest-bearing loans and borrowings are repayable as follows:

		2010		2009
		£m		£m
Within one year		12.9		19.4
Between one and two years		2.9		3.0
Between two and five years		4.9		7.8
Total		20.7		30.2

18.  Financial liabilities - derivatives

The fair value of hedging derivatives is split between current and non-current assets or liabilities based on the maturity of the cash flows.

Non-current liabilities

			2010		2009
			£m		£m
Interest rate derivatives			0.4		0.5
Total			0.4		0.5

A fair value loss for the year of £0.1m on interest rate derivatives has been included within finance costs in the income statement.

Current liabilities

			2010		2009
			£m		£m
Forward foreign exchange contracts			0.1		0.2
Interest rate derivatives			0.2		-
Total			0.3		0.2

A fair value gain for the year of £0.1m on forward foreign exchange contracts has been recognised directly in equity as hedge accounting is applied to these contracts.

The amounts of financial instruments carried at fair value by valuation method were:

	2010			2009
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
	£m	£m	£m	£m	£m	£m
Derivatives deemed held for trading	-	0.5	-	-	0.5	-
Derivatives used for hedging	-	0.2	-	-	0.2	-
Total liabilities	-	0.7	-	-	0.7	-

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs (other than quoted prices included within level 1) that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

19.  Provisions

	Property and dilapidations	Other	Total
	£m	£m	£m
At 1 October 2009	0.2	0.9	1.1
Utilised in the year	(0.1)	(0.2)	(0.3)
At 30 September 2010	0.1	0.7	0.8

The provision for property and dilapidations relates to an obligation under a short leasehold agreement on vacant property. The provision has been discounted at a rate in line with the Group's post tax cost of capital which is 8.5%.

Other provisions relate to liabilities arising associated with disposals made during 2007 and ongoing commercial dispute resolution.

All of the above provisions will potentially be utilised or will reverse during the next five years.

20.  Other non-current liabilities

	2010	2009
	£m	£m
Other creditors	2.4	2.5

Other creditors consist mainly of deferred subscription revenue and a deferred property lease liability.

21.  Other reserves

Treasury reserve

The treasury reserve forms part of the retained earnings and represents the cost of shares in Future plc purchased in the market and held by the EBT to satisfy awards made by the trustees.

	2010	2009
	£m	£m
Balance at 1 October	(0.1)	(0.3)
Acquired in the year	-	(0.1)
Utilised in the year	0.1	0.3
At 30 September	-	(0.1)

During the year, the Group transferred £0.1m of shares to employees under Deferred Bonus Share Awards (2009: £0.3m shares transferred under Restricted Share Awards).

In September 2010, Future plc paid £0.1m to Abacus Corporate Trustees Limited as trustees of the EBT, which will be used to purchase Future plc shares in the market. The treasury reserve is non-distributable.

Cash flow hedge reserve

The cash flow hedge reserve forms part of the retained earnings and represents the net gains or losses on effective cash flow hedging instruments that will be recycled to the income statement when the hedged transaction effects profit or loss.

		2010		2009
		£m		£m
Balance at 1 October		(0.2)		-
Net fair value gains/(losses)		0.1		(0.2)
At 30 September		(0.1)		(0.2)

Merger reserve

The merger reserve of £109.0m (2009: £109.0m) arose following the 1999 Group reorganisation and is non-distributable.

Key Performance Indicators

The table below shows the Key Performance Indicators for 2009 and 2010. These were selected by the Board after considering the implications of the Companies Act 2006 and other regulations and guidance in this area. Some of them are statistical indicators while others require more commentary as explained below.

Key Performance Indicators for the year ended 30 September	2010	2009
Annual growth in revenue (at constant currency)	-1%	-13%
EBITA operating margin (as a %)	6.7%	6.6%
Absolute EBITA (in Sterling)	£10.1m	£10.1m
Change in adjusted earnings per share (as a %)	+33%	-36%
Number of magazines sold per month	3.4m	3.6m
Proportion of magazines sold from total number printed	See notes 1-3	See notes 1-3
Proportion of Group's business derived from our brands compared with partnership publishing	76:24 (note 4)	76:24 (note 4)
Number of unique users logging on to our websites per month	23m (note 5)	27m (note 5)
Growth in total advertising revenue (as a % at constant currency)	-5%	-15%
Proportion of advertising revenue that is online (as a %)	25%	22%
Human Capital	See note 6	See note 6
Net bank debt	£7.4m	£15.6m

Notes

1  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 ('newsstand efficiency') 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 74% of magazines (by volume) are sold at newsstand. Our overall UK average newsstand efficiency has been   
    maintained at the same level achieved in 2009. Future has increased the proportion of magazine volume sales derived from 
    subscription rather than newsstand, from 23% to 26%. The majority of UK revenues for magazines are derived from cover

    price.

3.  In the US 31% of magazines (by volume) are sold at newsstand. The majority are sold by subscription at heavily discounted

     prices. Newsstand efficiency improved during the year.

4.  Partnership publishing represents 24% of 2010 Group revenue. This category includes business from our Official magazines

     and programmes published for Microsoft (Xbox 360 and Windows), Sony (PlayStation and Qore), Nintendo, plus customer

     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. 2009 figures included seven million unique users relating to our 
     aggregation websites (since closed).

6.  Human Capital is the Group's most important resource, with 1,199 employees (at 30 September 2010). 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.

 

END

 

 

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