Future Network: Greg Ingham
We speak to the man who turned the company around following the dotcom collapse
The BBC is viewed by many as a bastion of British journalism. With its guaranteed supply of revenue through television licensing, the group can afford top writing and broadcasting talent.
In other words it takes some beating; especially by an organisation that is a mere two decades old. But Future Network Plc is on the verge of doing just that. The business, led by chief executive Greg Ingham, recently moved to acquire Highbury House, hitherto a rival. If the transaction completes as expected, Future will jump from being Britain’s fifth biggest consumer magazine publisher to third biggest, nudging the Beeb into fourth place.
Indeed, Future’s meteoric rise to the publishing big league is the stuff of a bestselling page-turner. From the tiny cash amount it took to start the business, it has burgeoned to a turnover approaching £200m, profits in 2004 of £23.6m and a pre-deal market capitalisation of £270m. And the figures are set to jump again this year with the addition of Highbury’s titles.
Ingham is confident of a successful completion, but he is wary of the buying process having been through it several times. “I think we have the support of the shareholders,” he ventures, “but we have to be careful; it’s a due process we’re going through.”
The offer on the table is £96.5m. It is comprised of £31.6m in Highbury shares and £64.9m in debt. The latter amount is, however, prior to a series of disposals, including the sale of its B2B titles for £12.5m, its local newspaper business for £6.1m and its headquarters for £2m.
Ingham describes the remaining costs as “comfortable”. He expects the bulk of shareholders to transfer to a stake in the enlarged Future, but has set aside a £10m cash alternative for those who prefer to jump ship.
The company also enjoys a bank debt facility of £20m, which because of its size in relation to Highbury is easy to contend with.
On the face of it, any element of risk seems to have been kept to a minimum, but questions remain. Highbury comes with a substantial debt and its own route to growth – through acquisition – was the source of its downfall. So why is Future mimicking its former rival by snapping it up?
Ingham’s answer is simple. Highbury is operationally profitable; it has simply spent too much money for a company of its size. Unlike in Future’s case, there existed no substantial, stable core around which each new asset could be fixed.
“We were the under-bidder in about six of the deals for consumer titles won by Highbury,” he says, “I think the consensus was that they over-paid.” A good example of Highbury’s dubious exuberance was its purchase of Paragon in June 2003. The company spent £32m on the deal, making that single asset worth slightly more than the whole of its parent company in today’s market.
As Ingham explains: “In addition to the lack of synergy, there are a number of duplicated activities within the business: a large number of sites, for example. They haven’t run it strongly enough and they overpaid. I don’t think we’d do the same.”
In contrast, Ingham is glowing about Highbury’s new management team. They have been tasked with reducing the level of debt and getting bankers off the company’s back, although this has left them with no time to run the business in any conventional sense.
Ingham is in no doubt that his decision to go for Highbury was the right one and it seems the market is thinking along the same lines. Future’s share price rose immediately after the bid announcement – in most cases prices fall on such news.
While the transaction is based on sound principles and shareholders are comfortable with the deal, the physical merging of the two companies presents more of a problem for Ingham.
He describes Highbury’s offices as being “dotted around”, while Future’s own headquarters are in Bath, with a branch in London. His reasoning for locating the business outside the capital is that life in Bath offers a collegiate atmosphere in picturesque surroundings, appealing both to employees and business partners.
The business was originally formed in the Somerset town of Somerton in 1985 by founder Chris Anderson, but a vote taken a year later approved the move of the headline business up the road to Bath.
“It’s a great place to run a business,” he says. “We’re outside the limelight, but to be a relatively large employer in a small city you get a better sense of pride and identity, and from an employment point of view, people who have committed to living in Bath tend to be more committed to the company.”
The London office was established in 1994 as an ad sales hub, simply because it was more convenient for meetings and PR contacts. Gradually, magazines such as Total Film and gadget bible T3 were set up in London for the same reasons. These were later joined by acquired titles already established in the city.
Predominantly in the interests of synergy, Ingham has set aside £4m for space to house 600 staff – 450 to be drawn from Highbury – in the Paddington area of London, which boasts quick access to the west of England by train.
He believes Highbury’s strategy of quick-fire acquisition has left the company fractured and nebulous, so binding the new enlarged group will be a primary task in coming months. Surprisingly, Ingham believes there is very little overlap between the two companies that would lead to inefficiencies. So redundancies should be minimal – something which will help team and morale building early on.
“It’s a very complementary portfolio. Some of it gives us greater strength and depth in key areas such as computers, gaming and music-making. Some of it builds our positions in, say, home and cars; and some of it takes us to entirely new areas, such as puzzles, craft and men’s lifestyle.”
When challenged on the issue of Front magazine – Highbury’s only ‘lads’ mag’ – which represents an entirely new departure for Future, Ingham’s confidence is unwavering. He is dismissive of media reports suggesting that the title is at risk because of its content and status in the market.
“It’s a fundamental misapprehension that a magazine is only worth having if it’s the market leader – just plain nonsense. More important questions to ask are, ‘is it selling?’ [circa 75,000 copies a month], can you make a profit and can you increase the profit margin?”
To illustrate his point, Ingham draws a comparison with rival publishers. Future’s profit ratio was 17% last year compared with market leaders EMAP on 16% and IPC with 18%. Their numerous titles are a mixture of market leaders and laggers.
The organic experience
Ingham knows he’ll have his hands full over the next few months and has no more plans for UK acquisitions. But that shouldn’t be a problem – he prides himself on Future’s track record of organic growth, which has been the cornerstone of the company’s success.
Apart from the original £10,000 bank funding taken on in 1985, Future took on no further debt until the management team bought the business from Pearson, publishers of the Financial Times, for £41m in April 1998.
Ingham adds: “Deep in the company’s DNA is a small organisation that realises what it’s like to pull yourself up by your boot-straps – not by throwing money around but by being creative and focusing on the job in hand.”
Despite publishing 96 magazine titles in four countries – the UK, US, France and Italy – which represents 21% of turnover and nearly half its business, Ingham jealousy hangs on to the ‘small town’ company ethic which has survived the rigours of such swift growth.
He paints a picture of Future resembling a utopian workplace, in which people cycle to work, come in to the office at weekends ‘because they like it’ and who are loyal, enthusiastic and genuinely devoted.
In June 1999, just before Future floated on London’s FTSE market, rumours were flying around about pending changes to the company. Going against traditional corporate protocol, the management team decided to let the secret slip.
They informed employees about the move and of the target date for listing, but emphasised that it would inhibit the process if word got out. Despite hundreds of people knowing it, the secret did not leak to the press.
“That was quite a remarkable demonstration of the company’s culture. It is very strong, and while it eroded as the company grew, the fundamentals are still in place,” he says.
These ‘fundamentals’ were drummed into Ingham from early on in his career. After completing an English degree and a few stints at trade magazines, he found himself at Reed, publisher of the New Scientist magazine.
While finding the experience useful and coming away thinking it was “a great business”, Ingham found his 12 months at Reed to be an uninspiring experience.
After working in a “massive great monolith of a building” in Sutton, without much opportunity to communicate or share thoughts, he was brimming with ideas of how he would change things if he got the chance.
“You walk through a dauntingly large atrium, you get in the lift, you then walk down a corridor of closed doors and end up in your little room with two other people, and you think: ‘this is creativity?'”
At 28 Ingham got his “lucky break” when he joined Future as a publisher, effectively ranking him joint-second in command to Anderson, who had launched the business three years before but had already built it up to employ around 40 people.
It was the start of what he describes as his “float” up the career ladder. Technically speaking, neither Ingham nor his co-deputy Kevin Cox were ever promoted; the company simply expanded beneath them.
Ingham headed up the computer magazine division, which soon became the biggest in the UK and was given the role of joint managing director when Chris Anderson finally sold to Pearson in 1994. He became chief executive after his team bought the company back and floated.
Ingham sees himself as a lucky man, not least because he joined a company that was on the up, but also because the subject matter, at that time computers, was exploding.
“It was very fortunate timing with the whole computer boom. Computing is a great topic for magazines: it’s complicated, expensive and needs a lot of explaining. Magazines are a useful medium for that, and in the Commador, Atari, Amstrad days it was very fertile ground.”
Amstrad Action, Future’s first title employed cutting edge technology to turn around copy efficiently and cheaply. PC Plus, launched in 1987, was the first magazine to feature a computer disk on every issue. The titles attracted huge attention and the company never looked back.
Highs and lows
Ingham cites the flotation as one of his career highs, despite the “flotilla of advisers and myriad of paperwork”. It happened in the form of a “marathon and then a sprint”, with the purchase of the Italian business in April, the US one in June and IPO immediately after that.
Another highlight for Ingham was the MBO from Pearson. The Future team were up against stiff competition from Cinven, the venture capital firm that had recently purchased fellow consumer publisher IPC and planned to merge the two companies.
Backed by Apax, a smaller VC group, Ingham and his management team were worried their pitch would not be strong enough and that control would pass to Cinven.
“We were about four days away from being bought by Cinven, which I thought would be wrong for the company,” remembers Ingham. “Winning that was personally very gratifying, and there was just a great sense of euphoria throughout the company.”
Being awarded ‘official status’ for its PlayStation and, later, Xbox titles was a source of great pleasure to Ingham, as was more recently the strong performance of Future’s French branch, which now publishes 16 titles in its own right.
Less fond memories include the dot com bubble bursting, which led to a “crap 12 months” from October 2000 through to September 2001. Like so many companies at the time, Future overextended itself online and paid the price in cutbacks. Market capitalisation, which, misleadingly perhaps, peaked at £1.2bn then plummeted to £32m, leaving analysts calling for management heads to roll. After three profit warnings, following a loss of advertising revenue, and accounting irregularities in its French business, Ingham managed to stave off bankruptcy by selling 20 titles and cutting 20% of its staff as well as reverting to the model that had made it successful.
“It was an insane period and caused a complete distortion of the way we viewed the business,” remembers Ingham. “From a City point of view, it looked like a miraculous turnaround, but that’s bollocks – it was really just a reversion to what had been there for 15 years or so.”
Ingham sees “digestion” as key to the short-term future in the UK, but he sees scope for further growth internationally. He lets on that there are a number of magazines outside the UK worth considering for acquisition, perhaps small ‘bolton’ titles in Italy, or more substantial ones in the increasingly successful French business.
Future is already 13th biggest consumer publisher in the US by newsstand sales and Ingham is planning to hit the market with US variants of successful UK titles and to launch new ones covering subjects as disparate as snowboarding and scrap working.
With all this going on Ingham admits he has little spare time for anything other than family these days. But apart from reading the occasional book and listening to music, it is publishing that is his real hobby. Where possible, he still breezes through magazines from the Future portfolio and writes up an analysis of every magazine redesign for the company newsletter, explaining what is improved.
When asked if he would ever leave publishing, Ingham answers that he’d consider starting a business all of his own one day. But what that might be, he is unsure.
“I’ve never thought about leaving publishing; not when something is as changing as our business. It’s got great potential, so why step off? We’re doing pretty well.”