Future — Adding new verticals

Future — Adding new verticals

Future has announced the purchase of five well-known, specialist consumer titles from Haymarket Media for up to £14m, 1.2x their combined revenue for the year to June 2017. These strengthen the group’s offering in audio visual and add new verticals in sports and leisure. Management has a very good record on speedy and successful integration of consumer titles and their improved monetisation. It expects this deal to be earnings enhancing. We will update our estimates when the transaction completes in May. The share price has drifted back from recent highs and we consider that the current rating does not fully reflect the opportunity.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Future

Adding new verticals

Purchase of additional titles

Media

21 March 2018

Price

354p

Market cap

£162m

Net debt (£m) at 30 September 2017

10.0

Shares in issue

45.7m

Free float

99.5%

Code

FUTR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

Business description

Future is an international media group and leading digital publisher, with a scalable platform and a range of leading consumer brands. It operates two separately managed, brand-led divisions: Media and Magazine.

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5700

Future is a research client of Edison Investment Research Limited

Future has announced the purchase of five well-known, specialist consumer titles from Haymarket Media for up to £14m, 1.2x their combined revenue for the year to June 2017. These strengthen the group’s offering in audio visual and add new verticals in sports and leisure. Management has a very good record on speedy and successful integration of consumer titles and their improved monetisation. It expects this deal to be earnings enhancing. We will update our estimates when the transaction completes in May. The share price has drifted back from recent highs and we consider that the current rating does not fully reflect the opportunity.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/16

59.0

2.3

9.2

0.0

38.5

N/A

09/17

84.4

8.3

21.0

0.0

16.9

N/A

09/18e

91.4

13.6

22.1

0.5

16.0

0.1

09/19e

92.1

14.6

23.1

1.0

15.3

0.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments.

Future is paying up to £14m, mostly in cash with the balance in shares (proportions not yet disclosed but with a three-month lock-up on the shares) for five titles from Haymarket Media. These are: What Hi-Fi, a key title in its field with a 40-year heritage, published in six countries and with 1.6 million readers (source: Haymarket); FourFourTwo, which is described by Haymarket as ”the world’s biggest football magazine” and which represents Future’s first foray into mainstream sport; sister titles Practical Caravan and Practical Motorhome, the former founded in 1967 and the latter in 2001; and Stuff, which adds to the men’s lifestyle portfolio and is the one title that will require CMA clearance to proceed. Future has built up considerable experience in successfully transferring established titles onto its platforms and systems in a short timeframe, as well as adding in e-commerce revenues. The group had £10m of net debt at end FY17 and our model previously had this coming down to £4.3m by end FY18e. The group’s cash profile is improving as the revenue mix changes (see previous notes) and as the heavier tech investment phase has now passed, meaning that this purchase is comfortably within financial parameters.

Disclaimer

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Disclaimer

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Future and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: TMT

Ebiquity — Improving growth profile

Headwinds in the US affected overall performance in FY17 and we pare back FY18 EPS forecasts by 5%. However, remedial action has been taken, activity in H2 has picked up and we continue to forecast an acceleration in like-for-like revenue growth in FY18. Ebiquity’s (EBQ’s) growth profile should be further improved by the proposed divestment of AdIntel, paving the way for an unwinding of its discount to the peer group. An in-line EV/EBIT rating would point to a value of around 90p.

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