Future — US Purch-ase

Future — US Purch-ase

Future is taking a major step towards realising its US ambitions with the acquisition of Purch for $132.5m/£100.1m, fully funded by a rights issue of 3 new for 4 existing shares at 303p. The purchase fits neatly with Future’s existing media brands and tech-enabled culture and expands the US revenue base to around half of group (historic pro-forma). The purchase price represents 2.1x Purch’s CY17 revenues, 13.1x EBITDA, and management expects the transaction to be materially enhancing to earnings in its first full year, FY19. On the ex-rights price and indicative forecasts, the shares will be trading on an undeserved discount to peers.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Future

US Purch-ase

Acquisition

Media

18 July 2018

Price

530p

Market cap

£246m

£1:US$1.32

Net debt (£m) at 31 March 2018 (prior to previous deals)

2.0

Shares in issue

46.5m

Free float

99.5%

Code

FUTR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.0

38.5

74.2

Rel (local)

0.6

31.3

69.7

52-week high/low

554p

290.0p

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.

Next events

Y/E trading update

Early October 2018

Final results

End November 2018

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Neil Shah

+44 (0)20 3077 5715

Future is a research client of Edison Investment Research Limited

Future is taking a major step towards realising its US ambitions with the acquisition of Purch for $132.5m/£100.1m, fully funded by a rights issue of 3 new for 4 existing shares at 303p. The purchase fits neatly with Future’s existing media brands and tech-enabled culture and expands the US revenue base to around half of group (historic pro-forma). The purchase price represents 2.1x Purch’s CY17 revenues, 13.1x EBITDA, and management expects the transaction to be materially enhancing to earnings in its first full year, FY19. On the ex-rights price and indicative forecasts, the shares will be trading on an undeserved discount to peers.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/16

59.0

2.3

9.2

0.0

57.6

0.0

09/17

84.4

8.3

21.0

0.0

25.2

0.0

09/18e

110.0

14.4

22.9

1.0

23.1

0.2

09/19e

124.5

17.4

26.0

2.0

20.4

0.4

Note: Figures before Purch acquisition. *PBT and EPS (diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

US market with clear attractions

The scale of opportunity in the US market has made it an obvious target for Future, and the purchase of Newbay in April gave the group a further foothold and broader revenue base. This acquisition is a larger step up. Purch’s business is also more closely aligned with Future’s, with prominent brands in consumer technology and science and knowledge. It generates solely digital revenues, with no legacy print, and has similar review-type formats to Future’s media brands, with advertising and affiliate revenue streams. While there is inevitable duplication of some of the tech stack, Purch brings with it an in-house developed ad tech platform including RAMP, which optimises digital advertising yields across platforms and clearly complements Future’s Bordeaux platform, which optimises viewability.

Meaningful EBITDA uplift

Future’s recent corporate development has been rapid, with five acquisitions in the last two years. Management has an impressive record on implementing the integrations, migrating systems and delivering the outlined benefits on budget and on schedule. The scale of this deal is greater than previous transactions (Home Interest was the previous largest at £30.25m net cash consideration). We will revise our forecasts formally on completion (and adjust historic EPS for the rights dilution), but our provisional modelling suggests FY19e EBITDA increasing from £21.3m to £31.5m (+48%), with EPS of 23.9p.

Valuation: FY19 deal benefits emphasise value

Future's shares have performed strongly, increasing 71% over the last year (over 4x in two years), as the implementation of management’s strategy has translated into good organic growth and successfully integrated acquisitions. The theoretical ex-rights price is therefore 433p (implying a value for the nil paid shares of 130p). This price would represent a multiple of 18.4x our indicative FY19e EPS, a clear discount to our weighted basket of peers on FY2 P/E of 19.9x.

Scaling up the US

We have outlined in previous reports that, while the transformation of the UK business has been successfully implemented, the real step-change opportunity for Future is in the US. The relative scale of the potential audience and the sophistication of online behaviour (particularly the propensity to transact) should allow management to use the tools developed in the UK to build enthusiastic communities and to monetise them effectively.

Purch ticks the boxes

Purch is a tech-enabled media business, as is Future. The reasons for the acquisitions are:

It has a strong positioning in consumer technology, with its key brands including Tom’s Guides, Tom’s Hardware and TopTenReviews. Its B2C interests fit neatly with Future’s existing portfolio, both in terms of brand positioning and in its approach to generating and growing advertising revenues.

Adding Purch slants Future’s combined earnings more heavily toward media, accounting for 64% of pro-forma FY17 revenues. Our provisional modelling indicates this increases to 73% in FY19.

Just over half of pro-forma FY17 revenues would have been generated in the US. This proportion will also clearly rise, both as a function of consolidating Purch but also as monetisation of US audiences improves within Future’s operations.

It has invested in building a strong tech stack ($4.2m of internally developed software and $2.9m of developed technology – after accumulated amortisation – are within intangibles on the balance sheet, spend of an average of $2.7m over the last three years). The resulting stack includes some features that can be incorporated into Future’s. Particularly attractive is the ad tech platform, RAMP.

Purch has an established B2B publishing services operation, whereby it sells advertising inventory on behalf of a number of publishers. This could be combined with Future’s existing B2B operation, which is based on the Newbay acquisition earlier in the year.

Strong brand portfolio

Purch’s key brands are in the consumer technology and science verticals, with the most important being Tom’s Guide and Tom’s Hardware in tech, and LiveScience and Space.com in knowledge. Future’s Techradar brand is closely aligned in the tech category, with further potential overlap between Tom’s Hardware and PC Gamer, where the community is also interested in and knowledgeable about related hardware. Space.com clearly has commonality with Future’s magazine, All About Space, whereas LiveScience sits well with the magazine How It Works. The monthly average unique user numbers for the key brands are shown in Exhibit 1 below. These sites also draw traffic from outside the US. In March 2018, 58% of traffic came from the US, 6% from the UK and 37% from the rest of the world.

While there are obvious advantages in being able to leverage content across a wider array of websites, the combination of Purch with Future gives US market leadership in terms of audience reach in the technology news segment (as defined by ComScore). Together, traffic numbers overtake Ziff Davis, the current US market leader. It is particularly in this vertical that the group will become an even more attractive partner for advertising agencies looking to manage larger campaigns.

Exhibit 1: Purch media brands

Source: Company

Tilting the scales to media

Future has been building scale, particularly over the last three years, through acquisition as well as organic growth. This has involved a number of transactions bringing in magazine brands, with legacy print and falling advertising revenues. However, these acquisitions have brought in recognised brands, content and communities to the group; highly complementary to the media businesses. Our existing Future forecast for FY18 is shown below (with no Purch contribution), with our provisional picture for a full 12 months inclusion of Purch’s revenues for FY19. The magazines remain core to the group brand strategy.

Exhibit 2: FY18e divisional revenue split, Future only

Exhibit 3: FY19e divisional revenue split, incl. Purch

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 2: FY18e divisional revenue split, Future only

Source: Edison Investment Research

Exhibit 3: FY19e divisional revenue split, incl. Purch

Source: Edison Investment Research

Working the US opportunity

The sheer scale of the US market makes it an obvious target for expansion for Future’s activities. Management has been working on driving revenue per user in the US. This has been improving, but is still a long way below that of the UK. Revenue per user was £0.74 in FY17 (versus the UK at £1.40). On a rolling annualised basis to March 2018 this figure had risen to £0.80, but the UK figure had climbed faster to £1.58, as the newer income streams from digital advertising and e-commerce started to gain traction. With 50m unique visitors in February 2018, the rough equivalent figure for Purch is $1.27 (£0.96).

The acquisition gives Future the traction with advertisers, particular in consumer technology, that it was looking to build. With a stable of well-recognised brands, it should also be in a better position to recruit digital media talent to its New York base, with support functions in lower-cost locations.

Combining the tech stack

Future has committed a great deal of expertise and energy in recent periods in putting together a scalable platform, with back-office systems (CRM, financial, data management) and infrastructure, including moving its US operations to a new base in New York. Its tech stack comprises:

Vanilla: a fully-integrated platform for content creation and management (including multi-language), with dynamic content analysis that can direct the efforts of its journalists. Its automated content tagging facilitates segment targeting for its advertising.

Proof: a CMS that enables content to be shared across brands.

Hawk: Future’s proprietary e-commerce platform, which has near real-time pricing information.

Bordeaux: an ad tech platform that optimises viewability to drive yields.

Purch has also demonstrated its tech-enabled credentials with the investment outlined above. There are two elements to its tech stack that have particular attractions for Future. The first, RAMP, is its ad tech platform. This incorporates a server-to-server header-bidding solution that works in real time and across all types of inventory (display and video) as well as auction models. Integrating Bordeaux with this should give a best-in-class ad tech solution. The second, PIP, is a data intelligence platform built by Purch, which can also be integrated with the elements outlined above.

Purch financial record

Exhibit 4: Purch historic record

2016

2017

% change

B2C affiliate revenue ($m)

10.6

12.6

19

B2C advertising revenue ($m)

27.6

29.0

5

Other revenue ($m)

3.9

4.4

13

Total B2C revenue ($m)

42.1

46.0

9

Cost of sales ($m)

(3.8)

(4.3)

13

B2C gross contribution ($m)

38.3

41.7

9

Gross contribution margin

91%

91%

Publisher Services revenue ($m)

16.9

17.5

4

Cost of sales ($m)

(13.3)

(13.7)

3

Publisher Services gross contribution ($m)

3.6

3.8

6

Gross contribution margin

21%

22%

Total revenue ($m)

59.0

63.5

8

Total gross contribution ($m)

41.9

45.5

9

Total gross contribution margin

71%

72%

Overheads ($m)

(32.1)

(32.4)

1

Net contribution before central costs ($m)

9.8

13.1

34

Contribution margin

17%

21%

Expected central costs ($m)

(3.0)

(3.0)

0

Adjusted EBITDA ($m)

6.8

10.1

49

Adjusted EBITDA margin

12%

16%

Source: Circular and Prospectus

Purch’s published historic audited revenues in the prospectus are segmented into advertising (63% FY17 revenue) and performance (37%). Advertising is ad revenue generated through the sale of advertising space on owned or network websites, sold either on fixed-fee or CPM a basis, Performance revenues are generated from the sale of prospective consumer interest, third-party inquiries or sales commissions.

This segmentation is not particularly helpful for analytical purposes and a more detailed breakdown given in the prospectus separates out the B2C affiliate, B2C advertising and other B2C revenues from those generated by Publisher Services. This latter segment is effectively a B2B proposition, whereby advertising sales are delivered for a network of key partner brands. It achieves a considerably lower gross margin than the B2C propositions, as can be seen from Exhibit 4, above. The published operating loss for Purch for 2017 was $2.1m, with a positive EBITDA of $3.3m. However, there are $6.8m of adjustments to take that figure up to $10.1m (elimination of overheads not coming across as part of the deal and replacement with expected overhead allocation within Future – net benefit of $1.7m; CRO costs also not being transferred of $0.7m; and $1.0 of non-recurring/exceptional).

Integration and synergies

Future now has a polished procedure for assimilating acquisitions, with the first integration phase typically taking four months as back office systems are migrated onto Future’s platform. Phase two, transformation, would last the remainder of the first year and includes ensuring that best practice is shared between new and existing operations and appropriate incentive packages are put in place. The second year is focused on optimisation. For Purch, key management is coming across with the deal and the combined US business will be run day-to-day from Future’s New York office.

Potential synergistic benefits are described by management as ‘meaningful’ but are unquantified. Four elements are identified in the documentation:

Consolidating core commercial teams

In-sourcing some functions to Future’s Bath office

Integrating the tech stack, as described above

Savings in web hosting costs

Indicative combined financials show strong growth

The prospectus contains a pro-forma income statement for the year ended September 2017 and a statement of pro-forma net assets as at 31 March 2018.

Combined pro-forma FY17 revenues are presented at £144.0m, £94.7m from Future and £49.3m from Purch. Adjusted FY17 EBITDA actual for Future was £11.0m and the adjusted EBITDA figure given for Purch was $10.1m (£7.7m), giving a combined number of £18.7m. Our preliminary calculations suggest this rises to £32.6m for FY19, a 32% compound growth rate.

The pro-forma balance sheet as at 31 March 2018 indicates net assets of £171.3m, including £156.6m of goodwill; £82.2m of this relates to the acquisition of Purch.

Purch is being acquired on a debt- and cash-free basis, so the net debt on the pro-forma balance sheet relates to Future’s existing business in its entirety. It also predates the acquisition of Newbay, which was bought in April and completed in May 2018, and the four magazine titles purchased from Haymarket, which also completed after the interim balance sheet date. The modest net debt position of £2.0m at end March 2018 would have increased with the payments for those transactions (Haymarket titles were purchased on 1 May 2018 for £13m, including the issue of 370,708 shares; Newbay was purchased on 4 April 2018 for £8.6m cash and £1.1m in shares, with a further potential deferred payment of £3.9m in January 2019). Our forecast end-FY18e net debt position (pre-Purch) currently stands at £22.5m, which may prove overly conservative. The rights issue (which is not contingent on the deal proceeding) covers the purchase price and associated costs in full.

With this acquisition being for cash, there is obviously no related increase in indebtedness, while the equity base of the combined group will increase from £66.0m (net assets as at 31 March 2018) to a pro-forma £171.3m. The existing net debt of c £21.9m (£2.0m as at the interim results, plus the cash element of the Haymarket title purchases of £11.3m plus the cash element of the Newbay deal of £8.6m) would then represent 13% gearing, down from 33%.

We have carried out some indicative modelling of the combined group, including Purch for one month of the remainder of FY18e and for the whole of FY19e. We have made no alterations to our underlying Future forecasts, which are presented within Exhibit 6, page 8. We will revise our forecasts to reflect the acquisition once the rights issue and the acquisition complete.

In doing this, we have anticipated a good level of revenue growth for Purch across the two forecast years, as its ad tech and e-commerce capabilities gain traction in its markets. We have factored in a modest increase in EBITDA margin from 16% to 17%, driving Purch EBITDA from the adjusted $10.1m in FY17 pro-forma to $14.4m for FY19e, building on the momentum already established.

Exhibit 5: Indicative income 2018 statement including Purch from 1 September

£'m

2015

2016

2017

2018e

2019e

30 September

IFRS

IFRS

IRFS

IRFS

IRFS

Revenue

 

 

59.8

59.0

84.4

114.6

176.7

Cost of Sales

(40.6)

(16.0)

(23.4)

(36.0)

(42.1)

Gross Profit

19.2

43.0

61.0

78.7

134.7

EBITDA

 

 

3.7

5.2

11.0

18.4

31.8

Operating Profit (before amort. and except.)

 

0.7

2.8

8.9

15.3

25.1

Amortisation on acquired intangibles

(2.3)

0.0

(2.3)

(9.1)

(17.8)

Exceptionals

(2.5)

(16.5)

(3.7)

(3.5)

0.0

Share-based payments

(0.1)

(0.5)

(2.1)

(2.8)

(2.8)

Reported operating profit

(4.2)

(14.2)

0.8

(0.2)

4.5

Net Interest

(0.6)

(0.5)

(0.6)

(1.0)

(0.5)

Profit Before Tax (norm)

 

 

0.1

2.3

8.3

14.3

24.6

Profit Before Tax (reported)

 

 

(2.3)

(14.9)

0.2

(1.2)

4.0

Reported tax

0.3

0.5

1.4

(1.0)

(0.8)

Profit after tax (norm)

0.4

2.3

8.6

11.4

19.4

Profit after tax (reported)

(2.0)

(14.4)

1.6

(2.1)

3.2

Discontinued operations

0.7

0.2

0.0

0.0

0.0

Net income (normalised)

0.5

2.3

8.6

11.4

19.4

Net income (reported)

(1.3)

(14.2)

1.6

(2.1)

3.2

Average Number of Shares Outstanding (m)

22

24

37

50

81

EPS - basic normalised (p)

 

 

2.3

9.5

23.2

22.9

23.8

EPS - normalised, diluted (p)

 

 

2.2

9.2

21.0

22.5

23.6

EPS - basic reported (p)

 

 

(5.9)

(58.8)

4.3

(4.3)

3.9

Dividend per share (p)

0.0

0.0

0.0

1.0

2.0

Revenue growth (%)

(9.4)

(1.3)

43.1

35.8

54.2

Gross margin (%)

32.1

72.9

72.3

68.6

76.2

EBITDA margin (%)

6.2

8.8

13.0

16.1

18.0

Normalised operating margin (%)

1.2

4.7

10.5

13.3

14.2

Source: Company accounts, Edison Investment Research

Deal fully funded by rights issue

The acquisition is entirely for cash, funded by the proceeds of the fully underwritten rights issue (which is not dependent on the deal). It is not of the whole company; it is the purchase of particular assets of interest, with non-compete undertakings given for the B2C assets. The vendor is US based and private equity funded. Some, but not all, of the current management team is coming across with the B2C units.

The purchase consideration is US$132.5m/£100.1m, subject to post-completion adjustments

Anticipated deal fees come to £5-6m

Equity fundraise of £105.4m

Terms of 3 new shares for 4 existing shares, at 303p

Prospectus issued: 18 July

General meeting to approve the rights issue: 2 August

Result of rights issue and admission of shares: 21 August

Completion expected: 29 August

Purchase price represents 2.1x historic revenue (CY17); 13.1x historic adjusted EBITDA

Implications for valuation

As Future’s business model covers different activities, our valuation framework uses peer sets that aim to capture these aspects.

Exhibit 6: Valuation framework

EV/EBITDA

P/E

EV/sales

Div yield

EBITDA

Segment

Last (x)

1FY (x)

2FY (x)

Last (x)

1FY (x)

2FY (x)

Last (x)

Last (x)

margin last (%)

Consumer media average

10.7

10.0

8.6

21.0

16.0

13.8

1.8

2.4

14.2

Events average

26.2

15.0

12.2

29.7

19.7

16.6

4.6

2.5

22.2

E-commerce/ performance marketing average

30.5

25.3

19.6

95.2

58.1

43.5

2.4

2.4

14.4

Weighted average (current mix)

17.9

13.7

13.3

35.0

23.6

19.2

2.6

2.4

15.1

Future (current forecasts)

24.2

14.8

12.5

25.7

23.6

20.8

3.1

0.0

13.0

Weighted average (indicative mix)

17.3

13.8

13.5

36.6

24.6

19.9

2.4

Future (indicative forecasts, using theoretical ex-rights price of 433p)

11.8

18.4

Rating discount

13%

8%

Source: Bloomberg, Edison. Note: Priced at 9 July 2018. *Based on weighted average (indicative) and Future indicative forecasts.

On the existing business, Future’s faster earnings growth opened out a modest EV/EBITDA discount for FY19e, on par with peers for current year on a P/E basis.

Working then on the theoretical ex-rights price of 433p ((4x530p + 3x303p)/7) and calculating the EV on the increased share base, the FY19e EV/EBITDA of 11.8x is at a 13% discount to the basket of peers weighted by the changed mix that we are factoring in with a full year’s contribution from Purch.

The P/E on a similar basis is at an 8% discount.

Our DCF calculations will be updated when the forecasts are refined and formalised.

Exhibit 7: Financial summary

£'m

2015

2016

2017

2018e

2019e

30 September

IFRS

IFRS

IRFS

IRFS

IRFS

INCOME STATEMENT

check

Revenue

 

 

59.8

59.0

84.4

110.0

124.5

Cost of Sales

(40.6)

(16.0)

(23.4)

(34.6)

(36.8)

Gross Profit

19.2

43.0

61.0

75.5

87.8

EBITDA

 

 

3.6

5.2

11.0

18.0

21.3

Operating Profit (before amort. and except.)

 

0.8

2.8

8.9

15.4

18.2

Amortisation on acquired intangibles

(2.3)

0.0

(2.3)

(7.5)

(8.0)

Exceptionals

(2.5)

(16.5)

(3.7)

(3.5)

0.0

Share-based payments

0.0

(0.5)

(2.1)

(2.8)

(2.8)

Reported operating profit

(4.0)

(14.2)

0.8

1.6

7.4

Net Interest

(0.6)

(0.5)

(0.6)

(1.0)

(0.8)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

0.2

2.3

8.3

14.4

17.4

Profit Before Tax (reported)

 

 

(2.3)

(14.9)

0.2

0.6

6.6

Reported tax

0.3

0.5

1.4

(1.3)

(1.3)

Profit after tax (norm)

0.5

2.3

8.6

11.6

13.4

Profit after tax (reported)

(2.0)

(14.4)

1.6

(0.7)

5.3

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.7

0.2

0.0

0.0

0.0

Net income (normalised)

0.6

2.3

8.6

11.6

13.4

Net income (reported)

(1.3)

(14.2)

1.6

(0.7)

5.3

Average Number of Shares Outstanding (m)

22

24

37

46

47

EPS - basic normalised (p)

 

 

2.7

9.5

23.2

25.3

28.6

EPS - normalised (p)

 

 

2.7

9.2

21.0

22.9

26.0

EPS - basic reported (p)

 

 

(5.9)

(58.8)

4.3

(1.6)

11.3

Dividend per share (p)

0.0

0.0

0.0

1.0

2.0

Revenue growth (%)

(9.4)

(1.3)

43.1

30.3

13.2

Gross margin (%)

32.1

72.9

72.3

68.6

70.5

EBITDA margin (%)

6.0

8.8

13.0

16.4

17.1

Normalised operating margin (%)

1.3

4.7

10.5

14.0

14.6

BALANCE SHEET

Fixed assets

 

 

44.9

36.1

97.9

113.1

104.3

Intangible assets

43.8

33.2

92.3

107.1

98.2

Tangible assets

0.6

0.5

1.0

1.1

1.2

Investments & other

0.5

2.4

4.4

5.7

4.7

Current assets

 

 

19.5

15.8

24.5

39.4

48.9

Stocks

0.5

0.4

0.7

0.7

0.7

Debtors

15.3

12.4

13.6

23.7

24.9

Cash & cash equivalents

2.5

2.9

10.1

14.9

23.2

Other

1.2

0.1

0.1

0.1

0.1

Current liabilities

 

 

(25.9)

(25.1)

(36.4)

(42.4)

(43.1)

Creditors

(20.7)

(21.4)

(29.9)

(35.9)

(36.6)

Tax and social security

(0.9)

(1.4)

(3.2)

(3.2)

(3.2)

Short-term borrowings

(4.3)

(2.3)

(3.2)

(3.2)

(3.2)

Other

0.0

0.0

(0.1)

(0.1)

(0.1)

Long-term liabilities

 

 

(7.1)

(5.6)

(24.7)

(38.4)

(35.0)

Long-term borrowings

0.0

(0.1)

(16.9)

(34.2)

(30.8)

Other long-term liabilities

(7.1)

(5.5)

(7.8)

(4.2)

(4.2)

Net assets

 

 

31.4

21.2

61.3

71.6

75.0

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

31.4

21.2

61.3

71.6

75.0

CASH FLOW

Operating cash flow before WC and tax

0.8

5.2

11.0

18.0

21.3

Working capital

(8.0)

(2.1)

4.7

(4.1)

(0.4)

Exceptional & other

(0.4)

0.0

(3.7)

(4.0)

0.0

Tax

(0.5)

(0.7)

(1.4)

(4.6)

(1.3)

Net operating cash flow

 

 

(8.1)

2.4

10.6

5.3

19.5

Capex

(2.0)

(2.5)

(2.6)

(2.3)

(2.3)

Acquisitions/disposals

1.3

(0.3)

(31.8)

(20.2)

(3.9)

Net interest

(0.6)

(0.4)

(0.6)

(1.0)

(0.8)

Equity financing

0.0

3.1

21.0

2.8

0.0

Dividends

0.0

0.0

0.0

0.0

(0.8)

Other

0.0

(0.1)

0.2

1.7

0.0

Net cash flow

(9.4)

2.2

(3.2)

(13.7)

11.7

Opening net debt/(cash)

 

 

(7.5)

1.8

(0.5)

10.0

22.5

FX

0.1

0.1

0.0

0.0

0.1

Other non-cash movements

0.0

0.0

(7.3)

1.2

0.0

Closing net debt/(cash)

 

 

1.8

(0.5)

10.0

22.5

10.7

Source: Company accounts, Edison Investment Research

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

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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

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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

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

Avon Rubber — More M50s

Avon Rubber has announced another M50 order in the final year of the 10-year sole-source contract with the US Department of Defense (DoD). This order underpins FY18 and FY19 expectations and we make no changes to our forecasts. However, Avon is in advanced negotiations with the US DoD on future programmes, which fit comfortably with its growth strategy.

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