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.
Future |
Adding new verticals |
Purchase of additional titles |
Media |
21 March 2018 |
Share price performance
Business description
Analysts
Future is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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.
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Disclaimer
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Research: TMT
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.