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Future — e-Commercial

Future — e-Commercial

Future’s H1 trading update shows continued good progress in diversifying the group’s revenue streams, reinforcing the strategy of building a global platform for specialist media. e-Commerce and events both performed notably strongly in the period, up 70% and 15% on the prior year (albeit off lower bases). Cash performance was also better than expected. The acquisitions of Imagine Publishing and the magazines of Team Rock have played out to plan and the benefits should accrue more strongly in FY18, as built into our (unchanged) forecast figures. This faster earnings growth brings the rating down to attractive levels. Interims are due on 19 May.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Future

e-Commercial

Trading update

Media

11 April 2017

Price

182.00p

Market cap

£67m

Net cash (£m)
at end September 2016

0.5

Shares in issue

36.6m

Free float

67%

Code

FUTR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

11.7

(14.9)

28.1

Rel (local)

10.9

(17.8)

8.2

52-week high/low

14.4p

7.9p

Business description

Future is an international media group and leading digital publisher. It operates two separately managed brand-led divisions: Media and Magazine.

Next events

Interims

19 May 2017

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’s H1 trading update shows continued good progress in diversifying the group’s revenue streams, reinforcing the strategy of building a global platform for specialist media. e-Commerce and events both performed notably strongly in the period, up 70% and 15% on the prior year (albeit off lower bases). Cash performance was also better than expected. The acquisitions of Imagine Publishing and the magazines of Team Rock have played out to plan and the benefits should accrue more strongly in FY18, as built into our (unchanged) forecast figures. This faster earnings growth brings the rating down to attractive levels. Interims are due on 19 May.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/15

59.8

0.2

2.7

0.0

67.4

0.0

09/16

59.0

1.6

5.7

0.0

31.9

0.0

09/17e

70.0

4.6

10.0

0.0

18.2

0.0

09/18e

73.0

8.6

18.0

0.0

10.1

0.0

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

Content and data

Future’s focus is on building recurring and repeatable revenue streams based on monetising the data generated by consumption of its content. Developing these new sources of income is fuelling much faster growth than would be possible through traditional media activities such as advertising. It also provides its content consumers with relevant opportunities, be it to purchase, attend events or interact through other channels. The recent Photography Show at the NEC attracted over 30,000 attendees over four days. In the magazine division, the addition of the Imagine portfolio and the Team Rock titles has increased the reach and number of verticals addressed. As per management strategy, magazines are generating cash to invest in the digital assets across the group, including brand extensions to T3 into areas such as Home and Baby, as well in their own online presence.

e-Commerce greatest potential

The e-commerce opportunity has the greatest transformative potential, building on the high level of trust that users of websites such as T3 and TechRadar have with their audiences. The group recently recruited an e-commerce and trading director, Jason Kemp, a consultant with an extensive background in retail and e-commerce. He adds retail expertise to the data and content knowledge already in place.

Valuation: Starting to reflect opportunity

The share price picked up strongly after the finals in November, as the market took on board the degree of transformation implemented and the extent of the opportunity to build a global platform for media brand leverage. The shares then settled back to current levels, putting them on an historical EV/ EBITDA of 13.9x, with the substantial forecast growth bringing that figure in to 7.3x for FY17e. Global B2C media peers trade on a historical 14.6x, prospective 9.7x, allowing further upside as the group builds its record of delivering against expectations.

Exhibit 1: Financial summary

£'m

2015

2016

2017e

2018e

30 September

IFRS

IFRS

IRFS

IRFS

INCOME STATEMENT

Revenue

 

 

59.8

59.0

70.0

73.0

Cost of Sales

(40.6)

(37.2)

(44.1)

(45.3)

Gross Profit

19.2

21.8

25.9

27.7

EBITDA

 

 

3.6

4.7

9.0

12.4

Normalised operating profit

 

 

0.8

2.3

6.1

9.5

Amortisation of acquired intangibles

(2.3)

(0.9)

(3.7)

(3.7)

Exceptionals

(2.5)

(16.5)

(2.0)

(1.0)

Share-based payments

0.0

0.0

0.0

0.0

Reported operating profit

(4.0)

(15.1)

0.4

4.8

Net Interest

(0.6)

(0.7)

(1.5)

(1.0)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

Profit before tax (norm)

 

 

0.2

1.6

4.6

8.6

Profit before tax (reported)

 

 

(2.3)

(14.9)

(1.1)

3.9

Reported tax

0.3

0.5

0.2

(2.0)

Profit after tax (norm)

0.5

2.1

3.6

6.7

Profit after tax (reported)

(2.0)

(14.4)

(0.9)

1.9

Minority interests

0.0

0.0

0.0

0.0

Discontinued operations

0.7

0.2

0.0

0.0

Net income (normalised)

0.6

1.4

3.6

6.7

Net income (reported)

(1.3)

(14.2)

(0.9)

1.9

Basic average number of shares outstanding (m)

22

24

36

37

EPS - basic normalised (p)

 

 

2.7

5.9

10.1

18.0

EPS - normalised (p)

 

 

2.7

5.7

10.0

18.0

EPS - basic reported (p)

 

 

(5.9)

(58.7)

(2.5)

5.1

Dividend (p)

0.0

0.0

0.0

0.0

Revenue growth (%)

(9.4)

(1.3)

0.2

0.0

Gross margin (%)

32.1

37.0

37.0

38.0

EBITDA margin (%)

6.0

8.0

12.9

17.0

Normalised operating margin (%)

1.3

3.9

8.7

13.0

BALANCE SHEET

Fixed assets

 

 

44.9

38.6

51.9

51.3

Intangible assets

43.8

33.2

46.1

45.5

Tangible assets

0.6

3.0

3.4

3.4

Investments & other

0.5

2.4

2.4

2.4

Current assets

 

 

19.5

15.8

17.4

21.3

Stocks

0.5

0.4

0.3

0.3

Debtors

15.3

12.4

14.7

14.4

Cash & cash equivalents

2.5

2.9

2.3

6.4

Other

1.2

0.1

0.1

0.1

Current liabilities

 

 

(25.9)

(25.1)

(31.6)

(34.3)

Creditors

(20.7)

(21.4)

(25.4)

(28.1)

Tax and social security

(0.9)

(1.4)

(1.4)

(1.4)

Short-term borrowings

(4.3)

(2.3)

(4.8)

(4.8)

Other

0.0

0.0

0.0

0.0

Long-term liabilities

 

 

(7.1)

(5.6)

(10.2)

(10.1)

Long-term borrowings

0.0

(0.1)

(4.7)

(4.6)

Other long-term liabilities

(7.1)

(5.5)

(5.5)

(5.5)

Net assets

 

 

31.4

23.7

27.5

28.2

Minority interests

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

31.4

23.7

27.5

28.2

CASH FLOW

Operating cash flow before WC and tax

0.8

1.5

7.1

12.9

Working capital

(8.0)

1.6

(1.8)

(2.1)

Exceptional & other

(0.4)

(0.3)

(2.5)

(1.0)

Tax

(0.5)

(0.8)

(1.2)

(3.2)

Net operating cash flow

 

 

(8.1)

2.0

1.6

6.6

Capex

(2.0)

(2.5)

(2.0)

(2.0)

Acquisitions/disposals

1.3

(0.3)

(20.0)

0.0

Net interest

(0.6)

(0.4)

(1.5)

(1.0)

Equity financing

0.0

3.1

14.2

0.0

Dividends

0.0

0.0

0.0

0.0

Other

0.0

0.2

0.0

0.3

Net cash flow

(9.4)

2.1

(7.7)

4.0

Opening net debt/(cash)

 

 

(7.5)

1.8

(0.5)

7.2

FX

0.1

0.2

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.2

Closing net debt/(cash)

 

 

1.8

(0.5)

7.2

3.0

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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2017. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2017. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: TMT

XP Power — Firing on all cylinders

After a strong H216, XP saw further acceleration in order intake in Q117, with growth of 55% y-o-y and 27% q-o-q. Q117 revenues grew 23% on a constant currency basis. Revenue and bookings strength combined with sterling weakness lead us to upgrade our forecasts. We lift our revenue forecasts by 4% and normalised EPS forecasts by 2% for FY17 and FY18.

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