Future Moves On The Home Front
Edison | Jul 07, 2017 07:41AM ET
Future (LON:FUTR) has announced the acquisition of the Home Interest division of Centaur Media (LON:CAU), part-funded by a placing of £22m at 250p. The purchase, for a net cash consideration of £30.24m, adds a strong new vertical with good margins and attractive cash flow. Future should be able to drive additional value by adding e-commerce capabilities and internationalizing the brands, further boosting the earnings enhancement. Our numbers will be formally updated when the deal completes (estimated to be at the end of July), but provisionally we would expect to be showing a small uplift in EPS in FY17e and around 10% in FY18e, highlighting the attractive rating.
Attractive brands, margins and cash flow
For Future, the attractions of the Home Interest portfolio are clear. Importantly, the business is profitable and growing – revenue CAGR +7% over the last three years, net contribution margin of 38% in FY16 (FY15: 37%). There are well-recognised brands, led by Home Building & Renovating (market leader in the self-build and renovation space), with an established events portfolio. Exhibitions generated around half of the Home Interest revenues of £12.8m in 2016. Margins are inherently higher than for publishing, while the working capital profile benefits from forward bookings. The Home Interest audience has many similar characteristics to other group markets, not least loyalty and enthusiasm, opening up e-commerce opportunities using Future’s platform and expertise.
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