This Magazine Owner Has Morphed Into a Digital Giant. Investors Like the New Image.
Media group Future has transformed itself from a print-magazine owner worth just 30 million pounds sterling ($41 million) in 2014 to a digital-content giant with a market value that has jumped to £4.6 billion.
The transition is reflected in the stock price. In the past 12 months, shares (ticker: FUTR.U.K.) in the company that owns Marie Claire, Mac Life, Music Week, and Wallpaper jumped 151% to £38.22.
The highly acquisitive Bath, U.K.–based company boosts its new brands’ earnings through e-commerce, the clever use of customer data, and expansion into new markets. The possibility of more acquisitions and Future’s focus on the U.S. market means the stock still has momentum.
Last month, it agreed to pay £300 million to buy U.S.-based Dennis Publishing, which publishes The Week, MoneyWeek, and Kiplinger’s. In 2019, Future paid £140 million for TI media, which changed its name from Time Inc UK. In November, the company spent £594 million for price-comparison website GoCompare.
Edward James, an analyst at Berenberg, forecasts the stock will increase 28% to £48.90, predicting further M&A could add 40% to 2023 earnings per share.
“While investors may believe they have missed the “mags to riches” equity story, which has witnessed the shares rise 110% year to date and over 3,000% over the past five years, we believe there is more to come,” he wrote in a note.
The company fetches a high multiple of 27.5 times this year’s expected earnings and is valued at a 20% premium to its peers. In the full year to Sept. 30, 2020, pretax profit increased 309% to £52 million, from £12.7 million the year before, on revenue of £339.6 million. In the half year to March 31, revenue was up 89% to £272.6 million from the prior year.
“One of the advantages of our diversified model is the wealth of opportunities for continued growth, be that by geography or revenue mix,” Chief Executive Officer Zillah Byng-Thorne says. “Our strategy has served us well over the last five years and we are confident that it will continue to do so.”
The business could transform itself by further applying its earnings-generating model to new brands and deepening its move into the U.S. market—which already accounts for more than 50% of revenue. With more than 70% of revenue outside of print, the key is Future’s shift to digital, and widening advertisers’ access to customers in various regions.
With new acquisitions, Future is able to cut costs from duplicated back-office functions such as accounts, purchasing, and IT. The company uses subscription data to help advertisers target customers, and produces specialist editorial content aimed at niche audiences that span music, technology, and leisure.
Future leverages this by ranking and reviewing products to guide customers. Retailers such as Amazon.com (AMZN) display this content next to products on their sites to help users make purchasing decisions. Future earns a cut from every sale in which it has played a part.
Roddy Davidson, an analyst at broker Shore Capital, wrote in a note that “engaging content to drive e-commerce and digital advertising revenues will deliver attractive medium-term organic growth and provide good scope for medium-term forecast upgrades.”
The Dennis acquisition will add 1.2 million subscribers and help the U.S. expansion—where 56% of Dennis revenue comes from. “We remain of the view that the group’s premium rating is justified,” Davidson says. “A strong acquisition track record is also a significant positive, with more deals likely to supplement organic growth.”