TIDMFUTR
RNS Number : 6886R
Future PLC
30 October 2019
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This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 ("MAR").
30 October 2019
Future plc
Proposed Acquisition of TI Media for GBP140 million
Future plc (LSE: FUTR, "Future", "the Group"), the global
platform for specialist media, today announces the proposed
acquisition by its subsidiary, Future Holdings 2002 Limited, of TI
Media (the "Acquisition") for a total consideration of GBP140
million in cash.
TI Media is a UK-based, print-led consumer magazine and digital
publisher with deep industry heritage and a portfolio that
incorporates 41 brands including Decanter, Country Life, Wallpaper*
and Woman & Home. TI Media brings to Future a presence in the
Wine, Golf, Equestrian, Country Living, TV Listings and Gardening
verticals and deepens and extends Future's strength and position in
Home, Cycling, Consumer Technology and Country Sports.
Future also today announces a proposed placing of 8,184,906 new
ordinary shares (the "Placing") to part fund the Acquisition
consideration.
Compelling strategic and financial rationale
-- Entry into new market verticals through leading brands and
expansion within existing markets
o Introduces three new specialist verticals to the Group:
Lifestyle (brands include Decanter, Country Life, Wallpaper*);
Women's Interest (brands include Woman's Weekly, Woman's Own,
Woman, Chat); and Sport (brands include Golf Monthly, Horse &
Hound - to sit alongside existing sports titles)
o Extension and deepening of a number of our core existing
verticals: Gaming & Entertainment (brands include What's on TV,
TV Times); Technology (Trusted Reviews); and Home Interest (brands
include Country Life, Homes & Gardens)
o Addition of TI Media's brands gives Future over 220 brands
globally
-- Leverages Future's proprietary technology platform to deliver growth
o Opportunity to improve quality of earnings by implementing the
Future diversified revenue model across TI Media's market leading
brands
o Significant opportunities in digital advertising, eCommerce
and audience growth
-- New geographies & monetisation models
o Decanter is a global authority on wine and comprises a
multi-dimensional brand with an opportunity to further leverage
premium subscription model
o TI Media is historically UK focussed - opportunity to leverage
Future global operating model
o Acquisition provides opportunity to access new advertising
bases and materially diversify audience reach of Future
-- Creating centres of excellence
o Leveraging Future's expertise to share best practice in SEO
online audience development, events, licensing, email newsletter
and e-commerce and expand capability of TI Media in areas in which
Future has created centres of excellence
o Significant opportunity for Group overhead savings through
consolidation of back offices, including Finance, IT and HR
-- Significant financial benefits
o Materially earnings enhancing in the first full year following
completion
o Cost synergies of GBP15 million per annum will be achieved
within 24 months, with a significant proportion to be achieved in
first full financial year following completion of the
acquisition
o ROIC expected to exceed WACC within the first full year
following completion
o An acquisition of scale - the Target's continuing revenue was
GBP201.5 million and Adjusted EBITDA was GBP28.7 million for the 12
months ended 31 May 2019(1)
o A multiple of 4.9x Adjusted EBITDA (pre synergies) on a last
12 month basis (to the end of May 2019)
o Expectations of strong cash generation
Transaction highlights and financing
-- Consideration of GBP140 million, funded through combination
of debt and an equity fundraise via an underwritten placing, also
announced today
-- Increase of debt facility to GBP135 million with drawdown of
additional GBP45 million through exercise of accordion in order to
part finance the transaction
o Leverage to remain below the Company's stated target of
1.5x
-- The Acquisition is a Class 1 transaction for Future under the
Listing Rules and accordingly requires the approval of
Shareholders
o Future expects to publish a shareholder circular in the coming
days to convene a general meeting for approval of the Acquisition
(expected by the end of November 2019)
-- Completion of the Acquisition is conditional upon (i)
approval of Future's Shareholders; (ii) the CMA taking a decision
(or being deemed to have done so) that (a) it does not intend to
make a Phase 2 reference; or (b) in the event of the CMA announcing
its intention to make a Phase 2 reference, it has accepted
undertakings-in-lieu of a Phase 2 reference from Future or its
subsidiaries (the "Competition Condition"); and (iii) the placing
and sponsor agreement between Future, Numis and N+1 Singer (the
"Placing and Sponsor Agreement") not having been terminated in
accordance with its terms
-- Completion is anticipated to occur by the Spring of 2020
____________
(1) Unaudited
Board appointment
Current TI Media CFO, Rachel Addison will join Future as CFO of
the Group upon completion. Rachel brings a wealth of media
experience having previously held CFO roles in the newspaper
industry. Rachel has experience of large scale integrations,
including most recently running the integration of Local World and
Reach. Upon Rachel's formal appointment on completion of the
Acquisition, Penny Ladkin-Brand will commence her new role at
Future as Chief Strategy Officer.
Current trading
The financial year ended strongly with revenues in the region of
GBP220 million, and as such the Board expects trading to be at the
top end of Board expectations and we remain confident of another
strong year in 2020.
Zillah Byng-Thorne, CEO of Future, commented:
"This acquisition provides an outstanding opportunity to
accelerate Future's strategy and to bolster its growth levers.
"TI Media's long-established market leading brands, industry
events and quality content are an exceptional fit with our business
and our strategy. TI Media will substantially expand our presence
in existing verticals and bring a number of new content verticals
that will significantly enhance the Future portfolio.
"In addition, the largely UK-focussed, print-led nature of the
TI Media portfolio offers a multiplicity of opportunities to
leverage our proprietary technology stack and operating model to
develop new digital monetisation models and geographic
expansion.
"This deal marks the latest move in our strategy to deliver
growth both organically and through acquisition. We are confident
that the acquisition will be materially earnings enhancing in the
first year, driving further growth in profitability and cash
generation whilst significantly enhancing our scale and reach."
There will be an analyst conference call at 8am on 31 October
2019 UK time - please contact Hannah Campbell at
hannah.campbell@instinctif.com or telephone 020 7427 1412 for
details.
Enquiries
Future plc 01225 442244
Zillah Byng-Thorne, Chief Executive Officer
-------------
Penny Ladkin-Brand, Chief Financial Officer
-------------
Numis Securities (Sponsor, Financial Adviser and Joint 020 7260
Bookrunner) 1000
-------------
Nick Westlake, Mark Lander, Hugo Rubinstein
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020 7496
N+1 Singer (Joint Bookrunner) 3000
-------------
Mark Taylor, Tom Salvesen, Justin McKeegan
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020 7457
Instinctif Partners 2020
-------------
Kay Larsen, Chantal Woolcock
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Proposed Acquisition of TI Media for GBP140 million
1. Introduction
Future announces the proposed acquisition by its subsidiary,
Future Holdings 2002 Limited, of TI Media for a consideration of
GBP140 million. The consideration for the Acquisition will be
satisfied entirely in cash. The consideration and related
transaction costs will be funded by the net proceeds of the Placing
announced today and the balance from the GBP45 million accordion
facility provided under Future's revolving credit facility.
TI Media is a special interest media publisher with operations
in the UK. The Target is the holding company for the brands
operated under the TI Media umbrella.
The Acquisition is conditional on (i) approval of Future's
Shareholders, (ii) the CMA taking a decision (or being deemed to
have done so) that (a) it does not intend to make a Phase 2
reference; or (b) in the event of the CMA announcing its intention
to make a Phase 2 reference, it has accepted undertakings-in-lieu
of a Phase 2 reference from Future or its subsidiaries (the
"Competition Condition"); and (iii) the Placing and Sponsor
Agreement not having been terminated in accordance with its
terms.
2. Reasons for the proposed Acquisition
The Directors believe that both the strategic and financial
rationales for the Acquisition are compelling and that the
Acquisition is strongly aligned to the Group's existing strategy.
The combination of Future and TI Media will allow the Enlarged
Group to expand its presence into a number of existing markets and
enter into new markets, creating significant scale in the UK market
in particular. In addition, the Directors believe that Future's
platform can be applied to a number of TI Media's content
categories and iconic titles to create scalable new Media revenue
streams.
Future has recent experience in delivering scalable new Media
revenue streams, with the expansion of the acquired Home Interest
portfolio into a new global brand with an eCommerce led editorial
strategy (realhomes.com), the creation of a new video on demand
show (The Real Homes Show) and an extension of the existing events
strategy, all while continuing to grow the magazine business. While
the recent acquisition of the cycling titles from Immediate enabled
Future to use its editorial expertise to launch a new cycling brand
(Bikeperfect.com) within five months of acquiring the business.
TI Media's diverse portfolio of new verticals, including
Gardening, Golf, Country Living and Wine, coupled with the
increased leadership position in Home and Cycling, amongst others,
present a material opportunity for Future to replicate the
successes seen on other similar acquisitions.
Expand Future's presence across existing markets, entry into
market leading specialist verticals and audience
diversification
One of the key principles that Future executes against is that
its businesses need to be experts in their respective fields, and
the acquisition of TI Media will introduce three new specialist
verticals to the Group: Lifestyle (Decanter, Country Life,
Wallpaper*); Women's Interest (Woman's Weekly, Woman's Own, Woman,
Chat); and Sport (Golf Monthly, Horse & Hound to sit alongside
Future's existing sports titles).
The Directors believe that the Future operating model, coupled
with its proprietary technology platform, enables the acceleration
of a diversified strategy for these new verticals quickly,
economically and at scale. In these content verticals, which are
new to the Group, TI Media holds market leading positions in print
in Country Living, Marine and Equestrian (according to ABC) and
brings with it long-standing expertise with a number of heritage
brands such as the 135-year old Horse & Hound magazine.
The specialist portfolio also includes a number of other brands
in new areas for the Group, including Craft and Wine, which the
Directors believe offer interesting expansion opportunities into
Media revenue models. The new verticals are in valuable content
areas which Future has been seeking to enter for some time. Future
has demonstrated a strong track record of monetising specialist
content and the Directors believe that the Group can drive
significant value from the monetisation of these new content
areas.
The Directors believe that the Acquisition will allow the
Enlarged Group to scale up its presence in a number of existing
verticals, in particular, Technology (Trusted Reviews); Gaming
& Entertainment (What's on TV, TV Times) and Home Interest
(Country Life, Homes & Gardens). TI Media's portfolio includes
iconic brands such as Country Life and Home & Gardens, in
addition to Ideal Home, Living Etc, Country Homes & Interiors,
25 Beautiful Homes and Style at Home, making it the UK's number one
homes print portfolio (according to ABC), which the Directors
believe will further strengthen the Enlarged Group's presence in
that vertical.
The Acquisition will also allow Future to enter new markets such
as TV weeklies. While the strategy for the TV weeklies to date has
been print led, with a high subscriber base mitigating newsstand
volume declines, management believe there is an opportunity to
materially grow the digital audience and capitalise on eCommerce
opportunities.
The addition of these new content verticals to Future's magazine
portfolio is expected to add approximately 870,000 to Future's
existing Gaming and Entertainment audience reach and other TI Media
brands are expected to expand Future's Home Interest audience by
10.3 million.
Leveraging Future's technology and media platform
The majority of TI Media's historical revenue has been print led
and the integration of the Target Group into the Enlarged Group is
expected to provide the opportunity to leverage Future's proven
technology platform and SEO expertise to grow new digital revenue
monetisation models. In line with the strategy executed by Future
over the previous three years, with both legacy and recently
acquired brands, Future's technology platform provides the
opportunity to launch new websites leveraging TI Media's
content.
This diversification of the revenue model should lead to an
improved quality of earnings at the TI Media business. The Group's
track record in this area has been demonstrated through the
successful digital monetisation of Home Interest, the migration of
What HiFi onto the Future technology platform and, more recently,
the migration of Cyclingnews.com among other brands.
One of the benefits of Future's technology platform is the fully
integrated programmatic sales tool, Hybrid, and the eCommerce
affiliate marketing engine, Hawk. Through migration to Future's
technology platform and taking the same approach as Future's
management has with historic acquisitions, the Directors believe TI
Media would see increased digital monetisation in these areas.
Future's Vanilla website platform and SEO expertise provides a
platform for the growth of a digital audience of scale, which the
Directors believe can then be monetised. The Target is currently
monetised almost entirely in the UK, therefore the Directors
believe there is the potential for expanding the digital brands
into the US, as a greenfield monetisation opportunity, as a result
of the geo-localisation functionality in the technology stack
coupled with the presence and expertise of local teams.
Due to TI Media's more print orientated business (revenue from
magazines and publisher services accounted for 73 per cent. and 11
per cent., respectively, of total continuing revenue for the year
ended 31 December 2018), management expects the share of Magazine
and Publisher Services revenue to increase following Completion.
However, through leveraging Future's platform management expect
that within first full financial year, more than 50 per cent. of
revenues and more than 60 per cent. of contribution of the Enlarged
Group would come from the Media division.
Revenue from digital advertising and eCommerce accounted for
approximately 9 per cent. of the Target's total revenue for the
year ended 31 December 2018 compared to 57 per cent. of Future's
total revenue for the six months to 31 March 2019. The Directors
believe that this indicates that there is a significant opportunity
for the growth of Media revenues within the TI Media business under
Future's ownership.
New geographies and monetisation models
Premium subscriptions - Decanter is a global authority on wine
and comprises a multidimensional brand that operates in print as
well as awards and events in the UK and Asia. Decanter hosts one of
the largest wine awards with 20,000 paid entries. Decanter.com's
audience includes Decanter Premium paid subscribers, accessing
content behind the paywall, with access to 22,000 wine reviews.
Growth in premium subscribers was 63 per cent. over the 12 months
to September 2019.
While Decanter is a global brand, its US audience is
under-indexed; out of its global audience 24 per cent. of users are
in the UK and 38 per cent. in the US and Canada. There are also
expansion opportunities in Asia following eight years of the
Decanter Asian World Wine Awards. There is an opportunity both to
expand Decanter's premium subscription model and to apply that
monetisation model to other verticals and brands within the
Enlarged Group.
Global scale presents opportunities - TI Media has been a
largely UK focussed business with 89 per cent. of its revenues for
the year ended 31 December 2018, being generated in the UK.
Future's global operating model, including local sales teams in the
US, Canada and Australia represent an opportunity to expand the
audience reach of TI Media. Due to the domestic focus and operating
model of TI Media there has been little focus on the US
opportunity, the combination of Future's Hybrid Advertising
platform coupled with Future's local US and Australian sales and
marketing teams represent an opportunity to develop TI Media's
brands.
Future's centralised licensing and syndication team also provide
an opportunity to distribute the TI Media content into non-UK
markets. Future has demonstrated its ability to grow UK domestic
brands into online global brands. An example of this within the
Company's existing portfolio is What Hifi, which has grown a
material US online presence under Future's ownership.
New advertising base - The Acquisition is expected to materially
diversify the audience reach of Future and currently females
comprise 63 per cent. of TI Media's audience. This compares to
Future's audience which is predominantly male (approximately 60 per
cent.) and would broaden the Group's appeal to a wider range of
advertising partners. Partly as a result of this difference in
demographics, there is very limited overlap between existing
advertisers which presents an opportunity to cross sell within the
UK.
Creating centres of excellence
Future aims to deliver organic revenue growth through best in
class content, monetised via numerous revenue streams supported by
centralised hubs. Through the execution of Future's stated
strategy, Future has created centres of excellence in events, email
marketing, newsletters, SEO, licensing, syndication and eCommerce.
Future believes the Acquisition represents an opportunity to expand
the capability of TI Media in areas in which the Group has already
created centres of excellence.
This is expected to be achieved through the sharing of best
practices, content and resources across both businesses. Examples
of this include sharing of SEO best practice to help support
increased growth in digital audiences. This approach was successful
in the acceleration of the digital audience growth in Tom's Guide
(acquired as part of the acquisition of Purch B2C), while the
opportunity to monetise global audiences through accessing Future's
centralised licensing and syndication teams is expected to create
higher margin earnings.
An additional example of the benefits of the centres of
excellence is Future's global events teams, which operate as one
function across the US and the UK, servicing both the business to
business and the business to consumer brands. The Directors believe
that moving TI Media events to this model will create process
efficiencies as well as benefits from expert marketing teams.
Future's centralised hubs model allows the business to scale in a
cost effective manner and will facilitate the delivery of synergies
(further details are set out below).
Strong financial rationale
In addition to meeting the Group's strategic criteria for
acquisitions, the Directors believe that the financial rationale
for the Acquisition is compelling. The Directors have carefully
reviewed the prospects of the Enlarged Group, as well as the
expected synergy benefits and associated costs of achieving them.
The Enlarged Group will be of a greater scale which the Directors
believe will give rise to benefits in advertising and distribution
arrangements as well as procurement. The Group's management team
has significant experience in successfully integrating
acquisitions, delivering cost synergies and driving new
monetisation channels. The acquisition enterprise value equates to
a multiple of 4.9x Adjusted EBITDA (pre synergies) on a last 12
month basis (to 31 May 2019). The key elements of the financial
rationale are:
-- The Directors expect the Acquisition will be materially
earnings enhancing in the first full year following Completion;
-- Cost synergies of GBP15 million per annum with total
restructuring costs of GBP9 million to achieve these;
-- The Directors expect the Acquisition will deliver a return on
invested capital in excess of Future's weighted-average cost of
capital within the first full year following Completion;
-- Expectations of strong cash generation which should provide
further opportunities to invest in growth with expectation of
normalised cash conversion of 85 - 90 per cent. to free cash flow
as part of Future; and
-- Acquisition of scale - the Target reported continuing revenue
of GBP201.5 million and Adjusted EBITDA of GBP28.7 million for the
12 months ended 31 May 2019 (unaudited).
Proven management team with a track record of successfully
integrating acquisitions
The Future management team has deep experience of integrating
acquisitions built up over a number of years. The TI Media business
is well known to management, being an asset management identified
more than two years ago as a strategic fit, and the Directors
believe this will facilitate the integration process.
3. Summary Information on TI Media
TI Media is a consumer magazine and digital publisher in the
United Kingdom, with a portfolio selling approximately 33.2 million
magazine copies in each of the last two years. The business of TI
Media came together as a result of a number of media mergers and
acquisitions over the last century. The International Publishing
Corporation Ltd was formed in 1963 following the merger of the UK's
then three leading magazine publishers - George Newnes, Odhams
Press and Fleetway Publications - which came together with the
Mirror Group to form the International Publishing Corporation
("IPC"). IPC Magazines was created five years later, in 1968. A
number of the titles launched by TI Media in the late 19(th)
Century are still being published today under the TI Media
umbrella. The Field, which launched in 1853, and joined the IPC
stable in 1994 following the acquisition of Harmsworth Magazines,
is the oldest brand within the business.
IPC was acquired by Time Warner in 2001 and was renamed Time
Inc. UK in 2014 after Time Inc. acquired the company in connection
with its spinoff from Time Warner. Shortly after Time Inc.'s
subsequent acquisition by Meredith Corporation in 2018, Time Inc.
UK was acquired by a vehicle owned by funds advised by Epiris LLP
and rebranded to TI Media in June 2018. In September of 2018, TI
Media sold its library of pre-1970 IPC Comics titles to Rebellion
Developments and, in 2019, TI Media sold its music magazines to
Bandlab Technologies. TI Media's portfolio includes 41 brands and
ten weekly titles, of which three are in the TV listing vertical
including the 64-year old TV Times.
TI Media also includes the UK's number one homes print
portfolio, which includes six magazines and three websites. While
the audience demographic is broad, on average it reaches the 35
years old and over category, with 63 per cent. of its audience
being female. The addition of TI Media's brands to Future's
existing portfolio would result in the Group publishing over 220
brands globally.
TI Media's digital portfolio has an audience reach of 26.8
million monthly unique browsers, generating approximately 66.6
million monthly page views; and has approximately 45 per cent. of
its online audience based in the UK (in each case, as at August
2019). The digital portfolio includes leading consumer technology
brand Trusted Reviews and also Marieclaire.co.uk which had 1.8
million unique users a month in June 2019.
Examples of TI Media's audience reach include:
-- Sport - 4.6 million audience reach
-- Women's Interest - 12.7 million audience reach
-- Lifestyle - 6.8 million audience reach
TI Media's business also includes the UK's second largest
distributor of magazines, Marketforce. The Directors believe that
the ownership of Marketforce, a leading UK newstrade sales,
marketing and distribution business, which is owned by TI Media,
will facilitate the integration of the Group's magazine supply
chain. Marketforce is the link between publishers and retailers,
providing a comprehensive range of circulation and distribution
services for TI Media's portfolio.
In recent years, Marketforce has expanded its strategy to be the
partner of choice for the magazine industry by introducing
subscription management to its product offering, with a
full-service subscription management service which now manages all
the consumer subscriptions for TI Media. It is management's view
that this investment could be leveraged to support the Future
subscription model, resulting in cost savings and revenue
opportunities.
Part of the business offering includes a number of events and
awards programs, including the iconic Decanter awards, with over
20,000 paid entries a year, 400,000 unique users a month and over
5,000 subscribers to its digital premium subscription brand. Growth
in premium subscribers was 63 per cent. over the 12 months to
September 2019.
4. Summary financial information on the Target Group
The Target Group generated GBP225.8 million of revenues and
GBP31.1 million of adjusted EBITDA in the year ended 31 December
2018. Of the total revenues, 67.6 per cent. were revenues from the
Target's magazines, which declined by 4.7 per cent. in 2018; 15.1
per cent. were revenues from the Target's media business, which
grew by 9.6 per cent. in 2018; and 10.5 per cent. were revenues
from the Target's publisher services business, which grew by 2.6
per cent. in 2018, in each case compared to the prior year. In the
12 months ended 31 May 2019 (unaudited), the Target Group reported
continuing revenue of GBP201.5 million and adjusted EBITDA of
GBP28.7 million. In 2018, the Target generated adjusted free
cashflows(1) of GBP34.1 million. Gross assets at 31 December 2018
were GBP205.1m.
Selected Financial Information
May 2019
Year ended 31 LTM 2018 2017 2016
December GBPm GBPm GBPm GBPm
---------------------- --------- ------ ------ -------
Magazine revenue
total 147.9 152.6 160.2 175.0
Media revenue
total 31.2 34.1 31.1 28.2
Publisher services
revenue 22.4 23.7 23.1 16.9
--------- ------ ------ ---------
Net continuing
revenue 201.5 210.4 214.4 220.1
--------- ------ ------ ---------
Discontinued revenue 10.3 15.4 26.5 40.4
--------- ------ ------ ---------
Net Revenue total 211.8 225.8 240.9 260.5
========= ====== ====== =========
Selected Key Performance Indicators
May 2019
LTM 2018 2017 2016
Year ended 31 December GBPm GBPm GBPm GBPm
----------------------------- --------- ------ ------ ------
Adjusted EBITDA 28.7 31.1 29.8 26.0
Adjusted EBITDA margin 14% 14% 12% 10%
Magazine Revenue
as % of Continuing
Revenue 73% 73% 75% 80%
Media Revenue as
% of Continuing Revenue 15% 16% 15% 13%
Adjusted free cash
flow(1) 34.1 19.7 0.6
Adjusted cash conversion(2) 110% 66% 2%
EBITDA Reconciliation Table
2018 2017 2016
Year ended 31 December GBPm GBPm GBPm
---------------------------- ------ ------ ------
Operating (loss)/profit
before interest and
share of associate
and joint venture (8.5) 4.4 1.2
Exceptional items 28.2 17.1 18.4
Share based payments 2.5 1.4 0.9
Depreciation 2.0 3.0 2.4
Amortisation of intangible
assets 6.9 3.9 3.1
----------------------------- ------ ------ ------
Adjusted EBITDA 31.1 29.8 26.0
----------------------------- ------ ------ ------
Note:
1. Adjusted free cash flow is defined as adjusted EBITDA less
capital expenditure and working capital. Historic cash-flows have
been adjusted to exclude exceptional items however working capital
movements do include provision movements in relation to exceptional
items.
2. Cash conversion is defined as Adjusted EBITDA less capital
expenditure and working capital.
Breakdown of exceptional items
Year ended 31 December 2018 2017 2016
GBPm GBPm GBPm
-------------------------------------------- ------ ------ ------
Acquisition expenses 2.0 - 0.2
Impairment of intangible assets 12.5 - 1.3
Pension plan amendments -1.2 -6.1 -
Profit on disposal of intangible
assets -0.4 -0.1 -1.9
Contingent consideration released - - -2.1
Bankruptcy of print supplier - - 2.1
Severance costs 9.7 13.5 10.0
Strategic consultancy and transformational
costs 2.6 5.7 6.1
Property relocation costs - 3.8 2.1
Business sale related expenses 2.3 - -
Facility and professional fees relating
to ownership transition 0.7 0.3 0.6
Total 28.2 17.1 18.4
--------------------------------------------- ------ ------ ------
5. Synergies and integration of the Target
The Group has a track record of delivering synergies from
previous acquisitions and the Directors believe that there is scope
for a material level of cost synergies that could be delivered in
the following areas:
-- back office functions - GBP5.3 million of synergies from
consolidation of management teams, integration of support functions
and efficiency improvements from adopting Future's operating model,
processes, IT platforms and tools;
-- front office functions - GBP6.0 million of synergies from
integration of business facing functions, deployment of Future's
editorial model across the combined business and efficiency
improvement driven by consolidated portfolio of brands and Future's
digitally focused approach; and
-- other overhead costs - GBP3.7 million of synergies from
office rationalisation, consolidation of IT contracts and
professional fees.
The Directors believe that Future's recent experience in
acquiring and integrating acquisitions will be beneficial as the
two businesses are brought together. It is anticipated that the
total cost savings achieved in connection with acquisition will be
a run rate of GBP15 million per annum and will be achieved within
24 months, with a significant proportion of these savings to be
achieved in the first full financial year following completion of
the acquisition. It is anticipated that total restructuring costs
of GBP9 million will be incurred by the end of the financial year
ending 30 September 2021 in order to deliver these cost savings.
The overall synergies of GBP15 million represent approximately 5
per cent. of the combined cost base based on the financial year
2018 (ended 30 September 2018 for Future and 31 December 2018 for
TI Media).
The synergies identified above reflect both the beneficial
elements and the relevant costs that will arise as a result of the
Acquisition. The synergies are contingent on the Acquisition
completing and could not be achieved by Future and the Target
operating independently.
6. Principal Terms of the Acquisition
On 30 October 2019, Future Holdings 2002 Limited, a subsidiary
of Future, (the "Purchaser"), Future as guarantor, and the sellers
named therein (the "Sellers") entered into the Share Purchase
Agreement, pursuant to which the Purchaser agreed to acquire 100
per cent. of the share capital in the Target for an aggregate sum
of GBP140 million on a cash-free and debt-free basis with a
normalised level of working capital.
Completion of the Acquisition is subject to (i) the approval of
Future's Shareholders, (ii) the Competition Condition (as more
fully described above under "Introduction") and (iii) the Placing
and Sponsor Agreement not having been terminated in accordance with
its terms.
7. Financial impact of the Acquisition
The Board believes that the Acquisition will generate
considerable value for Shareholders. The key financial implications
of the Acquisition are expected to be:
-- Materially earnings enhancing in the first full year
following completion of the Acquisition;
-- Cost synergies are expected to be GBP15 million per annum;
-- The Directors expect the Acquisition will deliver a return on
invested capital in excess of Future's weighted-average cost of
capital within the first full year following Completion;
-- Expectations of strong cash generation which should provide
further opportunities to invest in growth with leverage remaining
below 1.5x; and
-- The Group will remain appropriately leveraged and retain
significant financial flexibility with the cash generative nature
of the Target and its existing business allowing it to de-lever
quickly following Completion.
8. Financing of the Acquisition
The consideration for the Acquisition will be satisfied entirely
in cash. The consideration and related transaction costs will be
funded by the net proceeds of the Placing, as announced by the
Company today, and the balance from the GBP45 million accordion
facility provided under Future's existing revolving credit facility
on a 'certain funds' basis.
9. Current trading and prospects
The Group
The financial year ended strongly with revenues in the region of
GBP220 million, and as such the Board expects trading to be at the
top end of Board expectations and we remain confident of another
strong year in 2020.
TI Media
Since 31 December 2018, trading has been in line with
expectations and there has been no significant change in the
financial or trading position of TI Media since that date.
10. Dividend policy
The Group aims to pursue a progressive dividend policy whilst
optimising value for shareholders by balancing returns to
shareholders with investment in the business to support future
growth and accordingly has a dividend policy which requires
dividend cover to be at least four times earnings and cash. The
Board paid a dividend of 0.5 pence per share as a final dividend
for the year ended 30 September 2018. Future's Employee Benefit
Trust waives its entitlement to any dividends.
Presentation of Information
Forward-looking information
This Announcement may contain and the Company may make verbal
statements containing "forward-looking statements" with respect to
certain of the Company's plans and its current goals and
expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results.
Forward-looking statements sometimes use words such as "aim",
"anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "seek", "may", "could", "outlook" or other words
of similar meaning. By their nature, all forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances which are beyond the control of the Company,
including amongst other things, United Kingdom domestic and global
economic business conditions, market-related risks such as
fluctuations in interest rates and exchange rates, the policies and
actions of governmental and regulatory authorities, the effect of
competition, inflation, deflation, the timing effect and other
uncertainties of future acquisitions or combinations within
relevant industries, the effect of tax and other legislation and
other regulations in the jurisdictions in which the Company and its
respective affiliates operate, the effect of volatility in the
equity, capital and credit markets on the Company's profitability
and ability to access capital and credit, a decline in the
Company's credit ratings; the effect of operational risks; and the
loss of key personnel. As a result, the actual future financial
condition, performance and results of the Company may differ
materially from the plans, goals and expectations set forth in any
forward-looking statements. Any forward-looking statements made in
this Announcement by or on behalf of the Company speak only as of
the date they are made. Except as required by applicable law or
regulation, the Company and the Joint Bookrunners expressly
disclaims any obligation or undertaking to publish any updates or
revisions to any forward-looking statements contained in this
Announcement to reflect any changes in the Company's expectations
with regard thereto or any changes in events, conditions or
circumstances on which any such statement is based.
Target historical financial information
The historical financial information of the Target Group set out
above has been prepared in accordance with IFRS, as adopted by the
EU. This Announcement includes unaudited non-IFRS financial
measures and ratios, including Adjusted EBITDA, EBITDA margin and
cash conversion for the Target Group, which are not measures of
financial performance under IFRS. Adjusted EBITDA, as presented in
connected to the Target Group is defined as operating profit or
loss for the year before exceptional items, share based payments,
depreciation and amortisation. Cash conversion is defined as
Adjusted EBITDA less capital expenditure and working capital.
Please see the reconciliation of Adjusted EBITDA to the nearest
IFRS line item included above.
Prospective investors should not consider these non-IFRS
financial measures as alternatives to measures reflected in the
historical financial statements of the Target, which have been
prepared in accordance with IFRS. In particular, prospective
investors should not consider such measures as alternatives to
profit after tax, operating profit or any other performance
measures derived in accordance with IFRS or as an alternative to
cash flow from operating activities as a measure of the Target's
activity.
Company website
Neither the content of the Company's website nor any website
accessible by hyperlinks on the Company's website is incorporated
in, or forms part of, this Announcement.
Definitions
The following definitions apply throughout this announcement,
unless the context otherwise requires:
"Acquisition" the acquisition of the Target by the
Purchaser on the terms and conditions
set out in the Share Purchase Agreement
"Board" or "Directors" the directors of Future as at the date
of this Announcement and/or the directors
of Future from time to time (as the context
so requires)
"CMA" the Competition and Markets Authority
in the UK
"Company" or "Future" Future plc (incorporated in England and
Wales with registered number 03757874)
"Competition Condition" the CMA taking a decision (or being deemed
to have done so) that (i) it does not
intend to make a Phase 2 reference; or
(ii) in the event of the CMA announcing
its intention to make a Phase 2 reference,
it has accepted undertakings-in-lieu
of a Phase 2 reference from Future or
its subsidiaries
"Completion" completion of the Acquisition pursuant
to the terms of the Share Purchase Agreement
"Computershare" Computershare Investor Services PLC
"CREST" the relevant system (as defined in the
Regulations) in respect of which Euroclear
is the operator (as defined in the Regulations)
"Enlarged Group" the Group as enlarged by the Acquisition
"Euroclear" Euroclear UK & Ireland Limited (incorporated
in England and Wales under registered
number 2878738), the operator of CREST
"Existing Ordinary Shares" the 85,387,955 Ordinary Shares currently
in issue
"RCF Agreement" the committed facilities agreement originally
entered into between the Borrower and
the Bank on 23 June 2016 as amended and
restated from time to time
"FCA" or "Financial the Financial Conduct Authority of the
Conduct Authority" UK in its capacity as the competent authority
for the purposes of Part VI of FSMA and
in the exercise of its functions in respect
of Admission to the Official List otherwise
than in accordance with Part VI of FSMA
"FSMA" the Financial Services and Markets Act
2000 (as amended)
"Group" Future and its subsidiary undertakings
from time to time
"IPC Seller" IPC Magazines Holdings Limited
"Lenders" HSBC Bank plc, National Westminster Bank
plc and The Governor and the Company
of the Bank of Ireland
"Listing Rules" the listing rules of the Financial Conduct
Authority made pursuant to Part VI of
FSMA
"N+1 Singer" NplusOne Singer Capital Markets Limited
"Numis" Numis Securities Limited
"Official List" the Official List of the FCA
"Ordinary Shares" the ordinary shares of 15p each in the
capital of Future, other than in respect
of the period prior to 2 February 2017
where references to Ordinary Shares are
to ordinary shares of 1 pence each in
the capital of Future
"platform" the technology systems and infrastructure
that facilitate the production of content
and the delivery of it to the consumer
"Purch B2C" The business to consumer business of
Purch Group, Inc.
"Purchaser" Future Holdings 2002 Limited
"PwC" PricewaterhouseCoopers LLP
"Regulations" the Uncertificated Securities Regulations
2001 of the United Kingdom
"Resolution" the resolutions set out in the notice
of General Meeting
"SEO" search engine optimisation
"Share Purchase Agreement" the purchase agreement dated 30 October
2019 between the Purchaser, Future and
the Sellers
"Sellers" the sellers named in the Share Purchase
Agreement
"Shareholders" the holder(s) of Ordinary Shares
"Sponsor" Numis
"Target" Sapphire Topco Limited
"Target Group" The Target and its subsidiaries, including
TI Media
"TI Media" TI Media Limited and its subsidiaries
"technology stack" the suite of technology a company uses
to run its business
"Time UK" Time Inc. (UK) Ltd
"Time UK Purchaser" Sapphire Bidco Limited
"uncertificated" or recorded on the relevant register of
"in uncertificated form" Ordinary Shares as being held in uncertificated
form in CREST and title to which, by
virtue of the CREST Regulations, may
be transferred by means of CREST
"United Kingdom" or the United Kingdom of Great Britain and
"UK" Northern Ireland
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACQURRNRKBAROAA
(END) Dow Jones Newswires
October 30, 2019 12:48 ET (16:48 GMT)
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