Proposed acquisition of TI Media October 2019 - Future Plc
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Proposed acquisition of TI Media October 2019
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Our strategy
Future is a global platform business for
specialist media, driven by technology, with
diversified revenue streams
We create fans of our brands by giving them a
place they want to spend their time and
where they go to meet their needs. We
continue to create loyal communities
We are expanding our global reach through
organic growth, acquisitions and strategic
partnerships
We are diversifying our monetisation models
to create significant revenue streams
4
Acquisition of TI Media
● Significantly increases Future’s specialist verticals
Compelling ● Opportunity to significantly scale new specialist media genres, leveraging the Group’s platform business
strategic ● Diversification of revenue streams and audiences, including largely untapped opportunity in US and Australia
rationale ● Introduction of new monetisation models, including premium content & opportunity to access new advertiser
sector
● Materially earnings enhancing in the first full year, the Future operating model provides an opportunity to deliver
Significant at least £15m significant cost synergies through consolidation of centres of excellence
financial ● ROIC expected to exceed WACC within the first full year of ownership
benefits ● Highly cash generative, allowing the Company to de-lever quickly
● An acquisition of scale – Revenue: £202m*; Adjusted EBITDA £28.7m LTM to May 2019
● Enterprise value of £140m, implying 4.9x May FY19 LTM Adjusted EBITDA
● Funded through a combination of debt and an equity fundraise, the company is seeking to raise net proceeds of
Transaction
£95m
overview
● Increase of debt facility to £135m through exercise of accordion option with additional £45m drawn down to fund
the acquisition, leverage less than 1.5X
5
*Continuing revenue
TI Media overview
A leading consumer magazine & digital publisher with iconic brands
Lifestyle Homes Sport
Women’s Games ● Market leading brands - trust and heritage spanning over 160 years
Lifestyle & Ents
● Adding new segments, advertising partners and expertise to our
portfolio
● Significant scale as TI Media engages with 23% of all UK adults, 27%
of all AB UK adults; 63% female audience
○ 33.2 million annual circulation
○ 66.6 million monthly page views
● Recurring revenues with over 500k subscribers - high retention
rates as well as ‘frequent purchasers’ at the newsstand
● Includes Marketforce a leading UK distributor of magazines
providing vertical integration of the supply chain
● A number of events and awards programs, including the iconic
Decanter awards
Online
Free cash Annual
Revenue LTM EBITDA LTM Brands Monthly
flow FY18 circulation
£201.5m £28.7m 40+ Users
£30.6m1 33.2m2
26.8m
6
Financials relate to the LTM to May 2019, 1. Free cash flow - EBITDA less capex and working capital (FY18), 2.Total number of copies sold per year
Strategic Rationale
Accelerating Future’s growth strategy, TI Media brings further opportunities to diversify revenues and extend platform
model
● Introduces three new specialist vertical to the Group: LIfestyle (Decanter, Country Life, Wallpaper); Women’s
New market leading Interest (Woman's Weekly, Woman’s Own); and Sport (Golf Monthly, Horse & Hound)
1 specialist verticals ● Extension and deepening of core existing verticals: Home (Home & Gardens, Country Life); Consumer Technology
(Trusted Reviews); Gaming & Entertainment (TV Times, What's on TV)
● Heritage print led magazine brands present opportunity to improve quality of earnings by implementing the
Leveraging technology Future diversified revenue model
2
& media platform ● Significant opportunities in digital advertising and eCommerce through audience growth, which combined
account for 9% of total TI Media revenue today vs Future at 57%1
● TI Media historically very UK focussed, opportunity to plug into Future’s global operating model
New geographies &
3 monetisation models
● New monetisation models, including premium membership model with the Decanter Brand and opportunity to
access new advertising bases
● Leveraging Future’s expertise to share best practice in SEO online audience development, events, licensing, email
Accelerating margins
newsletter and e-commerce
4 through centres of
● Significant opportunity for Group overhead savings through consolidation of back offices, including Finance, IT and
excellence HR
● Expected to be materially earnings enhancing in first year of ownership, including delivery of at least £15m of
Materially earnings synergies
5 enhancing ● Significant cash generation in first full year of ownership, business expects to de-lever quickly
● ROIC expected to exceed WACC within the first full year of ownership
● Experienced Future team with proven track record in acquisitions
Proven management
6 ● TI Media CFO to take role of Future CFO upon completion of transaction, opportunity to retain key TI Media
team
management to aid integration and drive future growth opportunities
7
1. Note: Financials relate to year ending 31st December 2018 for TI Media and H1FY19 for Future
Where we operate
Materially increasing core audience reach, adding three new specialist verticals
142.8M 41.4M 12.4M
audience reach audience reach audience reach 9.7M 12.9M 7.7M
#1 online in UK & US #1 in PC gaming #1 in renovations audience reach audience reach audience reach
Gaming &
CONSUMER
Technology Home Interest Sport Women’s Interest Lifestyle
Entertainment
● TV brands add 870K to Gaming &
Entertainment audience
33.4M 17.7M
4.2M audience reach audience reach
audience reach #1 in space online in #1 print music ● TI Media brands add 10.3M to Home
#1 online in UK & US US making in UK & US Interest
Creative & Photography Knowledge Music
8
Note: Audience reach is based on Company data, market positions based on September 2019 comScore data or newsstand sales
1 New market leading, high value specialist verticals
Proven track record - Cycling Three new specialist verticals added to group
● Cycling news ● Introduces three new specialist verticals; Lifestyle (Decanter,
acquired Feb Country Life, Wallpaper), Women’s Interest (including babies)
2019, migrated to and Sport (Golf, Equestrian)
Vanilla platform in
Sep 19 ● Majority of revenues are print led, affording opportunity to
utilise our platform and operating model to achieve new
● Audience growth revenues and improve margins
20%, digital revenue
growth 197%
● New verticals are in highly valuable categories that
● New site significantly enhance Future’s portfolio
Bikeperfect.com
July 2019
Proven track record - Home Interest Opportunity for diversified monetisation strategy
● Future has experience of acquiring
● Realhomes.com
launched Nov new high value verticals (Home
2017 Interest, Cycling & Knowledge) and
implementing Future wheel to
● Audience grow additional new revenues and
growth 259% Y- audiences
o-Y, 501% ● The Future operating model.
growth from US,
coupled with our proprietary
eCommerce
revenue growth technology platform enables the
450% acceleration of a diversified
strategy at scale, quickly and
economically
9
2 Leveraging the technology & media platform
Proven track record Unique opportunity to deploy model at scale
● Live Science, Tom’s Guide and Tom’s Hardware acquired in Sep
18 ● TI Media monetisation model is concentrated in Newstrade,
Print Ads & Subscription revenues
● Migrated all sites to Vanilla during year and rolled out SEO
playbook ● Opportunity to materially grow digital propositions through
leveraging Future’s operating model and technology platform
● Live Science online audience up 26% since acquisition;
eCommerce revenues up 79% ● Today 7% of TI Media revenue is from digital advertising,
Ecommerce revenue accounts for 2% of turnover1
● Tom’s Guide online audience up 28%*; online revenue up 42%
● Advertising and eCommerce tech and embedded ways of
● Tom’s Guide and Tom’s Hardware combined
working enable Future to grow revenues
● eCommerce revenue up 69% and combined advertising revenue
up 19%
Mix of tech and process drives audience growth Numerous high value specialist categories
● TV portfolio covering value, mainstream and premium markets.
To date strategy has been print led, with pricing inelasticity
offsetting volume. TV and Satellite Week has a subscriber base of
30%+
● Future’s platform, opportunity to materially grow audience in the
UK and into US to allow the brand to answer the question
“what’s on TV tonight?”; coupled with eCommerce opportunities
in high value streaming areas.
● Goodtoknow brand covers babies, family and wellbeing, and is
significantly under monetised. Opportunity to accelerate
Tom’s Guide audience 10
*US, excludes forum. 1. Note: Revenue for 12 months ending December 20183 New geographies & monetisation models
Decanter - Premium Subscriptions New advertising base & International opportunity
● Decanter international authority on wine. Operating in print, awards ● Differences in Future & TI Media demographics mean there is
and events in the UK and Asia very limited advertiser overlap, represents an opportunity to
cross sell within the UK
● Decanter hosts one of the largest wine awards, 20k paid entries
● Of TI Media’s top 40 clients, only 6 crossover with Future
● Decanter.com’s audience includes Decanter Premium paid
subscribers, who access paywall content, with access to 33,000 wine ● Due to the domestic focus and operating model of TI Media
reviews there has been little focus on the US opportunity, the
combination of Hybrid, the Future Advertising platform, coupled
● Growth in premium subscribers is 63% in LTM to Sept 2019 with the local US & AUS sales and marketing teams represent an
● Although a global brand, US audience is under indexed; Global opportunity
audience, 24% of users are in the UK; 38% in the US ● Our centralised Licensing & Syndication team also represent an
opportunity to distribute the TI Media content into non English
markets
Global Scale – What HiFi Revenue Comparison
● Future experience of growing UK domestic brands into material Revenue mix by geography
online global brands
US
25% UK
52%
75%
48%
Future Future + TI Media
Note: Future FY19 H1 annualised revenue; TI Media FY18 revenue 114 Accelerating margins, synergies of at least £15m p.a.
● Run rate synergies of at least £15m per annum to be achieved within 24 months, with a significant proportion of
these savings to be achieved in the first full financial year following the acquisition
● Total exceptional restructuring costs of £9m expected to be incurred
● The Future strategy is to deliver top-line organic growth through best in class content, monetised via numerous
revenue streams supported by centralised hubs
● Centres of excellence established in a number of revenue areas to support this growth including events, email
marketing, newsletters, SEO, licensing, syndication and eCommerce
● Centralised hubs model allows business to scale in a cost effective manner
● Material level of cost synergies through:
1. Back office functions - £5.3m 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
2. Front office functions - £6.0m million of synergies from integration of business facing functions and Future’s digitally
focused approach
3. Other overhead costs - £3.7 million of synergies from office rationalisation, consolidation of IT contracts and
professional fees.
125 Financial Overview
Headline financial information Compelling financial rationale
2016 2017 2018 LTM May 19*
y/e 31 December £m £m £m £m ● Enlarged Group gains significant scale
Magazine revenue 175.0 160.2 152.6 147.9 ● Opportunity to expand TI Media margin on the Future platform
Media revenue 28.2 31.1 34.1 31.2
● Greater scale of enlarged Group driving benefits with suppliers,
Publisher services 16.9 23.1 23.7 22.4
advertisers and distributors
Net continuing revenue 220.1 214.4 210.4 201.5 ● Materially earnings enhancing in the first 12 months
● ROIC expected to exceed WACC within first full year of ownership
Discontinued revenue 40.4 26.5 15.4 10.3
Net Revenue total 260.5 240.9 225.8 211.8 ● 4.9x LTM EBITDA
Adjusted EBITDA 26.0 29.8 31.1 28.7
Adjusted EBITDA margin 10% 12% 14% 14%
Magazine Revenue as % of Financial characteristics
Continuing Revenue 80% 75% 73% 73%
Media Revenue as % of
● Magazine revenue impacted by structural decline
Continuing Revenue 13% 15% 16% 15%
○ TI Media revenues declining at 7% CAGR over 2016-2018
Adjusted cash flow 0.6 19.8 30.6
Adjusted cash conversion % 2% 66% 98% ● Media revenue has grown modestly from a low base at 10% CAGR -
* Unaudited
opportunity for material upside
○ Opportunity to expand the Media contribution margin to be in
line with Future higher margin
● Highly cash generative with cash conversion of 98% in 2018 with
expectation of normalised cash conversion of 85-90% to free cash flow
Note: Adjusted cash flow is defined as adjusted EBITDA less capex and working
capital. Historic cash-flows have been adjusted to exclude exceptional items
as part of combined group2
however working capital movements do include provision movements in relation to 13
exceptional items6 Proven management team with a track record of results, underpinned by
systematic approach to delivering acquisitions
✓ Undertake detailed integration planning sessions
90 days to completion ✓ Confirm go forward organisation structures, terms harmonisation, including “day
(during CMA process) 1 teams”
✓ Confirm location strategy
✓ Integration of key back office systems, including GL and
editorial tools
First 90 days
✓ Implementation of new combined management team
✓ Creation of key new ecommerce lead brands
✓ Deliver the new ecommerce opportunities in Sports, Lifestyle, TV, and Women's
Interest
Within 6 months
✓ Deliver identified cost savings
✓ Achieve the benefits of scale in advertising and distribution relationships
✓ Integration of all digital platforms to Future Vanilla sites
Within 12 months ✓ Renegotiation of all key contracts to deliver procurement savings
✓ Complete the organisational change and implement the new operation model
14
Note: timetable is indicative onlyPro forma Revenue TI Media & Future
Revenue mix by type Audience mix by demographic
11% Male
Publisher Services
30% 37%
Female
Mags 60%
73% Media
70%
63%
40%
16%
Future TI Media Future TI Media
● Expectation that within first full financial year, more
than 50% of revenues from the combined group and ● TI Media’s content is targeted
more than 60% of contribution would be from Media predominantly at a female audience, the
inverse of Future thereby creating a
● Opportunities exist to leverage the Future
complementary audience
monetisation models to generate new digital
revenues from TI Media assets both in the UK ● Additionally, monetisation opportunities
remain from an audience with limited
● TI Media revenue is predominantly from the UK
overlap
whereas more than 50% of Future’s revenues are
generated in the US. An additional opportunity exists
to grow and monetise TI Media audience in the US
15
Note: TI Media 2018 full year revenue, Future H1 FY19 revenue. Future online Audience share, TI Media Pamco statisticsCurrent Trading & Board Changes
● The financial year ended strongly with revenues in the region of £220m, and as such we expect trading
to be at the top end of the board’s expectations, the Board remains confident in another strong year in
2020
● Current TI Media CFO, Rachel Addison will join Future as CFO of the PLC upon completion. Rachel
brings a wealth of media experience having previously held CFO roles in the newspaper industry.
Rachel also brings experience of large scale integrations most recently from her role running the
integration of Local World and Reach. Upon Rachel’s appointment Penny Ladkin-Brand will
commence her new role at Future as Chief Strategy Officer
16In Summary
New market leading
1
specialist verticals
2 Leveraging the technology & media platform
3 New geographies & monetisation models
4 Accelerating margins through centres of excellence
5 Materially earnings enhancing
6 Proven management team
17Appendix
Reconciliation to adjusted financial information
2016 2017 2018
Year ended 31 December
£m £m £m
Operating (loss)/profit before interest and share
1.2 4.4 -8.5
of associate and joint venture
Exceptional items 18.4 17.1 28.2
Share based payments 0.9 1.4 2.5
Depreciation 2.4 3.0 2.0
Amortisation of intangible assets 3.1 3.9 6.9
Adjusted EBITDA 26.0 29.8 31.1
Note: breakdown of exceptional items provided overleaf
19Breakdown of exceptional items
2016 2017 2018
Year ended 31 December
£m £m £m
Acquisition expenses 0.2 - 2
Impairment of intangible assets 1.3 - 12.5
Pension plan amendments - -6.1 -1.2
Profit on disposal of intangible assets -1.9 -0.1 -0.4
Contingent consideration released -2.1 - -
Bankruptcy of print supplier 2.1 - -
Severance costs 10.0 13.5 9.7
Strategic consultancy and transformational costs 6.1 5.7 2.6
Property relocation costs 2.1 3.8 -
Business sale related expenses - - 2.3
Facility and professional fees relating to ownership transition 0.6 0.3 0.7
Total 18.4 17.1 28.2
20TI Media’s portfolio
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