Interactive Investor

This deal-making publisher has become a FTSE 250 star

17th August 2021 13:23

Graeme Evans from interactive investor

Our stocks writer examines recent events at a publisher that has become a top performer in the FTSE 250 this year.


Future (LSE:FUTR), the second-best performing stock in the FTSE 250 index so far this year, has been backed for further progress after the digital publisher's latest big acquisition showed another side to the recent bout of mid-cap dealmaking.

The takeover pursuits of Meggitt (LSE:MGGT), Ultra Electronics (LSE:ULE) and WM Morrison (LSE:MRW) among others have helped to push the FTSE 250 index deeper into record territory, although the bid premium on these deals pales in comparison with the momentum of two companies in the media sector.

Newspaper publisher Reach (LSE:RCH) has been the best performing of all London's second-tier stocks as its recovery picked up pace in 2021, with shares up 175% for a market value of £1.2 billion and the company's best position in more than a decade.

The next best performing is Future, which is up 119% over the year to date and by more than 500% from its pandemic low in March 2020, as a series of better-than-expected updates help to douse City scepticism over its surprise £594 million GoCompare takeover of last year.

Future's deal-making chief executive Zillah Byng-Thorne unveiled another acquisition yesterday with the £292 million addition of various titles from Dennis Publishing from Exponent Private Equity.

The move strengthens Future's position in the wealth, knowledge and B2B technology verticals, including through the addition of MoneyWeek, The Week and PC Pro.

Shares were up 5% to a record 3,870p at last night's close, valuing the business at about £4.6 billion as one of the 10 largest stocks in the FTSE 250 index.

Since taking charge seven years ago, Byng-Thorne has transformed the Country Life and Marie Claire publisher into a business where 70% of revenues are now generated outside of print.

US and Canada accounts for almost 48% of global online users, but this is set to rise further based on 56% of the revenues in the Dennis deal being in the US.

The shares retreated 60p today, despite more praise in the City as analysts evaluated how the subscription-based magazine business will fit into Future's prospects.

Deutsche Bank's Simon Davies upgraded his target price from 3,802p to 4,138p as he noted that the deal should be 10% earnings enhancing in the year to September 2022.

He said: “The fit looks good, and while it is paying a premium valuation, this is justified by a higher quality of earnings, and material potential synergies which will bring the valuation down.

“In addition, the deal is entirely debt funded, but given the speed of deleverage, it still has plenty of scope for additional bolt-on deals.”

Peel Hunt increased its earnings per share forecasts by 9%-10% for 2022 and 2023 while it put in place a new target price of 4,400p. But with shares at a lofty 26 times 2022 earnings and after  a recent strong performance, the broker has changed its recommendation from “buy” to “add”.

However, Peel Hunt added: “We believe further outperformance could come from potential revenue synergies from recent acquisitions,” Numis Securities also has a target of 4,425p.

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