Shares in Future (FUTR), the global platform for specialist media rose by 5.8% this morning to £39, following the announcement that it has acquired customer media subscription company Dennis for £290 million.
The are several financial benefits associated with the deal. The Dennis portfolio of brands has a strong organic growth profile with EBITDA (earnings before interest, tax, depreciation and amortisation) margin growth outpacing revenue growth (12% revenue growth in 2020, and 14% EBITDA growth in 2020).
The deal will be materially earnings enhancing in the first full year, and approximately £5 million run rate of annual synergies, of which 50% will be realized in 2022.
STRATEGIC BENEFITS
There are three compelling reasons to believe the deal will be strategically beneficial. First, the deal will enable Future to scale the wealth vertical. MoneyWeek and Kiplinger provide a highly complementary and scale presence both in Britain and America.
Future will be able to leverage its technology platforms and centres of excellence approach to further promote these brands. Second, there is an opportunity to increase recurring revenue and subscription capabilities. Subscriptions represent 75% of Dennis business revenues, and retention is high at 80%.
The Dennis brands also bring a high gross contributing margin. The Week UK, The Week Junior UK, and the Week Junior US, will add over 700,000 subscribers to the Group. Third, the deal will extend Future’s reach in North America. The acquired brands generate the majority of revenue in America, bring further geographic revenue diversification to the group.
According to Shore Captial media analyst Roddy Davidson: ‘We are encouraged by this deal which should slot into Future’s broad portfolio, and its tech platform-allowing the rapid realization of synergies and growth acceleration on both sides of the deal.’
