Future Share Price (FUTR)

Hold. Time will tell.

Investors's Champion tip sheet comment 4/4/24

https://www.investorschampion.com/channel/blog/an-interesting-business-lurks-in-the-wreckage

Future: why so cheap?

Future (AIM: FUTR), which calls itself the global platform for specialist media and also combines Go.Compare, the financial services comparison company it acquired in 2020 for £594m, updated on trading for the six months ended 31 March 2024.

Future owns more than 230 well-known brands such as Country Life, Homes & Gardens, Decanter, Money Week and plenty of technology and gaming titles. It acquired Money Week through the acquisition of Dennis Publishing for £300m in 2021.

The return to growth in the current year has been driven by a strong performance in Go.Compare, alongside good growth in B2B, and a resilient performance in Magazines. This has been offset by a more challenging performance in affiliate products and digital advertising.

There is lots of marketing speak in the update around the “reorganisation to accelerate the Growth Acceleration Strategy”, which means little to us, and plenty more marketing speak to enjoy in the investor relations section of their website here.

They also stated how “cash conversion in the half has been strong” but gave no indication of what this is and indeed the period end net debt position, which was £327m at the 30 September 2023 year end.

Despite the lack of detail, the market was clearly reassured with the news that Future is “on-track to deliver on expectations for FY 2024”, pushing the shares up 16% to 695 pence and market capitalisation to £800m.

By our reckoning statutory free cash flow in the financial year to 30 September 2023 was £159m (the results gave adjusted free cash flow as £253m, which conveniently ignores interest and tax!), which equates to a highly attractive free cash flow yield of c16% based on an enterprise value of £1 billion.

Forecast adjusted earnings of 121 pence for the year to September 20204 result in a PE ratio of only 5.7x, which suggests the market has little faith in forecasts and indeed the longer term outlook.

The shares are 80% down on the highs hit in August 2021, when the market capitalisation was over £4 billion, as it basked in the glory of an acquisition boom under former CEO Zillah Byng-Thorne, who stepped down in 2023.

If the future isn’t half as bad as the market clearly fears, there could be another good recovery story here and as we commented in our earlier article here, with appealing brands and cash flow it certainly looks vulnerable to a bid.

Everything is up, but shorters can keep this down easily after a decent update.

Neither do I petrencf. Only thing I can think of is market sentiment. Advertising is a sector traditionally hit hard in recession...even one that turns out to be mild or short lived. The converse is also true in that it is one of the first sectors to recover once green shoots start appearing.

Struggling to see how AI makes an impact, if that is what the shorters are banking on. Good cash flow company.

It can be more tax efficient to use share buybacks instead of paying out dividends, depending on the circumstances.

It is OK for Future to do this because it is highly cash generative, unlike some other companies.