Shares in publisher Future (FUTR) soared by more than 200 per cent last year. However, since being tipped into decline on the back of bearish research from short-seller ShadowFall Research, the group's market value has yet to recover, despite issuing improved trading guidance for 2020 and hosting a well-attended capital markets event.
Future’s chief executive, Zillah Byng-Thorne, told us that the group does not comment on anyone’s research, "good or bad". Yet while it has not responded to the contents of ShadowFall’s report, Future’s capital markets presentation explored areas including "execution strategy", "organic growth through audience" and the "acquisition playbook".
ShadowFall’s report had said that it had been "left with the impression that Future is little more than a collection of generally low quality, often distinct and shrinking assets”. Among other topics, the hedge fund questioned the 11 per cent organic growth figure stated by Future for 2019, and the quality of the businesses that Future has acquired. It says that Future appears to be “a monumental example of shareholder exuberance”.
The media group broke down the 11 per cent organic growth figure, noting that total revenue landed at £222m in 2019, and after subtracting the impact of acquisitions and a foreign-exchange boost, organic revenues were £121m, up from £109m. The group defines organic growth as year-on-year growth for its like-for-like portfolio of brands. It excludes any acquisitions made during the prior two-year period, but includes closed titles.
ShadowFall also argued that some of Future’s acquired assets had "long histories of declining revenue and profit and all too frequent reorganisation costs”, using Future’s most costly acquisition to date, TI Media, as an example.
Ms Byng-Thorne noted that TI Media is a predominantly magazine-led business today, with about 85 per cent of revenues coming from magazine and about 15 per cent coming from online opportunities. “For us, that’s where the significant and material opportunity lies” – while TI has a well-managed magazine portfolio, it does not “have a scalable digital platform”. Future also sees an opportunity to improve TI’s digital revenues through its in-market team in the US.
Ms Byng-Thorne and Future’s chief financial officer, Penny Ladkin-Brand, each bought around £100,000 of shares the day after the capital markets event, which followed a separate share purchase in early December.
The chief executive said that buying shares in the group represented “remarkably good value” at the current price, which “undervalues the growth in the business”. However, these deals follow on from £43.7m in share sales by management members last November after the exercise of options, including a £14.6m sale by Ms Byng-Thorne.
Ms Byng-Thorne noted that she and Ms Ladkin-Brand were net purchasers in Future rather than sellers up until that point, based upon shares they had bought themselves as opposed to shares they had been awarded.
