Shares in publishing group Future (FUTR) are in free-fall, down by nearly a quarter at 944.5p, since equity research firm Stockviews posted an aggressive sell note on the company on Monday night.
We recently published an in-depth look at the company in the wake of its ascent to the FTSE 250. We ultimately concluded that the share price was too high, although we were positive on the business as a whole.
To summarise, the criticisms from Stockviews are that market expectations are now unrealistic, earnings quality is poor due to recurring charges and management representation of free cash flow is ‘at odds with reality’. The note adds that the remuneration policy has prompted ‘aggressive acquisitions’ to hit earnings targets.
READ MORE ON FUTURE HERE
To address some of these complaints, there was a material difference between statutory and adjusted profit in the company’s first half results to 31 March although in part this reflected costs associated with acquisitions and the move to the Premium segment of London’s Main Market. The remainder of the disparity was linked to share-based payments.
The difference between adjusted and statutory operating cash flow was relatively limited. Remuneration has undoubtedly been generous, but bonuses have for the most part included a share-based element, so management’s interests are at least partly aligned with shareholders and linked to cash flow as well as earnings.
Stockviews' final line of attack concerned the monetisation of the company’s content, flagging website ranking data which suggests this is harming brands such as TechRadar and Tom’s Hardware.
As a close follower of the stock this is something Shares will be keeping tabs on going forward although our previous conversations with chief executive Zillah Byng-Thorne suggest that she is very aware of the need to balance making money out of Future’s publications with the need to protect the integrity and credibility of the brands.
