A useful reminder that markets are forward-looking – Future Publishing’s (LON: FUTR) profits more than doubled in the latest results this morning but the share price is only up 16%. The results are absolutely stonking – adjusted operating profit up 110% – but there’s only that much lower rise in the price.
Why? Because the half-year results were also very good, with profits up 89%, and so much of the share price rise has already taken place. The general view was that the company was doing very well so, because it was therefore likely that the price would rise in the future is rises now. After all, if we think that a price will rise in 6 months when the results come in we’ll buy now in order to gain that price rise. But that means the price rises now because everyone buys now, not later.
This is where the old advice to buy the rumour and sell the fact comes from. But on what will happen – or might – because the action will be before the confirmation of it having happened. The 16% rise in Future’s share price today is not about the rise in profits, it’s about the removal of the uncertainty around whether what folks thought would happen would.
There will be continued volatility in the share price moving forward as well. For there will be those who think that the same thing will be repeated in the next results, those who insist that it has all happened.
As to what the company has actually been doing it’s one of the very few meatworld publishers who have been able to move online with any facility. There have also been any number of online only and new publishers who have crashed and burned. Someone, somewhere, was going to get the transition right and it is Future that is doing so. Their stable of games, VCR, camera and so on specialist magazines they’ve been able to take online successfully.
What makes it even more impressive is that this past year has been a disaster for the advertising markets. With lockdowns and the rest many people are reading many more internet pages – that makes the ad value of any one of them collapse. Especially since so many services and days out and experiences couldn’t operate at all and so weren’t advertising. To increase revenues (79%), a good portion of which was organic growth (23%) and so profits soar that 110% in this market is exceptional going. They also bought and integrated old titles into their new platform and systems which explains the growth over and above that organic kind.
The question now, the betting, is whether they can find more titles to so integrate or not? Have they actually cracked this market and system or have they just been lucky so far? Their skills and methods are more widely applicable or not? The debate over this will drive further volatility in the share price over time.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.