Interactive Investor

FTSE 250 winners: huge gains for this mid-cap pair

After a couple of difficult years for these companies and their shareholders, both have rallied strongly today. City writer Graeme Evans explains what’s behind the move.

16th May 2024 13:35

by Graeme Evans from interactive investor

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The hunt for value in the FTSE 250 index lifted Future (LSE:FUTR) and Auction Technology Group (LSE:ATG) shares today as investors focused on the recovery potential within their half-year results.

As we reported yesterday, the UK’s faster-than-expected exit from recession and hopes of lower interest rates have revived interest in the mid-cap index after a long post-Brexit slump.

Media platform Future, whose interests include the price comparison site Go.Compare and the magazines Marie Claire and Country Life, signalled an upturn in fortunes today when it reported a return to revenues growth in the second quarter.

Its shares have now risen more than 50% since the end of April, including today’s bounce of 130p to 1,000p after the highly cash-generative firm added another £45 million to its share buyback programme.

Interest was also fuelled by the company’s view that the businesses making up the group are significantly undervalued. Future said it will continue to “keenly appraise performance and will actively look at further options” to accelerate value creation.

The group, which generated 36% of its half-year revenues of £391.5 million in the United States, recently reorganised into three units spanning business-to-consumer, Go.Compare and business-to-business operations.

Longer term, Future believes it can grow annual organic revenues by mid-single digits over the next three years with an adjusted margin of 28-30%, up from the 28% expected this year.

The shares peaked at 3,800p at the end of 2021 before much higher interest rates triggered a slump as investors rotated away from growth and technology stocks.

Despite the recent recovery, Future went into today's half-year results valued at about seven times forecast 2024 earnings. Peel Hunt said this continued to look attractive, with the City bank having a price target of 1,210p.

It added today: “This was a solid set of results, alongside positive trends also seen by peers in recent months. The improved sector backdrop and stabilised audience trends give us confidence of further improvement in the second half.”

The trends also appear more encouraging for Auction Technology Group after the company behind The Saleroom and BidSpotter reported progress opening up new growth opportunities.

This was highlighted by the 44% rise in revenues from digital marketing and other value-added services, which accounted for 23% of the group’s half-year total of $86 million (£68 million).

ATG powers eight online marketplaces and listing sites, hosting in excess of 85,000 live and timed auctions each year in the industrial and commercial and art and antiques sectors.

The stock topped 1,500p at the end of its debut year in 2021 before a reversal to 450p by January. It fell again in April after the disclosure of tougher trading at Proxibid, North America’s largest online marketplace which lists items from agricultural machinery to classic cars.

Today’s adjusted earnings of $35.7 million (£28.2 million) fell 6%, in line with April’s guidance, but the group continues to forecast full-year revenues of between $175-$180 million. That implies a mid-point growth rate of 7%, including organic revenue growth of 2%-5%.

The unchanged guidance helped shares rally 58p to 560p, back within 40p of its IPO price.

Analysts at Cavendish left their price target at 940p, noting that ATG remains a highly profitable, cash-generative business. Peel Hunt, which has a target of 784p, added: “While the second half is not in the bag, recent weakness is mostly behind us, with green shoots from nascent strategies.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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