Reach's shares bounce on robust results

The market reacted positively to Reach’s (RCH) full-year figures for 2023, but given the 35 per cent year-on-year decline in operating profits to £46.1mn, it’s reasonable to assume that expectations were in the doldrums. Indeed, the commercial news publisher trumped consensus earnings and matters aren’t quite so dire once a phalanx of one-off adjustments is factored into the equation. They amounted to £50.4mn in total and relate to issues ranging from an impairment of vacant freehold property to onerous costs linked to a vacant print site.

The list goes on. But there are a couple of house-keeping issues that would have played well with the market. A High Court judgment in December provided a resolution on time limitations for historical legal issues, which had weighed on investor sentiment. The cost of settling these outstanding issues has consequently been reduced by £20.2mn. There has also been progress on the question of pensions. This amounts to an “agreed pathway to fully funding the schemes”, so from 2028 pension commitments are expected to reduce by c£40mn. Retirement benefit obligations stood at £168.8mn on the year-end balance sheet.

As far as the bread-and-butter issues are concerned, print volumes were in line with historical precedents, but solidity on this front is set against a 12 per cent decline in print advertising revenue to £76.6mn. However, Reach is not suffering in isolation; the fall-away is certainly part of a wider industry trend.

Management said trading has been robust in the early part of the year and that the group is on track to deliver a reduction in full-year operating costs of 5-6 per cent for 2024. Despite the important resolutions outlined above, we still think the lowly forward rating of three times consensus earnings is justified. Sell.

Last IC View: Sell, 82p, 25 Jul 2023