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Reach exits JPI Media talks

The newspaper and magazine publisher offered a positive trading update
December 2, 2019

Newspaper publisher Reach (RCH) is no longer in talks to buy certain assets from JPI Media – the entity formerly known as Johnston Press, whose titles include ‘The Scotsman’ and ‘The Yorkshire Post’. Reach had been focusing primarily on JPI's regional assets. It said that while “active discussions” – first announced in July – have ended, it will continue to review “on a regular and disciplined basis” those M&A opportunities that would accelerate its strategy. In the same breath, the group said that its trading has been “steady”, and remains in line with its expectations. The shares climbed by more than a tenth in response.

IC TIP: Hold at 92p

For the five months to 24 November, revenues fell by 4.4 per cent – better than the 6.6 per cent like-for-like contraction seen in the same period in 2018. Like-for-like print revenues were down 7.3 per cent, while digital rose by 14 per cent – constituting improvements from a fall of 8.2 per cent and a rise of 9.3 per cent respectively. To the latter point, Reach said that good audience growth has encouraged it to extend its network of digital regional brands into new places – with seven ‘Live’ site launches planned for next year.

Analysts had previously given estimates for year-end net debt, but Reach - citing strong cash generation - now anticipates a net positive cash balance as at 29 December. No bad thing, given the group’s large pension deficit and progressive dividend policy. Overall, management is confident about meeting full-year performance expectations.

On JPI, Reach’s chief financial officer Simon Fuller noted that “principally, when we look at acquisition opportunities, we look at the value for shareholders; and we had a price that we considered to be the right price for that set of assets, and we were not uncomfortable walking away if that’s wasn’t the price that was on the table.” 

The same morning that this news was released, the Daily Mail and General Trust (DMGT) revealed that it has acquired the ‘i’ – a UK national newspaper and website – from JPI Media for £49.6m. DMGT – whose shares were largely unmoved following its own announcement – noted that in 2018, the ‘i’ generated £11m in cash operating income and operating profits from £34m of revenue.

DMGT said that it was anticipated that the deal would be reviewed by the Competition and Markets Authority. Lord Rothermere – DMGT’s chairman – noted that his group was “committed to preserving” the ‘i’s’ “distinctive, high quality and politically independent editorial style”.