Trinity Mirror’s recent purchase of the media assets from Northern & Shell – which was finalised in March when the group changed its name to Reach (RCH) – has had the desired impact on reported numbers. Strip out lofty one-off charges and adjusted operating profits rose 6.2 per cent to £67m in the six months to 1 July.
But that is where the good news ends. Without the £65m of revenue contributed from the Express and Star titles, group revenues dropped another 7.2 per cent as advertising and circulation sales were hammered in the print business. Management continues to praise the performance of its digital division (where revenues were up 6 per cent), but this has little bearing on the overall performance. In fact, the recent acquisition has constrained the contribution of the online business to 14 per cent of overall sales, compared with 15 per cent in 2017.
Even worse was the performance of Reach’s regional titles, where “a more challenging outlook” forced management to take a £150m impairment and sent the group into a net loss position. The challenges of regional publishing are not likely to let up, nor the gradual increase in printing costs which whacked operating margins back to 19 per cent. Broker Numis has cut its 2019 forecasts as a result but, optimistically, retains adjusted pre-tax profit and EPS estimates of £134m and 36.7p in 2018 (from £123m and 36.1p last year).
| REACH (RCH) | ||||
| ORD PRICE: | 70p | MARKET VALUE: | £217m | |
| TOUCH: | 70-71p | 12-MONTH HIGH: | 107p | LOW: 65p |
| DIVIDEND YIELD: | 8.5% | PE RATIO: | na | |
| NET ASSET VALUE: | * | NET DEBT: | £81m | |
| Half-year to 1 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 320 | 38.2 | 10.6 | 2.25 |
| 2018 | 354 | -114 | -39.4 | 2.37 |
| % change | +11 | - | - | +5 |
| Ex-div: | 6 Sep | |||
| Payment: | 28 Sep | |||
| *Negative shareholders' funds | ||||
