Join our community of smart investors

Reach records £200m charge

The media group cited a challenging advertising environment and Brexit uncertainty
February 25, 2019

Reach (RCH) completed its acquisition of the ‘Express & Star’ titles last February, and the integration process is ostensibly running to schedule. Synergy cost savings of £3m were achieved over the course of 2018, and the media group is targeting annualised savings of at least £20m by 2020. It achieved additional structural cost savings of £20m last year, £5m ahead of plan.

IC TIP: Sell at 60p

Meanwhile, the Express deal underpinned double-digit revenue growth. And adjusted operating profits rose 16.8 per cent to £146m, beating market expectations which had been upgraded as recently as December.

That said, like-for-like sales dipped 7 per cent – suggesting that the overall business is still in slow decline. Moreover, the group swung to statutory pre-tax losses after a £200m non-cash impairment charge. This entailed a previously disclosed £150m provision in June 2018, and another in December 2018. Reach cited a “more challenging than expected trading environment for advertising revenue generated locally” and short-term Brexit uncertainty. Legal costs from the phone-hacking scandal have also been higher than expected, driving Reach to increase the provision for settling claims by £12.5m last year.

House broker Numis expects adjusted pre-tax profits of £145m and EPS of 39.4p in 2019 – down from earlier forecasts of £152m and 41.2p (2018: £142m and 39.2p).

REACH (RCH)    
ORD PRICE:60pMARKET VALUE:£ 180m
TOUCH:57.8-60p12-MONTH HIGH:90pLOW: 40p
DIVIDEND YIELD:10.2%PE RATIO:na
NET ASSET VALUE:186p*NET DEBT:7.3%
Year to 30 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201463682.028.13.00
201559367.233.95.15
201671376.524.95.45
201762381.923.05.80
2018724-120-41.06.14
% change+16--+6
Ex-div:09 May   
Payment:07 Jun   
*Includes intangible assets of £852m, or 285p a share