I’d be very happy to plough any investment funds I have swishing around in my bank account into Reach today. The business owns the Mirror national newspaper brand as well as a long list of local titles, and following the acquisition of Northern & Shell’s publishing empire in early 2018, the Express and Star papers and the OK! celebrity gossip magazine too.
The rationale behind the takeover was for Reach to turbocharge the revenues it gets from the digital publishing arena, and oh boy does this move appear to be paying off. These propelled like-for-like revenues at group level 4.4% higher between July 1 and November 24, it said today, swinging from the 6.6% decline endured a year earlier.
Exploding Digital revenues were one reason to celebrate, like-for-like turnover up 14% year on year from 9.3% in the same 2018 period. But the rate of decline amongst its Print titles is also beginning to slow — underlying sales were down 7.3% in the 2019 period versus the 8.2% drop of a year earlier.
On The March!
And Reach is taking steps to capitalise on this increasingly-favourable environment. It said that it continues to be “encouraged by strong audience growth across our portfolio of national and regional sites” and that, as a consequence it plans “to further extend our network of digital regional brands into new territories, with at least seven new ‘Live’ launches planned for 2020 and approximately 50 journalists to be recruited.”
City analysts expect earnings at Reach to drop 3% in 2020, though given the rate at which business is improving the chances of profits blasting through current projections are high. Not only are sales ripping higher but the business is also making huge progress when it comes to pulling down costs. It’s delivered £6 million of acquisition synergies following the Northern & Shell deal, and it expects to generate savings of £15 million in 2019 and £22 million next year. This is up £2m from its prior estimate.
At current prices the publisher trades on a ridiculously-low forward P/E ratio of 2.4 times and boasts a monster 7.2% dividend yield, too. And at these prices I think it’s too good to miss.
More On That Dividend
Reach has a long record of lifting the annual shareholder payout, and it looks in great shape to do this again as brokers are predicting for the immediate term and beyond.
An anticipated 6.8p per share dividend is expected by City analysts for 2020, up from the estimated 6.5p one for this outgoing year. And investors can be confident of Reach making good on next year’s projection thanks to brilliant dividend coverage of 5.6 times — well above the widely-considered safety benchmark of 2 times and more — along with the firm’s robust balance sheet.
Cash from operations soared by almost £10 million in the first half of 2019, to £70.4 million, and it has remained strong since. In that trading update mentioned at the top of the piece Reach advised that “cash generation continued strongly during the period [to November 24]” and that consequently it now expects “to show a net positive cash balance at the year end.”