Newspaper publisher Reach (RCH) faces a very frustrating situation. It is seeing unprecedented demand for its online content at a time when its ability to monetise said content is nixed by a collapse in advertising spend.
However, today’s update for the first four months of the year was taken positively by investors who marked the shares 12.8% higher to 80p.
Before the coronavirus crisis emerged, trading followed the same trend as seen for some time with print revenue falling and digital revenue growing. However, April saw both dive significantly. Print circulation has fallen away and regional advertising is enduring a particularly heavy impact.
At least the company is seeing some stabilisation in parts of the ad market. Additionally the company has net cash of £33.2m, has kept tight control on costs and the progress made on the online side could yield positive results in the longer term.
While the company had 42m online users in March, April saw total page views of 1.7bn (up 57%), average daily app users were up 47% to 674,000 and the hyper-local news platform InYourArea surpassed 650,000 registered users.
Numis analyst Gareth Davies surprisingly keeps his profit forecast for 2020 unchanged. He says: ‘Trading will undoubtedly remain tough near term. Reach's scale, ability to cut cost, consistent cash generation and strong balance sheet position it well to come out the other side of the current pandemic in a strong position.
‘We see scope for the group, once a new norm returns, to use its strong balance sheet to further consolidate the sector.’
