Shares in publishing firm Reach (RCH) climbed 4.7% to 161p after its latest trading statement revealed that the group’s performance in the last five months had ‘exceeded market expectations’ thanks to strong momentum in its digital business.

In the period from the end of June to the end of this month, digital sales rose 16.2%, lifted by ‘increased customer engagement’. This helped offset a 19.6% decline in print revenues, meaning group turnover in the second half to date is down 13.9%.

The firm said it ‘expects these trends of strong digital growth and resilient circulation to continue into December’, while adding that the higher contribution from digital sales together with cost cutting measures means ‘the operating margin in the second half is expected to be materially ahead of the first half’.

Reach publishes over 150 titles, including nine national newspapers led by the Mirror and the Star, and 110 regional newspapers such as the Birmingham Mail and the Manchester Evening News, with physical distribution through 48,000 retailers.

It also operates 50 websites which generate more than 42 million unique monthly views, and its Solutions business partners with brands to increase their perception and monitor take-up. It recently struck a three-year deal to ‘drive brand perception shift’ for UKTV’s seven tv channels.

Customer registration momentum was strong with more than 4.25 million people now signed up and the firm says it is confident of reaching its target of 10 million subscribers by the end of 2022.

Cash generation has been ‘healthy’ during the second half and the group ‘is forecast to retain a strong positive cash position at year-end despite incurring one-off cash costs associated with the transformation programme and other historical items.’

Analysts at Numis, for whom Reach is a key pick, have raised their earnings estimates on the back of today’s update and in particular the operating leverage driven by the increase in digital sales.

For this year the broking firm is now forecasting pre-tax profits of £122 million against £113.5 million previously and £126 million of profits for next year against a previous estimate of £117 million.

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Issue Date: 27 Nov 2020