Publishing group Reach (RCH) isn't out of the woods by a long way but it has struck a note of confidence today by announcing that full year trading will be above expectations, lifting the shares by 6.7% to 60.8p.

It appears the acquisition of Express and Star is driving sales, which rose 23% in the last three months of 2018.

When the acquisition is stripped out, like-for-like sales are likely to have fallen by 5% in the fourth quarter but this is better than the 7% decline in the previous quarter.

Today’s trading update shows that the group is still struggling to generate advertising income with ad revenues expected to drop by 15% and circulation revenues forecast to fall by 4%.

DIGITAL SALES FAIL TO OFFSET DECLINES IN PRINT

As people turn increasingly to online channels for news there is a growing trend for digital advertising.

Reach is trying to tap into this trend with digital sales forecast to rise by 5% but this is not enough to offset the decline in print advertising.

There are some positive aspects as Reach expects to save £3m in costs via its latest acquisition, ahead of its previous £2m target.

Debt is also seen falling from £81m to £55m thanks to the disposal of two vacant properties in Liverpool and Cardiff.

Unfortunately these bright spots do little to change Reach’s appeal with the shares languishing near all-time lows. Even with today's rally the stock is trading on just 1.6 times forecast earnings for 2019 which suggests the market thinks the decline may be terminal.


Issue Date: 14 Dec 2018