When a share price is very depressed a modicum of good news is often all that is required to get it moving again and so it proved with newspaper publisher Reach’s (RCH) first half results.
The shares rose 20% to 77.4p on news it is currently performing 'materially ahead' of market expectations for the full year.
Pre-tax profit for the six months through 28 June fell to £25.2 million, down from £58.2 million year-on-year, as revenue slumped 18% to £290.8 million.
Reach's bottom line was hit by £28.9 million of provisions for historical legal and contract issues. Adjusted pre-tax profit fell 23% to £53.5 million, with margins benefiting from cost cutting.
Reach did not declare an interim dividend, citing Covid-19 uncertainty. It did, however, recommend a proposed bonus issue to shareholders equivalent in value to an interim dividend of 2.63p, subject to shareholder approval.
'The board intends to resume cash dividends at an appropriate time, subject to market conditions,' the company said.
On current trading, Reach said it had seen a strong recovery in digital advertising, with digital revenue growth in the third quarter of 13%.
Chief executive Jim Mullen said that growth illustrated the 'significant potential of the customer value strategy as our websites, apps and newsletters attract increased page views from our scale audience, helping to drive forward digital revenues'.
Circulation sales had also stabilised, he said, and shown a gradual recovery during the second and third quarters.
Numis analyst Gareth Davies commented: ‘A strong set of interim results. Revenue as expected, profit and cash materially stronger. Revenue trends in Q3 showed a significant improvement, with digital particularly encouraging. Customer sign up momentum remains very strong.
‘Management confirm trading to be materially ahead for the year driven by improved Q3 revenue trend and prudent cost/cash management, we upgrade estimates accordingly.’
Based on Davies’ upgraded forecasts, the shares trade on a 2021 price-to-earnings ratio of 2.1 times.
