Panmure Liberum keeps its buy rating on the newspaper group as pension payments near their end and free cash flow is set to improve sharply
Reach PLC (LSE:RCH) shares fell around 8% on Wednesday despite its broker arguing the publisher is heading toward a period of substantially higher cash generation.
Panmure Liberum maintained its buy rating and 139p target price after a first-quarter trading update that showed revenues tracking ahead of expectations.
The selloff appears to reflect investor unease about the pace of digital decline rather than the broader financial picture Panmure Liberum is painting.
Revenues tracking ahead of forecasts
Overall group revenue fell 6.9% in the first quarter, but that was better than the broker's first-half assumption of minus 7.6%. Print was the positive surprise, down 6.6% against an expected decline of 8.1%, with circulation and advertising both coming in ahead of forecasts.
Digital was softer, down 8.1% against a 6.2% assumption. Panmure Liberum expects the rate of decline to moderate through the second quarter as the impact of last year's referral volume drop annualises out.
Sequential stability is already visible: the fourth quarter of 2025 showed a similar rate of decline, suggesting the business has found a floor.
The company said it is trading in line with market EBIT expectations of £95.9 million. Cost savings are on track and newsprint hedging provides support for the profit outlook.
Pension inflexion point
The more significant argument Panmure Liberum is making is about what happens to cash generation once Reach clears its pension obligations. The latest update showed the pension scheme in surplus, meaning the end of payments is close. The broker forecasts free cash flow per share rising to 7.1p in 2027 and 13.1p in 2028, compared with negative free cash flow this year as pension payments continue to weigh.
That is a substantial improvement in a short period, and it is the core of the investment case at current prices.
Digital strategy and the World Cup
Reach is making progress on three strategic priorities: growing off-platform audiences, expanding video content, and launching premium subscriptions. Eleven subscription products have now launched, up from six just two months ago.
Looking into the second quarter, the World Cup is likely to shift some advertising spend patterns. Panmure Liberum expects the net effect to be positive for the group.
At 52.3p (down 8%), the stock trades on a price-to-earnings multiple of almost three times 2026 earnings and offers a dividend yield of 12.7%. The gap between that valuation and the broker's 139p target reflects how much of the recovery story the market is still declining to price in.