Shares in publishing group Reach PLC (LON:RCH) fell in mid-morning trading Monday as the company swung to a loss in its half-year results.
The firm, formerly known as Trinity Mirror and owner of the Daily Mirror, Daily Star, and Daily Express newspapers, reported a pre-tax loss for the period of £113.5mln from a £38.2mln profit in the same period a year ago, despite a revenue increase to £353.8mln from £320mln.
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The swing to loss was attributed to a £150mln non-cash impairment charge incurred by the company against the carrying value of the goodwill and publishing rights in respect to its regional businesses, which it said reflected a more challenging trading environment for local advertising than was previously expected.
In terms of underlying profits, the firm saw pre-tax profit rise to £64.7mln from £61.3mln. Reach also raised its interim dividend to 2.37p from 2.25p previously.
Looking ahead, the group said revenue for July was expected to fall 7% on a like-for-like basis, however it maintained its full-year guidance to be in line with market expectations as it expected a significant increase in newsprint prices in the second half to be offset by cost savings from its acquisition of the Star and Express earlier this year.
Reach had said previously in a trading update at the end of June that it expected revenue for the 2018 financial year to grow by 11% year-on-year as a result of the acquisition of the Daily Express and Daily Star from Northern & Shell in February, however on a like-for-like basis, revenue was expected to decline 8%, with publishing falling 8% and print by 10%.
Reach’s chief executive Simon Fox said that the company had delivered a “positive financial performance in what remains a difficult trading environment for the industry, in particular the regional businesses”.
Brokers divided on outlook
The expected inflation in newsprint prices led City broker Numis to trim its target price for the group to 205p from 201p, although the broker reiterated its ‘buy’ rating on the stock, highlighting the outlook that showed that “management and the Board have confidence in the group strategy and expects trading to be in line with expectations”.
However, analysts at fellow broker Peel Hunt were less optimistic, saying that the firm would have to accelerate the growth rate of its digital content in order to “take full advantage of the Express & Star deal”, adding that the stock was “very lowly rated” due to “really tough market conditions”.
Reach shares were down 2.7% at 70.8p.