Reach PLC (LON:RCH), the national and regional newspapers publisher, shares rose after it said sales hadn't fallen as much as feared, with digital sales and profit margins both higher in the past five months to partly offset lower print circulation.
The company, where publications include the Daily Mirror, Daily Express, Manchester Evening News and OK! magazine, said its overall performance had exceeded market expectations for the year to end-November.
Group revenue declined 13.9% in the five months to November 22, 2020, as a 16.2%rise in digital revenue as customer registrations hit 4.25m was wiped out by a 19.6% fall in print revenue.
Management felt that the print performance was “resilient” in the face of the recent coronavirus lockdowns and the trend, along with strong digital growth, is expected to continue into December.
Costs have been “significantly” reduced by management’s ‘strategic transformation plan, where they have “done away with the distinction between regional and national products with Reach operating as one editorial operation”, and with further plans to consolidate its printing operations, the operating profit margin in the second half is expected to be “materially ahead” of the first.
“The headwinds from COVID-19 have been considerable, but while we remain mindful of potential impacts from the current lockdowns, we approach the end of the year with a strong and growing digital business, resilient print circulation sales, and a new, efficient operating model,” said chief executive Jim Mullen.
The shares rose 3% to 159.85p by mid-morning on Friday.
Broker Peel Hunt raised its forecasts but downgraded to 'hold' from 'buy'.
"Trading was described as exceeding expectations, but on first view is broadly consistent with our top-end range number," analysts said.
However, they said there was "room for a PBT upgrade" as margins appear to be materially ahead of expectations, which would see PBT forecasts rise to £122-124m from £115.4m, though for earnings per share would need to reflect the additional shares in lieu of a dividend last month.
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