Reach plc is the UK and Ireland’s largest commercial news publisher, incorporating over 120 brands, from national titles like the Mirror, Express, Daily Record and Daily Star, to local brands like MyLondon, BelfastLive and the Manchester Evening News, as well as a number of US brands.

Through the companies vast list of brands, the company claims to reach-out to 69% of the UK population.

Shares in Reach plc fell rather abruptly back in August 2021 primarily due to a disappointing earnings update and concerns about slowing digital growth.  In addition, the company flagged rising costs, particularly related to inflation in newsprint and other operating expenses. The guidance for higher cost pressures eroded market confidence.

The company had previously seen a surge in online traffic and digital revenue during the earlier part of the pandemic but this was not sustained and a combination of slowing growth, increased costs, and dependency on the struggling print business led to a sharp decline in market confidence, which has since been reflected in the share price.

A Potential Turn-around

The company have just issued a trading update that demonstrates notable financial performance.

First Half of 2024: Operating profits increased by 23% to £44.5 million, marking the company's strongest quarterly performance in nearly two years.

Full Year 2024: The company anticipates surpassing the forecasted £97.4 million in adjusted operating profit, attributing this success to robust digital revenues and effective cost management.

As of January 2025, Reach's price-to-earnings (P/E) ratio stands at 5.58x, which is below the industry average of 15.16x. This suggests that the stock may be undervalued compared to its peers.

The company has experienced a resurgence in digital revenues, with a 6.7% growth in the second quarter of 2024, marking the first increase since late 2022.  In addition, extensive cost-cutting measures, including workforce reductions, have improved operating margins, which rose to 16.8% in the first half of 2024.

Slightly marring the trading update was a reported short-fall (funding-gap) in a legacy pension scheme inherited in the 2018 acquisition of Express Newspapers.  The company expect to pay this in 2025.  

The Company has also completed the refinancing of its banking facilities. The facility comprises a £145m Revolving Credit Facility ("RCF"), with a four-year maturity to December 2028.

The Bottom Line

Reach's recent financial results indicate a positive trajectory, with significant improvements in profitability and digital revenue growth and the company looks to be undervalued to other Industry peers considering its PE ratio of 5.58

It's worth noting also that the company have a strong dividend track record consistenly paying bi-annual dividends with a current annual dividend yield of c.9%

If the company can continue it's digital revenue growth and increased profitability then from a markedly low valuation, new investors could see a nice up-lift in the share price from current levels.  The company reports its full 2024 annual results in March.