Reviewing Reach Plc with respect to acquisition of JPI Media

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Reach Plc

Reach Plc is a United Kingdom domiciled media and publishing company. It is one of the largest media companies in the United Kingdom which owns big names like The Sunday People, Daily Express, Daily Mirror, Sunday Mirror, Sunday Express, Daily Star, Daily Star Sunday and Daily Record and Sunday Mail among others in the newspaper world. The company in total owns about 240 newspaper titles with its subsidiary owning another 83 titles.

The company was founded in 11 November 1904 in the name of Echo Plc which at that time ran the title The Liverpool post. The company over the years went through a number of sale, purchase and reorganization events. Today the business of the company is organized into three main divisions; publishing- which is responsible for the publication and promotion of all the titles the company owns, printing- which is responsible for the printing of all its publications, owning twenty four presses across the United Kingdom and also outsourcing printing needs to outside agencies should a need arise and Specialist digital- which is responsible all the digital media platforms of the company as well as providing digital support to all the internal departments of the company.

The company claims that in the year 2018 it had sold 620 million newspapers and had an online audience which clocked more than one billion views per month. The company owns about seventy websites providing news coverage on politics, sports and entertainment on a 24/7 basis. The secret of its success as claimed by the company is the more than one hundred years of association with the British public and the ensuing trust that the company enjoys.

The shares of the company were first admitted to the London Stock Exchange for trading on the 02 December 1953. There the shares trade with the ticker name RCH.

News Update

The company recently has been in news regarding merger, acquisition and consolidation activity taking place in the publication industry in the United Kingdom.

• One of Reach Plc’s prime rival company JPI Media had put itself for sale some time back, leading to a fierce competition between Reach Plc and another of its prime competitors Newsquest to acquire the company.
• The sale, should it materialize, would give the acquirer ownership to hundreds of publications of JPI Media and put in in an enviable position against its closest rivals to dominate and dictate terms in the publishing marketplace.
• As per unconfirmed media reports the company had made an offer of around £50 million for the company but was matched by a higher offer by Newsquest leading to Reach Plc’s opting out of the race to buy JPI media.
• The company, sensing the increased competition that it might face in the marketplace, has announced the launch of seven new titles while increasing its headcount of journalists by 46.
• The company had come out with its half yearly financial report for the period ended 30 June 2019 on 29 July 2019.
• The revenues of the company for the six-month period decreased by 0.3 per cent to stand at £352.6 million which benefited on account of the acquisition of Express & Star.
• The revenue of the company on a like for like basis fell by 6.3 per cent, which is an improvement on the like for like fall of 7.2 per cent in the first half of 2018, aided by a strong circulation revenue.
• The synergies from the recent acquisitions of the company amounting to £6 million have been delivered and is as per the envisaged timeline to deliver annualized savings amounting to minimum of £15 million in 2019 and amounting to minimum of £22 million by 2020, far ahead of £20 million that had been targeted.
• The company was able to deliver on structural cost savings of £5 million during the six-month period which is in consonance of its envisaged objective to deliver £10 million structural cost savings for the full year of 2019.
• The adjusted operating profit of the company for the six-month period increased by 7.2 per cent to stand at £71.3 million, while the adjusted operating margin of the company for the period increasing from 18.8 per cent to 20.2 per cent, driven by strict adherence to the company’s cost optimization techniques.
• The statutory operating profit of the company for the six-month period stood at £63.7 million which is reflective of the reduction of the adjusting operating items in comparison with that for the first half of 2018.
• The company for the six-month period has been a strong cash generator, generating cash from operations of £70.4 million, which is an increase of 16.0 per cent on a year on year basis; the company has been able to achieve this feat on account of low leverage in its books with net debt falling by £27.9 million during the period to stand at £12.9 million as on 30 June 2019.

Performance at the London Stock Exchange

Price Chart as on 22 November 2019, before the market close (Source: Thomson Reuters)

On 22 November 2019, before the market close, RCH shares were trading on the London Stock Exchange at GBX 94.00. Over a period of one year, the company’s shares clocked 52-week High of GBX 104.60 and a 52-week low of GBX 54.00. The total market capitalization (M-Cap) of the group stood at around £269.34 million.

Outlook

The acquisition of JPI Media by Newsquest will bring about consolidation in the publishing media industry in the United Kingdom. Reach Plc will become the second closest rival to this newly created media behemoth and would have to face tough competition on account of the merging synergies of the other two entities. The company’s announcement of the launch of seven new titles and having new recruits in the company is just the first step in a series of many measures that the company has to take in order to rise up to the challenge being posed. Other than that, the company will also have to actively look for inorganic opportunities.