Reach Share Discussion Threads

[gfrae] 12/7/2018 08:42

I agree with you Harry,though in the short term there may be or are worries about how RCH will pay for them.

[harry_david] 11/7/2018 10:13

gfrae,
have just seen your last post, this will be an ideal purchase for Reach at the right price. They know all there is to know about regionals and nobody else will want to take them on.

[twixy] 11/7/2018 10:04

Setting aside the crippling bond interest, JPR operate on attractive gross margins so I wouldn't be dismissive of RCH acquiring an interest in the venture; perhaps as a JV with bond holders when it falls into their hands. It's in the bond holders interest to keep it afloat and being as efficient as possible in doing so.

[cityconindex] 11/7/2018 09:56

I sincerely hope the only part of jp they buy for a nominal sum is I paper. And let the rest sink. There are successful companies in the media sector which are making money. Why chase after dog's with fleas.

[harry_david] 11/7/2018 08:30

pvee, like you I am a believer and apart from Donald Trump cannot see a reason to be negative. The new papers are performing well and advertising is reported to be doing better.

[gfrae] 11/7/2018 08:28

Harry, I only mentioned the market cap of JPR as it makes it appear that the company is on the point of collapse,or some sort of debt for equity swap. I imagine there is zero possibility of RCH taking over the company ,with it's debt and pension fund deficit as you allude.
However,managing declining newspaper businesses is RCH's business,and so far as I am aware they are the only people doing it therefore there must be a high probability that RCH will get involved in some way or another.

[pvee] 10/7/2018 21:29

Dear all

Have you noticed the Irish govt investigation into the buyout of N&S etc + the announcement of a 2% sell-off by one of the main shareholders ?

My biggest holding so a genuine question not an attempt to deramp

I suppose we have to wait until the end of the month to know for sure where we're heading

I have to admit my finger is on the buy button - a minute before the market closed it was down 4.5p and then by magic it returned to zero at the close...surely below 70p it's a buy despite the negatve "press"

Something strange going on

[harry_david] 10/7/2018 19:02

Gfrae, in my view the market cap of Johnston is irrelevant, though it does show clearly that the company has no future as an independent company.
The problem is that the existing debt and the pension deficit are higher than the worth of the underlying business, and by some margin. Bond holders will have to accept a haircut of upwards of 50% and no doubt this will take some time to sink in before they will do any deal.
Most of Johnston's regional papers are small, Reach already prints several of their titles so a deal is going to be hard to strike. As the only potential buyer my guess is that they will ultimately go to Reach but there may be a long wait.

[gfrae] 10/7/2018 12:16

Now that the market cap of Johnston press is under £3m and sinking under it's expensive debt, does anyone have any ideas what happens next ? Presumably as the self styled consolidator of the sector Reach will be involved.

[harry_david] 05/7/2018 18:39

CJohn, The bank and negotiating fees payable in the first half were £4.8 million, see my earlier note.
One explanation for the improving cash flow would be that the takeover took effect at the end of February and from memory the newsstand prices of the Express and Star were increased in late March or April. The Star in particular went up by 33% to 40p and the Express I think went up by 10p also. On combined circulations of 600,000 that adds over £300,000 a week net.

[cjohn] 05/7/2018 17:34

Hi 3800, I'd like a large margin-of-safety given the numerous imponderables and risks the company faces. Assuming no change in circumstances, i'd certainly begin buying in the low 50s. As at that price, there'd be at least 50% upside to my pessimistic intrinsic value calculation.


I wouldn't be following the share, if I didn't think it was close to being investable (for myself.)

[cjohn] 05/7/2018 17:22

But thinking about it, we've both missed the transaction costs for the acquisition, which were £7m from memory. Some of those costs will have been incurred last financial year. In any case, you can add a few million to the £23.4m free cash flow figure I came up with for the first six months.

[cjohn] 05/7/2018 17:18

Hi Harry, the unpaid consideration isn't included in the debt figure.

Net debt is loans (short-term and long-term) minus cash and cash-like securities.

[3800] 05/7/2018 15:53

Thank you for the contributers to this thread for giving such informed and considered analysis, most of which has gone over my head. May I just ask Cjohn at what price would you buy Reach? Or is it a question of you wouldn't buy at all with the existing fundimentals?
3800

[harry_david] 05/7/2018 14:51

CJohn, you may be right with your analysis but to this non accountant net debt includes unpaid consideration for the acquisition but perhaps not on the pension top up as this is not irrevocable if there is an interest rate rise.
My experience in media is that the first two calendar months are the best for cash flow as you collect the debts from November and December the top months for advertising.
The terms of the takeover were cash neutral so I assumed nil cash as per contract.
The announcement itself was positive on cash and as you know they are not given to overstating their achievements.

[cityconindex] 05/7/2018 12:26

CJohn many a punter would love to have your ability to wait. A good lesson.

[cityconindex] 05/7/2018 12:25

hxxps://simplywall.st/stocks/gb/media/lse-rch/reach-shares/news/should-you-buy-reach-plc-lonrch/

[cjohn] 05/7/2018 10:54

I should add, I reamin on the sidelines here. it's just not clear enough an opportunity for me. (But to be fair, I miss many opportunities through over-caution.)

[cjohn] 05/7/2018 10:52

Hi Harry,

good to hear from you. Always like your contributions, though often in disagreement.


There's no doubt that RCH generates a lot of operational cash flow. But after pension payments and pension admin, hacking payments, restructuring costs, free cash flow figures are much less impressive.

In your last post you said this:

"The key question is how much cash has been generated in the first six months this year.
Ignoring the Pension top ups the total cash and debt incurred on the takeover was £106.7 mil to which should be added the net debt at the 31st Dec 2017 of £9 mil making a total of £115.7 mil
I then compare this with the figure the company stated in the trading announcement of £85 mil which I claim indicates a reduction of £30.7 mil. Lastly adding on the dividend of £10.5 mil makes a total cash return for the shareholders of £41.2mil or 13.7p a share in the half year."


Sadly, your conclusión is too optimistic.

Debt was £9m at year end 2017.

In the six months since, RCH has paid the FIRST tranche of consideration for Express and Star of £47.7m and a payment of £41.2m to Northern and Shell's pension scheme. This makes a total of £88.9m. (This figure is confirmed in the previous udpate of 3rd May.)


So adding £9m + £88.9m = £97.9. So debt is down £12.9m in the six months. But RCH has paid a dividend of £10.5m. So free cash flow was around £23.4m, on the face of it. (About 60% of your figure.)



However, consulting the last balance sheet of Northern and Shell before the acquisition, it's likely that RCH acquired some net cash. £7.5m was the net cash position on Northern and Shell's last balance sheet date.

So, unfortunately, the £23.4m figure is probably too rosy for the half year.




2. We have another clue from the net debt figures at the updates of 3rd May and 29th June. The figure at both dates was net debt of £85m. However, in this period, the end of year dividend of £10.5m was paid. so we can conclude that free cash flow in this period was stronger than over the period as a whole. Free cash flow at this level of analysis will be quite lumpy and depend on timing of various payments. So, being a pessimist, I'm not going to extrapolate from this "better" 8 week period.



All the best


CJohn

[gfrae] 04/7/2018 09:38

There are no buybacks and none planned.As Twixy says there are likely to be opportunistic acquisition opportunities in the near future and best to keep the powder dry.
The share price will sort itself out over time.

[twixy] 03/7/2018 23:45

CCI - not convinced we will see further buybacks in the next 18 months: Paying down debt, pension contributions and dividends will rank higher, not to mention opportunistic acquisitions will suck up cash.

[cityconindex] 03/7/2018 23:27

13.7P I would be incredibly well recieved.
Why won't they pay a special and divi so we can spend it as we like? Rather than buybacks which don't cancel the shares.

[freddie ferret] 03/7/2018 17:21

It will be interesting to see what benefit the merger will make to costs.

[harry_david] 03/7/2018 16:43

Kazoom and CJohn, I can see you are both better informed on accounting matters than I, so I was spurred into trying to read the 2017 accounts in detail, together with the acquisition details of Northern and Star.
My reading was as follows.
In 2017 Total Cash generated for shareholders was £41.4 million comprising reduction in debts, Share buybacks and Dividends.
Hacking costs look to have been £10.7 mil and £2.2 mil was paid towards the takeover.
For this year Hacking I guess will be about the same and the takeover fees will be higher at £4.8 mil.
The key question is how much cash has been generated in the first six months this year.
Ignoring the Pension top ups the total cash and debt incurred on the takeover was £106.7 mil to which should be added the net debt at the 31st Dec 2017 of £9 mil making a total of £115.7 mil
I then compare this with the figure the company stated in the trading announcement of £85 mil which I claim indicates a reduction of £30.7 mil. Lastly adding on the dividend of £10.5 mil makes a total cash return for the shareholders of £41.2mil or 13.7p a share in the half year.