Investors have piled into publishing giant Reach (LSE: RCH) on Friday following a lively trading update. The UK small-cap share was last trading 19% higher on the day and touching levels not seen since February 2014, at 210p.
Reach — which publishes national newspapers such as The Express and The Mirror along with a gaggle of local newspapers — said that it “expects underlying operating profit for 2020 to be ahead of market expectations.” This should come in at between £130m and £135m, the publisher reckons, beating City consensus by around £10m.
The UK publishing share endured another difficult year for its print operations in 2020. Revenues here slumped 11.7% in the fourth quarter, though this was better than the 12.6% drop it booked in the prior three-month period.
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However, today’s release highlighted the stunning progress Reach is making on the digital side. Turnover here soared 24.9% between October and December, a vast improvement from the 13.4% increase in the previous three months. The business reached the critical milestone of 5m online customer registrations in December too.
A combination of soaring digital sales and an improvement on the print side helped Reach’s total revenue decline of 14.8% in the third quarter improve to a 10.2% drop in quarter four. This gives it strong momentum moving into 2021.
City analysts reckon Reach’s annual earnings will rise 7% next year, giving it a forward price-to-earnings (P/E) ratio of 6 times. This UK share carries a 3.5% dividend yield for 2021 too.
Another soaring UK share
The Pets at Home (LSE: PETS) share price hasn’t ripped as high as Reach today. But a 7% gain takes the petcare retailer to its most expensive ever, at around 450p.
This UK share has made a habit of raising profits expectations in recent times. And it was at it again today. Pets at Home advised that “strong sales momentum” during the second quarter had accelerated through the October to December quarter. Indeed, Pets at Home said like-for-like revenues had grown by the “high-teens” last month.
As a consequence, the pet food, animal accessories and veterinary care provider has improved its estimates for the full fiscal year to March. Provided there are no changes to its designation as an ‘essential’ retailer, and assuming there are no changes to the range of services its vets are permitted to carry out during the pandemic, that underlying full-year profit would be “at least” £77m. This includes the repayment of Covid-19 business rates relief of £28.9m that it previously announced.
This follows Pets at Home’s September guidance that full-year profit would surpass broker expectations of £73m.
City analysts expect the UK share to punch a 2% earnings dip in financial 2021. This leaves it trading on a forward P/E ratio of 30 times. It boasts a 1.8% dividend yield too.
