We’re in the middle of earnings season, which means we can see sharp share price moves depending on how good or bad results are. For one UK share, half-year results didn’t come out as expected earlier this week, pushing the stock lower. But does that represent an opportunity to snap up a good deal?
Weaker sentiment
I’m talking about Reach (LSE:RCH). The fall over the past week now means it’s down 42% in the past year. The biggest reason for the short-term sell-off was the H1 results that disappointed investors. Revenue for the period was down 9% to £232.9m and adjusted operating profit down 4.1% to £43m. As a result, the company cut its interim dividend in half to 1.44p per share and suffered a statutory pre-tax loss due to print site closures and restructuring.
The management team is already taking action with disciplined cost activity, as the report noted: “The 2025 restructure along with the rationalisation of our print sites resulted in a 10.3% reduction in adjusted operating costs, ahead of our 5-6% target”.
Interestingly, management pointed to a dramatic shift in how readers discover news online. Google referral traffic plunged by 55% as AI-generated search summaries and changes to search algorithms reduced visits to Reach’s websites. On-platform page views fell by roughly 40%, with the share price dropping as investors digested the results.
Direction of travel from here
From my perspective, the big question is whether the results represent a temporary setback or a permanent structural change. If the structural decline in print continues, I do think the AI-driven search changes represent the biggest threat the company has faced in years. Although Reach is pursuing AI licensing deals, expanding video content and growing off-platform audiences on social media, there’s no guarantee these initiatives will replace lost advertising revenue quickly enough.
However, there are a few reasons why now could be a good time to snap up the stock. The underlying business appears more resilient than the headline numbers suggest. The cost reductions from H1 almost entirely offset the revenue decline, actually lifting the adjusted operating margin to 18.5%. Adjusted earnings per share even increased slightly to 11.1p despite falling sales, highlighting management’s ability to protect profits through efficiency measures.
The other point that struck me is regarding cash flow. Cash conversion exceeded 100%, so I don’t see any immediate concerns about the financial stability of the firm.
The price-to-earnings ratio is 1.67. This is incredibly low, but needs to be treated carefully. Sure, it could indicate a bargain. But it could also show that investors simply don’t want to own the stock.
On balance, if finances stabilise in the coming few months, today’s share price could already reflect an overly pessimistic scenario. But although it could therefore be termed a bargain, it’s a high-risk bargain given the worries around AI search changes. I’m staying away, but those with a higher risk appetite might want to consider it.
Should you invest £5,000 in Reach Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Reach Plc made the list?
Jon Smith does not hold any positions in the companies mentioned.
