National World – getting ready for the next share price move upwards

In mid-May last year, I alighted upon this budding media group.

Within four months its shares had doubled in price.

They subsequently peaked 130% higher than my profile price and easily breaking through my objective.

It was at an early point in the group’s development, just a few months after it had made a massive acquisition which totally changed its corporate path.

From a ‘tiddler’ status in January last year that purchase helped to turn it into the third largest UK operator in its chosen sector.

Shortly we should be seeing the first major year’s results and, hopefully, signposting its future growth from its well-expanded base.

The business

David Montgomery is ‘a man of the print’. He was formerly with the Daily Mirror, The Sun, the News of the World and Today. He knows his sector very well and made a couple of fortunes for himself and fellow investors along the way.

He also knew how to handle mergers and acquisitions within that trade, gaining further knowledge with his Mecom Group and then with Local World, the latter which was sold to the Reach Group.

He set up National World (LON:NWOR) and floated the new company in September 2019.

His aim was to acquire both historic and more recent news brands, then using latest technology to reduce costs while boosting online strategies.

He then looks to jettison legacy systems and archaic industrial practices to create efficient dissemination of news, monetising it by matching content to audience.

His new publishing business model enables his management ‘to localise, energise, digitise and monetise relevant and unique content’.

First stepping stone

Within three months of coming to the market the company confirmed that it had been contemplating several acquisitions. It also stated that it had approached JPI, the remnants of the former Johnson Press International provincial newspaper empire.

That was early December 2019. At the very end of 2020 the company announced the £10.2m acquisition of JPI Media Publishing and associated subsidiaries, making up the JPI Group, from JPI Media Ltd.

In one big blow Montgomery kicked off the first part of his corporate strategy for National World.

That cash and loan notes deal included a range of 13 regional and city daily newspapers, together with over 100 other franchises in print and online.

Third biggest local publishing group

The JPI Group is the third largest local news publisher in the UK and its iconic titles and websites include: The Scotsman, The Derry Journal, The Yorkshire Post, Belfast’s The Newsletter (the oldest English language newspaper in the world), The Sheffield Star, Edinburgh Evening News, The Portsmouth News and The Lancashire Evening Post.

What was effectively a ’reverse takeover‘, looks to have been a real coup for Montgomery and his team, who are also all well experienced within the print trade.

Equity

There are some 259.4m shares in issue. Larger holders include Aberforth Partners (20.5%), David Montgomery, Chmn (7.02%), Gresham House Asset Management (4.73%), Downing (3.30%), Miton Asset Management (2.01%), Canaccord Genuity Wealth (1.83%), Vijay Vaghela, COO (1.29%), Paul Curtis (1.04%) and David Poutney (0.96%).

Latest Trading Update

In the middle of last December, the enlarged group declared its Pre close Trading Update for the year ending 1 January 2022.

Since the acquisition of JPI Media and its subsidiaries on 2 January 2021, the modernisation of the business proceeded at pace and the new owners have established a media presence across the whole of the UK with numerous online launches. At the same time, very much as planned, they have delivered efficiencies and there has been an improvement in advertising revenue.

The group guided that revenue for last year was around £85m.

It also stated that it was implementing a new phase of restructure to create a sustainable premium content and sales business, as well as maintaining performance in the near term.

Brokers View

Analysts Paul Richards and Brendan D’Souza, at brokers Dowgate Capital, estimate that on last year’s sales it could well have made £7.6m adjusted pre-tax profits, worth 3.0p per share in earnings.

For the current year they go for a repeat £85m of revenues but with £8.1m of profits, generating slightly lower earnings of 2.4p per share.

The next year, 2023, should see some £86.2m of sales and £8.9m profits, giving 2.6p in earnings per share.
Upon the recent Update they increased their price objective from 50p to 55p per share.

My View

I do believe that Montgomery and his team have the talent and the ability to create a real force within the UK local and regional news publishing sector.

Although we have no dates yet for the full final results being published, I imagine that they are not that far away.
At that time I would expect the £70m group to step up its investor publicity quite significantly. They have a very good story to tell and that should reflect in a much higher share price.

Last year the group’s shares touched 42.28p, that was in early September. They subsequently fell away to just 24p at the start of this month.

It is well worth noting that the shares also boast some 8p worth of net cash in the balance sheet.

On Friday night they closed at 27p, I see them attempting to break above the previous High within the next year.

(Profile 17.05.21 @ 18.5p set a Target Price of 25p*)