Reading manager Veljko Paunovic was 'proud' of his young side's display on Saturday afternoon despite the Royals crashing out of the FA Cup at the hands of Luton Town.

George Moncur sealed a place in the fourth round for the Hatters with a goal in the first half.

Both Sone Aluko and substitute Nahum Melvin-Lambert hit the woodwork in the second half, as a youthful Reading side failed to find a way past the impressive Simon Sluga in the Luton goal.

Speaking after the game, Paunovic said: "I am proud because of our fantastic performance, especially in the second half, from the whole group.

"The youngsters who, whether they started or played for the first time, showed an amazing performance and spirit. In this test, they showed they are on the same page as the rest of the group."

The Serbian boss did say, however, that he was left frustrated that his players could not convert several chances in the second half.

"I am also a little bit frustrated, though. We did play very good football and deserved to score a goal. It would have helped build the confidence in that young group that we had at the end of the game especially.

"So, I am disappointed with that.

"But, the most important thing is we saw we had very good potential in our academy, our young players and the players that came in from the bench.

"We showed what our team is and you could see our identity and culture. If you have to lose, it's better to lose this way.

"This is how you claim your next opportunity, this is something we gave them today and they performed very well."

Paunovic also gave an update into how he believes the club will perform in the transfer window this month, alongside the status of negotiations with Omar Richards.

"It's good we're recovering players. The investment we did in coaching, teaching and motivating the group - and how they're responding to that - is the best asset we have.

"Every day we are getting busier, we're getting more calls, and we're getting involved in conversations. 

"If something happens, we'll let you know. We have been proactive in this window but it is not easy to close the deals.

"I did have a conversation with Omar and gave him my complete support that we'd like to have him here.

"We have to get a better understanding of what we are doing to the media where we have situations to deal where we are not in full capacity of being able to make full offers to players we want to renew. 

"It is not easy to close that down. We will see what happens in the coming months.

"He [Richards] has told me he is on the same page as the team and wants to deliver his best.

"He is having a great year and we want to keep him healthy, keep him on the field, and help him continue playing his best football so far.

When asked about whether financial restrictions from the EFL have played a part in the club's ability to renew contracts, Paunovic said "I want to talk about it, when I'm ready.

"I want to give you that answer because I think that is important to communicate with the media better to understand what is going on so we can have progress and solve the situation.

"At this point, I am not giving up on any of our players who may be approached in this window or the next one.

"They can be approached by other clubs and that's probably happening right now, but this is football.

"We know this business and while we are enjoying each other on and off the field and working together over the past five months has been excellent and exciting."