Reach profits plunge as Mirror and Daily Express publisher’s costs soar and its ad revenues are squeezed
- Reach is struggling against rising costs and weakness in advertising revenues
- It told investors it faced an additional £40m in operating costs in 2022
- The group expects similar trading conditions this year but pledged investment
British publisher Reach has posted a more than 10 per cent decline in annual profits on the back of soaring costs and a weaker advertising market.
Reach, which publishes the Mirror as well as a stable of regional titles, saw statutory profits fall to £71.3million in the 12 months to 25 December, from £79.3million a year before. On an adjusted basis, operating profit plummeted 27.4 per cent to £106.1million.
Revenues fell 2.3 per cent to £601.4million over the period, which Reach pinned on an ‘industry-wide decline in open-market advertising yields’.
Reach shares fell 7.3 per cent to 84p, bringing losses over one year to 44.7 per cent.
Mirror publisher Reach said price hikes had helped protect revenues in 2022
Like many publishers, Reach is struggling against rising costs and weakness in advertising revenues.
Reach told investors on Tuesday it had faced an additional £40million in operating costs as a result of inflation.
Its ad revenues plunged by 15.9 per cent over the year, while circulation fell 1.7 per cent.
However, it said price hikes and ‘resilient volume performance’ contributed to limiting a decline circulation revenue to 1.7 per cent for the year.
It said: ‘Circulation revenue continues to benefit from increased cover price activity during the second half of FY22, with print trends overall, similar to Q4 ’22 and in line with expectations.’
So far in 2023, total revenues are down 5.8 per cent, reflecting a rise of 1.8 per cent in circulation, and print and digital revenue declines of 3.6 and 11.9 per cent, respectively.
But the group highlighted growth of 56 per cent in data-led revenues, which are now 32 per cent of total digital revenue.
It also saw progress on engagement, with a 30 per cent rise in active registrations, page views up 4 per cent and page views per user up 7 per cent.
Jim Mullen, Reach chief executive, said: ‘Reach is continuing to deliver our customer value strategy and is becoming a fundamentally different business; more efficient, more digitally capable and more focused on building the foundation for growing sustainable and data led digital revenues.
‘Our award winning journalism and continued strategic investment is supporting a growing base of engaged and active customers.
‘The improved depth and breadth of our content and business-wide focus on data is driving an increasing proportion of higher yielding digital revenue and a decreasing reliance on open market programmatically driven advertising.’
But looking ahead, Reach said the challenging trading environment it currently faces will continue this year, ‘with sustained inflation and suppressed market demand for digital advertising’.
But, while input costs remain elevated, Reach said its cost action plan will enable it deliver a 5 to 6 per cent like-for-like reduction in its operating cost base for 2023.
It added: ‘While external factors are affecting near term performance, consistent strategic delivery is supporting the growth of higher quality digital revenues, which with our US expansion, puts us in a strong position to grow when macro headwinds subside. Profit expectations for the full year are in line with the current market consensus.’
Mullen said: ‘We expect uncertain macroeconomic conditions to persist during 2023 but, as shown during the pandemic, we are effective at managing them, with an action plan in place to help mitigate the current headwinds.’