- Big drop in fourth quarter ad revenues
- Print advertising income down more than 20%
- Company targeting cost savings of £30 million
Newspaper publisher Reach (RCH) had a painful start to 2023 as a fourth quarter trading update revealed a big slowdown in advertising revenue.
The gains the company made in 2021, when the shares traded above 400p, are now a long-distant memory with the stock down 26.5% to 80.4p this morning.
While circulation revenue for the three-month period was up 1.8%, driven by cover price increases on its titles which include the Daily Mirror and Daily Star as well as several local newspapers, this was more than offset by significantly lower than expected digital and print advertising income - revenue from these sources declining by 5.9% and 20.2% respectively.
WHAT’S BEHIND THE SLOWDOWN?
The question is whether this merely reflected wider economic trends - you would expect ad spend to drop in a recession - or whether the scale of the drop in revenue reflected company-specific issues.
Reach’s response is to cut its cloth accordingly, the company said it will target further cost savings of £30 million through ‘the simplification of central support functions, supply chain efficiencies in print and distribution, and accelerated removal of editorial duplication’.
The risk is that by stripping costs out the company undermines the quality of its key brands. If a publisher is not producing quality content, then it will struggle to hang on to readers and ultimately advertisers whether this content is being accessed online or through a physical product.
Reach CEO Jim Mullen said: ‘We expect current market headwinds will continue during 2023 and have therefore taken decisive action, putting in place a further cost reduction plan. This will ensure we retain our strong foundations and are able to continue investing in our digital growth priorities, which position us to benefit strongly when the economic environment improves.’
New finance chief Darren Fisher starts on 1 February and the company is set to announce its full year results on 7 March.
