- Revenue down 5.4% to £568.6 million
- Print circulation revenue up 2%
- Pre-tax profits down 10% to £92.7 million
Shares in Reach (RCH) were up over 15% at one point in morning trading to 68p after annual profit came in slightly ahead of market expectations.
The newspaper publisher reported a 5.4% fall in revenue to £568.6 million for the 53 weeks to 31 December 2023.
The shares were also buoyed by positive news on the resolution of pension funding and historic legal issues.
Reach said its 2019 and 2022 Pension Triennial valuations ‘had concluded’, and there was now an ‘agreed pathway to fully funding the schemes and from 2028 pension commitments are expected to reduce by £40 million.’
In relation to historic legal issues, last December the High Court put a time limit on claims for phone hacking which means ‘that a significant number of outstanding claims can [now] be resolved’ and ‘this should largely bring an end to future claims.’
Reach’s legal bill has now been reduced by £20.2 million.
Reach CEO Jim Mullen told Shares: ‘We got a favourable outcome for both pension funding and historic legal issues and that is a big relief for us after four years of hard work.’
Also, investors viewing these results as ‘not that bad’ considering the tough macro and geo-political headwinds creating a very weak advertising backdrop for Reach.
Reach owns regional UK titles including the Manchester Evening News, Birmingham Mail and Liverpool Echo as well as national newspaper titles the Mirror, Express and Star.
There was a strong print circulation performance with revenue up 2% to £312.5 million, however print advertising fell by 12% to £76.6 million.
CEO Jim Mullen remains positive and said the first two months of 2024 had been ‘robust’ with print advertising and digital performing well.
DIGITAL REVENUES MARGINALLY DOWN
It was not all good news for the newspaper publisher as data-driven digital revenues were down 4% and other digital revenues (including open market programmatically driven advertising) fell by 24% ‘due to the sector-wide decline of platform referred traffic to news brands.’
The company said the reason for the fall in fourth quarter digital revenue was due to the ‘well-publicised declining digital referral volumes alongside some volatility from a higher than usual high number of Google core updates.’
CEO Jim Mullen told Shares there will be no further job cuts in 2024.
Also, at the end of last year, the Express owner announced a restructuring which involved the loss of 450 jobs - a 10th of its entire workforce – in an attempt to reduce full year operating costs by 5% to 6% in 2024.
Reach had already announced two major rounds of job cuts in 2023.
EXPERT VIEW
Analyst Jonathan Barrett at Panmure Gordon was upbeat about Reach’s latest set of results. He said in a research note: ‘Reach is successfully mining its vast audience in the digital market. Data-driven revenue as a proportion of digital continues has climbed again (43% versus 2022 38%) while the print business is being managed effectively.
‘Reach management have proven they can grasp the nettles and deal with them whilst keeping the focus on improving the long-term fundamentals of the business. The business can support the current dividend till free cash flow (FCF) conversion jumps making the 12% yield extremely attractive.’
