In a Q4 trading update this morning (11 January), Reach said that it expected operating profit for the full year to fall below market expectations “by mid-single digits”.
Analysts had been expecting the group to post sales of £602.5m and an operating profit of £112.8m.
Reach’s shares tanked in early trading, falling by 30%. The price was down 28% at 78.67p at the time of writing. The 52-week high is 282p, low 64.40p.
Despite Reach’s focus on growth in its digital offering, digital revenue fell by 5.9% in the three months to 25 December, while print sales were down 3.6%.
Print circulation revenue was up 1.8% on the back of cover price increases, while print advertising was down 20.2%.
Reach said the underperformance was “largely due to a significantly lower than anticipated benefit from traditionally stronger programmatic yields and campaign spend around Black Friday and Christmas”, which it said had affected the whole sector.
“More broadly, we have also seen the continued impact of macroeconomic and consumer uncertainty, reflected in slowing market demand for advertising.”
The group is now targeting further savings of “at least £30m”.
“These will be generated throughout the business and include simplification of central support functions, supply chain efficiencies in print and distribution, and accelerated removal of editorial duplication.”
Some 200 jobs are likely to go across the group.
A month ago Reach announced plans to close its Teesside printing operation with the loss of 35 jobs, which will reduce its print footprint to three sites.
Regarding the plans for supply chain efficiencies in print and distribution, a spokesperson told Printweek that specific details were not currently available, but the group would be “looking at procurement processes and sourcing across every area of the business to ensure we're getting the best value for money”.
Reach is also under fire from independent retailers after it slashed the retail percentage margin to an “all time low” of 18.5%, effective 2 January.
The Federation of Independent Retailers is holding a newspaper summit today, where the issue will be discussed.
Daily Mail publisher DMG Media has also cut its retail margin, although it is still higher than Reach’s at 20.5%.
The Fed’s national president Jason Birks said that the action by Reach and DMG Media “flies in the face of the trading relationships that should exist between publisher and retailer”.
“Times are incredibly tough for independent retailers, amid the cost-of-living crisis, supply issues and soaring energy bills yet both Reach and DMG Media are showing their miserly colours by taking money from the Tiny Tims of the industry who need pro rata terms to simply stand still.
“After giving these titles many years of support, this is a massive kick in the teeth for independent retailers. Our members want to actively promote print to their readers but must be properly rewarded for doing so.”
He said that the reduced margins “will simply speed up the decline of the industry, as news retailers downgrade newspaper displays in their stores and look to other categories that demand less work but where there are greater rewards.”
In November, National World shelved its putative ambitions around a potential takeover bid for Reach.
