Reach posts £113.5m loss as regional titles take a hit

Reach has posted a £113.5m half-year statutory pre-tax loss in the first six months of 2018 after taking a £150m charge on a “more challenging than expected outlook” for its regional businesses.

In its interim results for the 26-week period to 1 July, the publishing group, which has recently rebranded from Trinity Mirror, recorded the loss against a statutory pre-tax profit of £38.2m in the same period last year. Adjusted pre-tax profit in the first half of 2018 rose by 5.6% to £64.7m.

The group reported revenue of £353.8m, up by 10.6% on the £320m achieved in the first half of 2017 and reflecting its near-£200m acquisition of Northern & Shell’s publishing assets in February, which have contributed revenue of £65m since the completion of the deal.

On a like-for-like basis excluding the Northern & Shell contribution, however, sales fell by 7.2%, which the group partly attributed to the £4.5m impact of handing back two regional Metro titles to Daily Mail owner DMGT.

Revenue for publishing, which incorporates print (circulation and advertising) and digital, increased by 11.5% to £330.4m but the adjusted operating margin was down from 22.5% to 21.3%. Printing revenue increased by 3.6% to £17.5m, which includes revenue of £1.2m from the Luton print plant acquired as part of the Northern & Shell deal.

On a like-for-like basis revenue for publishing fell by 0.6%, which Reach said reflected the impact of lower third-party volumes and newsprint supply mostly offset by new contracts including the Guardian.

In a webcast held this morning, Reach chief executive Simon Fox said: “Nationally sold print advertising had a strong six months, with low single-figure percentage declines, however regional advertising was disappointing and below our expectations. This slower performance in local advertising is reflected in the significant non-cash impairment charge.”

The group said improved performance from national print advertising coupled with further cost mitigation will support profits over the year despite a further increase in newsprint prices for the second half.

Fox added: “Growth in digital audience and revenue remains vital to our strategy and although we saw audience growth, we, like most other news brands, were adversely affected by algorithm changes from Facebook and, to a lesser extent, Google. Despite this, we grew digital yields with digital revenue growing faster than audience.

“We remain confident in our clear strategy and anticipate trading for the year to be in line with expectations.”

Sales of Reach's national newspapers all fell in the period, with circulation for the Daily Mirror down by 13.9%, the Daily Star down by 12.1% and the Daily Express down by 9.3%. This compared to a 9.3% overall fall for the UK national daily tabloid market.

Furthermore, circulation for the Sunday Mirror was down by 14.8%, Sunday People fell by 16.4%, the Sunday Express fell by 8.3% and the Sunday Star fell by 9.2%. This compared to a 10.4% overall fall for the UK national Sunday tabloid market.

Volume declines for the group’s regional titles were 14% for paid-for dailies, 15.5% for paid-for weeklies and 14.4% for paid-for Sundays.

The market for paid-for magazines was also challenging in the period, the group said, with volume declines seen in all three of its titles – OK!, New! and Star.

Reach is on track to deliver the savings of £20m it expected from integrating Northern & Shell’s publishing assets. The business said it delivered structural cost savings of £9m in the period and expects to deliver £18m for the full year, £3m ahead of its target of £15m.

Following regulatory clearance last month by the Department for Digital, Culture, Media & Sport, the group has commenced delivery of the synergy savings from the acquisition of the Northern & Shell assets and anticipates £2m of savings in 2018 with further savings being achieved in 2019.

The group’s pension deficit fell by £80.6m to £297m while the provision for dealing with historical legal issues was increased by £7.5m.

The board has declared an interim dividend of 2.37p per share, which represents an increase of 5.3% from the 2017 interim dividend of 2.25p per share.

Reach’s share price fell by 2.5% to 71p in early trading and stood at 70.52p at the time of writing.


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