In a trading update today (7 July) Reach announced plans to “transform” its business after the Covid-19 pandemic accelerated the structural changes that were already affecting news groups.
Sales in Q2 fell by 27.5% “impacted by reductions in circulation and advertising”. The situation improved slightly in June, with sales down 23.9% last month.
The PLC is planning an overall reduction in headcount of around 550 people, the equivalent of 12% of its workforce, through centralising functions across its national and regional teams. It will begin a 45-day consultation regarding the plans.
The changes will involve one-off costs of £20m, and will deliver annualised savings of £35m, Reach said.
Reach shares tumbled by 11.6p, or just over 13%, to 77.2p on the news. (52-week high: 185p, low: 67p.)
CEO Jim Mullen said that the restructure would “accelerate our customer value strategy”.
“Regrettably, these plans involve a reduction in our workforce and we will ensure all impacted colleagues are treated with fairness and respect throughout the forthcoming consultation process,” he stated.
“Award-winning journalism and content will always be at the core of our purpose. Through the transformation, Reach will realise the full potential of its business model, enabling our news brands to continue to shape the daily conversations of millions of people for years to come.”
The temporary pay cuts of between 10%-20% implemented in April will end for all colleagues except for the CEO, CFO and other board members, “whose pay will continue to be subject to a 20% reduction”.
All annual 2020 bonus schemes remain suspended. Reach is also going to resume its monthly contributions towards historic pension deficits.
Future dividend payments are “under review”.
The group grew its online registrations to more than 2.5m and has set a new target of 10m registrations by the end of 2020. However, reduced advertising spend meant there was not an equivalent boost to its commercial performance.
Print revenue declined by nearly 30% and digital revenue was down by 14.8%. “Circulation remains significantly below pre-Covid-19 levels with local advertising continuing to be challenging,” Reach stated.
However, Reach’s six regional print sites are not under threat. The group is the biggest contract printing company in the country with sales of nearly £162m in its most recent accounts.
A spokesperson told Printweek: “There are no changes to the print sites as part of today’s announcement. Business as usual.”
Unite the union said that the job losses were “the latest example of the economic downturn caused by the coronavirus pandemic”.
Unite national officer Louisa Bull commented: “This is just another example of a company that was financially sound before the pandemic being impacted drastically over the last three months.
“Reach has also confirmed that our members working in the print sites are not impacted by today's announcement.”
She added: “We will be working with Reach during this process and supporting our members in the commercial areas on both the national and regional titles. The newspaper sector has been in decline for some time and the tensions between print and digital have only been exacerbated at this time.”
Reach publishes the Mirror, Daily Express, Daily Star and OK! magazine alongside a number of regional titles. It had sales of £702.5m last year.