The publisher of the Daily Mirror and Express newspapers has revealed that annual profits tumbled by more than a quarter as it saw costs surge by 40 per cent and a drop in advertising demand.
Reach, which also owns the Daily Star and a raft of regional titles across the UK, posted underlying pre-tax profits down by 28 per cent to £103.3 million.
Underlying operating profits dropped 27 per cent to £106.1 million.
It said soaring inflation – largely due to rising newsprint costs as energy bills rocketed – pushed up its operating costs by around £40 million over the year and hit demand from advertisers.
Reach saw ad revenues plunge 15.9 per cent in the year to December 25, while circulation fell 1.7 per cent with falls limited by cover price increases in the second half of 2022.
Digital advertising, which has been a strong growth area for media firms, fell 2.7 per cent in the second half of the year as the economic outlook worsened.
Reach warned that trading remains “challenging” into 2023, with ongoing falls in ad demand seeing digital advertising revenue down by 11.9 per cent and print advertising off 3.6 per cent in the year so far.
Circulation is up 1.8 per cent since the end of last year.
Shares fell by 5 per cent in morning trading on Tuesday.
Reach said: “The current trading environment remains challenging and we expect this to continue in 2023, with sustained inflation and suppressed market demand for digital advertising.
“Although input costs remain elevated, we are confident that our cost action plan will enable us to deliver a 5 per cent -6 per cent like-for-like reduction in our operating cost base for full year 2022-23.”
Reach said newsprint costs were about 60 per cent higher than in 2021 – reaching a level not seen since the global financial crisis in 2008 – sent higher by sky-high energy tariffs over the year.
The group has launched a plan to slash costs by £30 million this year to offset inflation and ad pressures, revealing in January that this will see it axe 200 jobs.
It said at the time that savings were being made across group support functions, supply chains and stripping out duplicated roles across editorial, leading to redundancies and the brakes being put on hiring in some areas.
Jim Mullen, chief executive of Reach, said: “We expect uncertain macroeconomic conditions to persist during 2023 but, as shown during the pandemic, we are effective at managing them, with an action plan in place to help mitigate the current headwinds.
“We will continue to invest in areas which support digital expansion, such as the US.”
Press Association – Holly Williams