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Reach shares rally as cost savings to deliver expected annual profit

25th Jul 2023 10:15

(Alliance News) - Reach PLC on Tuesday said it expects 2023 profit to be in line with market consensus, despite a decline in revenue in the first half of the year, as it said cost savings will be felt in the second half.

However, the London-based newspaper publisher warned that digital revenue growth has been "materially affected" by lower referral traffic, after Facebook deprioritised news content.

Reach shares were up 16% to 79.80 pence on Tuesday morning in London, though the stock remains down 32% over the past 12 months.

Pretax profit in the 26 weeks that ended June 25 was GBP6.7 million, down more than two thirds from GBP32.0 million a year before, as revenue slipped 6.1% to GBP279.4 million from GBP297.4 million.

Within group revenue, Digital revenue was down 16% from a year before, while Print revenue was down just 2.7%. Within Print revenue, circulation revenue was up 2.4%, but advertising revenue was down 18%.

On an adjusted basis, pretax profit was down 24% to GBP34.8 million from GBP45.9 million.

Reach declared a 2.88 pence interim dividend, unchanged from a year before.

"While we continue to deliver our 'customer value strategy' our first half digital performance reflects a significant reduction in page views from Facebook which is impacting the whole sector, and the impact of ongoing macroeconomic uncertainty," Reach explained.

Social media site Facebook is part of Meta Platforms Inc.

Reach said it has moved to diversify revenue to areas less dependent on advertising and direct customer volumes, including revenue from e-commerce and data partnerships.

"Print revenue has been robust, with growth in circulation revenues driven by cover price increases," the company noted. "The cost reduction plans we put in place at the start of the year have helped to mitigate the ongoing impact of inflation, with overall operating costs lower by around 3%, partly offsetting the impact of lower revenue on operating profit."

Reach said plans to reduce full-year operating costs by 5% to 6% are on track to delivery second-half weighted savings.

As a result, Reach said, profit expectations for 2023 remain in line with market consensus for adjusted operating profit of GBP94.9 million. This would be down 11% from adjusted operating profit of GBP106.1 million in 2022. Adjusted operating profit in the first half of the year was GBP36.1 million, down 24% from GBP47.2 million in 2022.

The publisher of the Mirror, Express and Daily Star added that it expects a judgement on time limitation relating to phone hacking lawsuits in the autumn.

By Tom Waite, Alliance News editor

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