Daily Mirror publisher Reach posts drop in H1 profits amid cost pressures

Reach tumbled on Tuesday after the newspaper and magazine publisher posted a drop in first-half profits and revenues amid cost pressures and warned that digital growth would remain "subdued".

In the 26 weeks to 26 June, adjusted operating profit fell 31.5% to £47.2m, reflecting an "unprecedented" increase in newsprint cost, which was up £14m or £17m on a like-for-like volume basis. Revenues dipped 1.6% to £297.4m.

The owner of The Daily Express and The Mirror said digital revenues rose 5.4% to £72.5m, but print revenue was 3.9% lower at £223.4m, with circulation and advertising revenues down 5.1% and 9.9%, respectively.

Reach said energy prices were fuelling "all-time high" newsprint costs and this is not expected to improve during the year.

The company also pointed to "more subdued" demand from advertisers, particularly in the second quarter, amid the war in Ukraine.

"Print revenue remains resilient with cover price increases supporting stronger circulation revenues," it said. "Adjusted operating profit has been impacted by increasing inflation, particularly within newsprint. Several mitigating actions have been put in place to help mitigate the full year impact of this."

Chief executive Jim Mullen said: "We have acted swiftly to address the headwinds facing the business and expect the further cost efficiencies and cover price increases to mitigate the impact of newsprint inflation and reduced advertiser demand which are affecting the whole sector.

"Our strategic shift towards greater customer engagement and data-driven revenue is driving a more sustainable and profitable future. We are a stronger, more streamlined, and more efficient organisation, with the group well placed to benefit once industry trends return to more normalised levels of activity. In addition, the strength of our balance sheet and cash generation underpin both a growing dividend and continued investment as we transition to an increasing mix of higher quality digital earnings."

At 1020 BST, the shares were down 27% at 85.45p.