UK news publisher Reach lost almost a quarter of its value on Wednesday as it warned on profits after an unexpected fall in advertising over the holiday period.
In a trading update the publisher of the Daily Mirror and Daily Express said digital and print advertising declined in the fourth quarter of last year, which included Black Friday and Christmas.
Reach expected operating profits for the year to December 25 to be below the market consensus by “mid single-digit” percentage points as a result.
The statement is one of the first indications of how difficult the advertising environment has become for news publishers, and how the long-awaited boost from the festive period failed to materialise for many in the industry.
The group’s chief executive Jim Mullen pledged cost savings of £30mn during 2023 to mitigate the effect of “unavoidable headwinds” from difficult macroeconomic conditions.
“We expect current market headwinds will continue during 2023 and have therefore taken decisive action, putting in place a further cost reduction plan,” Mullen said.
Reach told the Financial Times that the cuts would include around 200 jobs in editorial and commercial departments, out of a total headcount of 4,500.
Its share price fell 26 per cent on Wednesday morning.
The company was hit in 2022 by cost inflation and lower advertising rates. It has lost around 80 per cent of its market value since its shares hit a 13-year high in 2021, fuelled by hopes that the company was making a successful transition to a digital content leader.
The publisher of regional newspapers the Manchester Evening News and Liverpool Echo also announced last December a plan to expand to the US, hiring correspondents and opening a New York office.
The company said the cuts would not affect the US expansion plan.
Fourth-quarter digital advertising revenue was 6 per cent lower than the previous year, while print advertising revenue declined by 20 per cent, the group, which was previously known as Trinity Mirror, said.
The drop compared with a 5.9 per cent increase in digital advertising and a 17 per cent decline in print advertising during the July-to-August quarter of 2022.
The advertising revenue declines more than offset growth in circulation revenue, which was 1.8 per cent higher in the quarter compared with the previous year.
Analysts at Singer said the “persistence of advertising headwinds” have masked “the positive underlying progress” made by the company, adding that it is in more “resilient” shape than three years ago.
Johnathan Barrett at Panmure Gordon noted the publisher’s registered customer base of 12.5mn UK consumers. “The backdrop is miserable, but management is keeping its focus on driving value”, he said.