The UK’s largest regional news publisher Reach has blamed changes at Facebook for plunging digital revenue in its latest half-year results.
Reach is the commercial news publisher with the largest online audience in the UK, some 37.9 million per month according to Ipsos iris figures from earlier this year.
But its half-year results reveal online page views down 16% (a decline that drops to 2% excluding the impact of Facebook). Digital revenue has also been hit by lower yields from automatically-sold programmatic advertising.
Facebook owner Meta has made a strategic decision to reduce the visibility of news on its platform, leading to falling page views for many publishers. The move comes as it fights efforts by regulators to force it to share some of its $100bn+ of annual ad revenue to support news publishers.
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Overall Reach revenue is down 6.1% year-on-year to £279.4m with operating profit down 23.5% to £36.1m.
Revenue from print newspapers (which include the Manchester Evening News, Mirror and Daily Star) was down 2.7% to £217.3m.
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Digital revenue was down 16.1% to £60.8m.
Print circulation revenue grew 2.4% year-on-year with price rises offsetting circulation decline. But print advertising fell 18.2%.
Registered online readers grew to 13.2 million (up from 11.5 million in the same period a year ago).
Some £24.9m of digital revenue was said to be data-led, meaning based around Reach’s own audience data, affiliates, partnerships and e-commerce. This segment was level year-on-year.
Reach has made a further £3.5m in payouts over hacking allegations with £45.4m now estimated to be the total future liability (with the provision increased by £5.9m).
But if Prince Harry succeeds in his bid to sue the Mirror titles over historical allegations of illegal newsgathering that could open the door to many more claims outside the usual six-year time limit for privacy actions.
Reach chief executive Jim Mullen said: “We continue to execute on our Customer Value Strategy, which is driving higher quality, more sustainable digital revenues. Digital growth for the period has been materially affected by lower referral traffic across the sector, particularly following Facebook’s deprioritisation of news content, which has driven page view declines for publishers.
“In spite of this and continued macroeconomic uncertainty, our focus on customer data means we’re driving more diversified, higher performing revenues, with greater exposure to directly sold, higher value advertising. Our scale audience and base of registered customers supports the growth of first-party data, a key advantage in a market moving closer to a future without third party cookies.
“The ongoing resilience and predictability of print underpins continued investment in a strong digital offering, with circulation revenue growing and newsprint costs starting to decline. Cash generation is supported by a focus on driving efficiencies, with cost reductions on plan and expected to support a stronger second-half performance. We expect full-year profits for 2023 to be in line with the current market consensus. The business has a strong balance sheet which supports long-term growth, dividend and pension commitments.”
Analysis: Reach results could mark turning point for company
Investors appear to think the Reach half-year results mark a turning of the corner.
Shares for the company rose 18% today to just over 80p, giving the company a market cap of £266m.
Investment bank Panmure Gordon said in a note that the results were ahead of expectations and that this was impressive given the macro-economic impacts.
It said the likely end of the rate rising cycle and falling newsprint prices also bode well for the company’s future performance (and valuation).
The bank said in an analyst’s note: “Reach’s strategy is essentially based on driving high quality engagement with its audience and collecting data on this engagement in order to boost value of its media and the services it can sell. It continues to make strong progress on registered users and even where consumers do not register it collects highly valuable contextrual data to boost the media value.
“Commercialisation continues to improve and we are bullish on the opportunity to incrase the optimisation of such a large audience.”
Analysts also note that a favourable decision in the Prince Harry case would be positive in terms of limiting the company’s ongoing phone-hacking liabilities.
While the pension fund deficit currently stands at £106.4m, top up payments are currently scheduled to finish at the end of 2027.
Reach half-year financial results statement for H1 2023.
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