Reach has grown its digital revenue by 20.4% so far in 2021 following a record year-on-year increase of 26% in the last quarter of 2020, according to its full-year results.
The owner of the Mirror, Express and Star and hundreds of regional titles today reported a 14.6% fall in revenue in 2020 to £600.2m but an above expectation adjusted operating profit of £133.8m (down 12.8% year on year) (statutory results down 94.2% to £7.6m).
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Reach said it had an adjusted operating profit margin of 22.3%, up from 21.8%, due to its digital performance and cost management, and strong adjusted operating cash flow of £121.8m with net cash balance at the year-end of £42m.
The company decided not to offer shareholders a dividend for 2019 in April when the immediate impact of the Covid-19 pandemic became apparent, but its board has now proposed a 4.26p per share dividend for 2020 subject to approval at the AGM in May.
Reach digital revenues
Reach chief executive Jim Mullen said the last quarter’s digital growth was an “encouraging end” to an “unprecedented” year. Across the whole of 2020 digital revenues were up 10.6% despite a significant drop in advertising during the early part of the pandemic.
The company will now move onto the next stage of its customer value strategy launched in February, which is aiming to build a more detailed picture of Reach readers to improve their experiences and allow brands to create more targeted campaigns and offers.
Mullen said the next part of the strategy, for which £5m was approved in 2020, “is where the learnings from data and insight will be applied in the form of new products, targeted advertising opportunities and commercial partnerships”.
The publisher has now reached 5.8m registered users (5m in December) – more than 10% of its digital users – compared to its original target of 2m by the end of 2020. It has now increased its target to reach by 2022 from 7m to 10m.
The publisher saw a 29% uplift in average page views per user across its network in 2020 and a 32% increase in average minutes per user. It said loyal users who visit every other day were up by more than 40% across its regional Live network and 91% on the Mirror.
Mullen said: “During the year, we will increasingly prioritise investment behind the customer value strategy, with the overall objective of doubling digital revenues over the medium term.
“Last year’s business transformation has established a highly efficient operating model, supporting a strong cash position and robust profit margin. Consequently, we expect our full year adjusted operating margin percentage will be ahead of last year.”
Reach print revenues
However print still accounts for 71% of Reach’s total revenue.
Print revenues were down 18.9% in 2020, with a low point of a 29.5% decline in the second quarter due to the first Covid-19 lockdown.
Circulation revenues of £319.7m declined by 11.6% and print advertising revenues were down 28.9% to £108.4m.
The Mirror, Express and Star daily titles saw circulation volumes fall by a total of 18.1% while their Sunday editions were down 16.7% overall.
The group’s paid-for daily titles, which including the Liverpool Echo and Manchester Evening News, were down 18%, paid-for weeklies were down 28.9% and paid-for Sundays were down 22.1%.
Reach’s paid-for magazines, which include OK!, were “more severely impacted” the publisher said without giving a figure, which it put down in part to restrictions around photojournalism and celebrity shoots.
But Mullen said print revenues reached 93% of their original budget in the fourth quarter despite the pandemic.
Reach Covid-19 impact
Reach claimed £7m through the Government’s job retention scheme to furlough staff in 2020.
It also saved £4m in temporary pay reductions and £7m from the suspension of bonuses. This meant total staff costs were down £22.9m to £217.2m.
It also spent £16.5m on severance payments as it made about 550 job cuts and implemented a transformation programme to result in less duplication between its national and regional titles over the summer. The changes will result in annual cost savings of more than £35m, it said.
Mullen said the “radical” efficiencies, made over a period of three months “that in normal circumstances would have been planned over three years”, were needed “in order to ensure the business could not just survive ongoing uncertainty, but be in a position to thrive in the new market conditions”.
Reach results 2020: Hacking cost rise above £100m
Reach paid out £10.6m to settle phone hacking claims in 2020 and increased its provision for dealing with the payments by £12.5m – bringing it to a total of £106.5m.
A provision of £23m remained outstanding at the end of the year, which Reach said was its best estimate of the amount required to resolve the historical issues over the next few years.
Chris Morley, Reach NUJ national coordinator, said it was “heartening” to see Mullen acknowledge that the publisher had emerged a “stronger business” through the pandemic “thanks to the ongoing hard work and commitment of our people”.
Morley said: “Although the company clearly took a hit due to Covid-19, as did many businesses in the industry, the fundamentals for Reach appear strong – particularly with journalism becoming increasingly important to the bottom line. Double-digit growth in digital revenue to £118m is built on the huge audience – and engagement of those readers – that our members are generating with their stories.
“We note that the company managed to more than double the cash balance it held from £20m, at the start of the pandemic, to £42m now. It has increased its profit margin to a ‘very strong’ 22.3% and announced a 5.2% increase in dividends to shareholders.
“We should not forget that all this was achieved thanks to the amazing and immediate transfer of our members working from home to keep the business functioning in the Covid crisis, while having to endure a painful restructuring that led to hundreds of journalists losing their jobs.
“The company cut £35m from its annual costs in the transformation of its business last summer and our members hope that 2021 and the years to come will be a time to consolidate around the company’s declared key priority to ‘maintain quality journalism’. That means having a well-resourced editorial function and journalists whose morale is high knowing they have the support of their bosses.”