Reach announced strong strategic development and digital revenue growth amid a more competitive market, but shares dropped 20% to 127p in early afternoon trading on Thursday.
Reach noted a decline in group revenue by 0.9% YoY as the war in Ukraine impacted advertiser demand.
The group recorded a 9.3% YoY growth in digital revenue, whereas print revenue fell by 4.2% in the latest trading update.
Reach said that the market has seen weaker advertiser demand and average yields over the last two months, with the war in Ukraine dramatically decreasing the amount of ‘brand safe’ material available to news publishers.
While this has resulted in lower growth than anticipated, the group is strengthening the quality of our digital sales, with significant growth in higher-yielding revenues such as PLUS+ becoming a larger part of the mix.
PLUS+ data has recently been integrated into three of the top advertising agencies’ online marketplaces, and Reach is continuing to develop customer profiles and employ technology, such as its AI contextual tool Mantis, to encourage greater consumer time on site.
Reach is continuing to invest in the Customer Value Strategy, with its cost base being reshaped to support data and technology investments.
However, the group has observed substantial rises in operating expenses since the middle of March, particularly in print, where the impact of newsprint hikes would now surpass previous projections.
Additional measures, such as the acceleration of efficiency programmes, modifications in print manufacturing, and activities regarding print cover prices, have been made to help counteract this.
As a result of the more adverse economic conditions, Reach forecasts a flat group revenue for the year, with a higher mix of circulation revenues and lower digital contribution than originally expected.
The impact of recent newsprint inflation is fully reflected in the group’s cost forecasts for the current fiscal year, and efforts are already being taken to help offset the impact on operational profit.
Jim Mullen, CEO of Reach said, “We’re developing a more sustainable and profitable long-term future for the business, with delivery of the strategy progressing well, despite a more challenging economic backdrop.”
“The effective collection and use of data are supporting the growth of our higher yielding digital products, which are becoming an increasing part of our revenue mix. We’ve taken swift action to address the impact of inflation on our cost base and the business remains strongly cash generative, supporting the investment in data and technology that is key to future growth.”