Reach reports higher adjusted operating profit, lower revenue

(Sharecast News) - Reach reported higher adjusted operating profit for the year ended 31 December on Tuesday, while lower revenues and digital headwinds saw the share price slide, although cost reductions and resilient print performance supported earnings ahead of market expectations. Revenue fell 3.7% to £518.4m from £538.6m, with print revenue down 4.6% to £388.1m, outperforming volume trends, and digital revenue broadly stable at £128.9m compared with £130.0m in 2024.

Adjusted operating profit rose 2.4% to £104.7m, lifting the margin to 20.2% from 19%.

Earnings per share on an adjusted basis increased 5.9% to 26.8p.

Statutory results swung to an operating loss of £160.1m from a £74.2m profit, reflecting a £222.8m non-cash impairment charge.

The total dividend was maintained at 7.34p per share.

"We are pleased to have increased our adjusted operating profit to £104.7m, driven by decisive action on costs as we move forward with a leaner and more strategic structure," said chief executive Piers North.

"In a year marked by disruption in the search and referral landscape, we have demonstrated our resilience with a strong financial performance."

Adjusted operating costs were reduced by 5.2%, ahead of the 4% to 5% target.

The group generated adjusted operating cash flow of £103.5m, compared with £107.3m a year earlier, with operating cash conversion of 99%, rising to 105% in 2025.

Closing net debt increased to £34.9m from £14.2m.

The IAS 19 pension position moved into a £6.9m surplus during the year, and the company said a buy-in transaction at the Trinity Retirement Benefit Scheme would reduce expected scheduled funding contributions by £8.6m.

Digital performance proved resilient despite materially lower Google referral volumes in the second half, which led to an 8% year-on-year decline in on-platform page views.

For the full year, digital revenue fell 0.9%, with direct revenue down 5.9% and indirect revenue up 2.8%.

In the fourth quarter, digital revenue declined 7.8%, as direct revenue fell 7% and indirect revenue dropped 8.4%, reflecting lower referral volumes and macroeconomic weakness, partially offset by growth in social revenues and video sponsorship.

Print revenue declined 4.6% over the year, with circulation revenue down 3.4% and advertising revenue down 14.8%.

In the fourth quarter, print revenue fell 4.7%, with circulation down 3.4% and advertising down 14.8%, as cover price increases and promotional activity helped offset volume declines.

The group said it was executing against three strategic priorities of connecting with audiences, accelerating technology and AI, and diversifying revenues.

More than 100 specialist video roles had been added across newsrooms, contributing to a 20% year-on-year rise in off-platform page views and a 21% increase in social referrals in the second half compared with the prior year period.

Direct video, social video and sponsorship revenues grew at a double-digit rate, although total video revenue declined 3% due to weaker programmatic income.

Reach said it had launched six digital subscriptions, including for the Manchester Evening News and the Express, targeting more than 75,000 subscribers in 2026.

Diversified revenue grew 4.5% year-on-year, supported by ecommerce initiatives such as the OK! Beauty Box advent calendar.

The company also agreed an AI content deal with Amazon AWS on a pay-per-usage model and expanded the use of its proprietary editorial tool Guten, which now supports 26% of articles, while more than 40% of colleagues were frequent users of Google Gemini.

"We have set a clear direction for the company through three strategic priorities, and we are already executing them at speed, with six digital subscription launches so far and a strong uptick in video output," North said.

"By leveraging our deep understanding of our communities and continuing to move with our audiences, we are building a more sustainable future for our content and our business as a whole."

Post year end, the group announced the closure of its Saltire and Watford print sites as part of a review of printing operations, with Oldham to continue serving most of the Scottish market.

The closures were expected to incur cash costs of around £25m, with a two-year payback period and property disposals planned for 2027.

For 2026, Reach said it remained on track to deliver market expectations, with consensus adjusted operating profit of £96.4m, underpinned by a planned 5% to 6% reduction in adjusted operating costs.

The group said it continued to trade against lower referral volumes and a challenging macroeconomic backdrop, and was taking a cautious approach to digital performance for the year.

At 1141 GMT, shares in Reach were down 10.32% at 61.7p.

Reporting by Josh White for Sharecast.com.