Profits for Daily Record owner Reach Plc tumble amid fears pressure will continue

The publisher of the Daily Record and local news sites Edinburgh and Glasgow Live has revealed that annual profits tumbled by more than a quarter in 2022.

Reach, which also owns a raft of regional titles across the UK, says it saw costs surge by 40% and a drop in advertising demand.

On Tuesday, the firm posted that underlying pre-tax profits were down by 28% to £103.3m, while underlying operating profits have dropped by 27% to £106.1m.

It said soaring inflation – largely due to rising newsprint costs – pushed up its operating costs by around £40m over the year and hit demand from advertisers.

The group saw ad revenues drop by 15.9% in the year to December 25, while circulation fell 1.7% with falls limited by cover price increases in the second half of 2022.

Reach warned trading remains “challenging” into 2023, with ongoing falls in demand for digital advertising.

It said: “The current trading environment remains challenging and we expect this to continue in 2023, with sustained inflation and suppressed market demand for digital advertising.

“Although input costs remain elevated, we are confident that our cost action plan will enable us to deliver a 5-6% like for like reduction in our operating cost base for [financial year 2023].”

It added that trading for January and February had been “in line” with expectations, with a decline in demand for digital advertising, open market yields and traffic down across the whole sector.

Jim Mullen, chief executive of Reach Plc said: “Reach is continuing to deliver our customer value strategy and is becoming a fundamentally different business; more efficient, more digitally capable and more focused on building the foundation for growing sustainable and data led digital revenues.”

He added: “We expect uncertain macroeconomic conditions to persist during 2023 but, as shown during the pandemic, we are effective at managing them, with an action plan in place to help mitigate the current headwinds.

“We will continue to invest in areas which support digital expansion, such as the US, where we’ll leverage our scale and apply the proven customer value strategy playbook which is positioning us favourably to benefit when economic conditions improve.”