Reach PLC (LON:RCH), the owner of the Daily Mirror and Daily Express newspapers, has reported a sharp decline in revenues for its second quarter as the coronavirus hit ad spending and accelerated declines in the circulation of print media.
In an update on Tuesday, the group reported that revenues in the period had fallen 27.5% year-on-year due to falls in circulation and ad spending, although it highlighted that trends had “slightly improved” in June with revenue falling only 23.9% in the month compared to 30.5% in April.
Print media declined by 29.5% in the period while digital revenues were down 14.8%. Reach added that circulation remained “significant below pre-[coronavirus] levels” and that local advertising was “continuing to be challenging”.
The company also reported that year to date revenue to June 28 was down 17.5%, benefitting from a good start to the year before the pandemic began to impact the business in mid-March.
Despite the difficult second quarter, Reach reported that customer registrations had passed the 2.5mln mark for the first time, exceeding its previous target for the end of 2020, adding that planned changes to its business are expected to deliver £35mln in annualised savings with an estimated one-off cost of £20mln.
The planned changes include the loss of around 550 people, 12% of the company’s workforce, while Reach also said it will invest in improving its digital customer experience across its brands.
“Structural change in the media sector has accelerated during the pandemic and this has resulted in increased adoption of our digital products. However, due to reduced advertising demand, we have not seen commensurate increases in digital revenue”, said chief executive Jim Mullen.
To meet these challenges and to accelerate our customer value strategy, we have completed plans to transform the business and are ready to begin the process of implementation. Regrettably, these plans involve a reduction in our workforce…The plans will provide a stable platform for us to accelerate our strategy, based on stronger and deeper customer relationships, increasing our appeal to advertisers. This will ensure the sustainability and profitability of the Reach business, enabling it to deliver to stakeholders over the long-term”, he added.
In a note, analysts at Peel Hunt reiterated their ‘add’ rating and 130p target price on the stock, saying the pressure on the company from the pandemic was “slowing” and while the news of job losses was unwelcome the “overall tone of the announcement speaks of a more positive outlook”.
“As with many companies, the extreme uncertainty of April has been replaced with more confidence and control. Digital trading stats on audience and yield are improving, and the transformation process shows that the company has returned to proactive not reactive mode. We expect this very modestly rated company should advance over the next few months”, the broker said.
The company’s shares dropped 11.8% to 78.3p in mid-morning trading.