11 October 2022

Reach plc - Q3 trading update for the 3-month period to 25 September 2022

Data-led strategy continuing to deliver; improved digital growth momentum during July & August                                                                        

·    Improved year on year group revenue trajectory versus Q2 driven by both print and digital    

·    Q3 and September revenue performance distorted by impact of the passing of HM The Queen which benefited circulation but significantly reduced advertising due to the blackout during national mourning

·    July and August more indicative of underlying revenue performance: print down 2.8%, digital up 5.9%

·    Cover price increases and efficiencies support stronger than historic H2 weighting of profit    

Digital revenue  - improving underlying performance

Digital revenue for the period was up 1.1%. Revenue up by 5.9% in July and August reflects ongoing momentum in data-led initiatives, continued growth in page views (6% across the period) and stabilisation in comparative programmatic yields as Q2 headwinds moderated. Customer engagement has continued to grow with page views per user and registered page views up during the period, while our total registered customer base is now over 12m. Revenue decline of 8.1% in September was due to an industry wide reduction in advertising spend following the passing of HM The Queen, with multiple brands deferring or cancelling scheduled campaigns during the period of national mourning. 

Print revenue  -  cover price increases support expected uplift in circulation

Print revenue for the period declined by only 2.9%. Circulation revenues were up by 2.0% following recent price increases, with volumes responding as anticipated. Circulation in September was up 4.3% reflecting a material one-off uplift, The Express and The Mirror growing aggregate volumes by around 30% on the day following the Queen's passing and the day after the funeral. This upside was more than offset by an associated reduction in print advertising, which was down by 17.0% in July and August, but 32.2% in September.

Given all the above, the estimated overall net effect (print and digital) on trading for September was around a 5% reduction in revenue.

Newsprint inflation as expected; cost management actions progressing

We have seen more stability in the cost of newsprint during the period. Cost management actions taken during H1, including reductions in print pagination and supply, along with the operating model changes, outlined in our interim results, are helping to offset persistent inflationary pressures.

Outlook

The macroeconomic and political climate is volatile, and we are mindful of the potential impact of changing consumer behaviour on trading, given this uncertain external environment. Although the unusual period of trading during September impacted revenue and profit, underlying revenue trends during Q3 were broadly as anticipated heading into Q4, historically the strongest period for advertising. We expect circulation revenue to be supported by increased cover prices, while advertising revenue should benefit from seasonally stronger yields, particularly around Black Friday and Christmas and from the football World Cup which starts in November.

Jim Mullen Chief Executive

"We have made further good strategic progress as we continue to deliver quality content to a growing and increasingly engaged digital audience. I am particularly proud of our teams who worked so tirelessly over recent weeks to produce such comprehensive, respectful, and sensitive coverage of the Queen's passing, a truly once in a generation event. Actions on costs are helping to mitigate inflationary pressures and while macro uncertainty persists, improved revenue trends during Q3 are a positive. The strength of our balance sheet underpins ongoing investment in the strategy, as we continue to transition to an increasing mix of higher quality digital earnings."

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