Reach sees ‘strong recovery in digital advertising growth’ after H1 Covid-19 hit

Daily Mirror owner Reach has bounced back from a disastrous start to 2020. After profits dived in the first half of the year, digital advertising has had a strong recovery in the third quarter, assisted by increased customer engagement and loyalty – showing a bright spot amid a tough year for publishers. The Drum crunches the numbers and what they mean.

Reach sees return to ‘healthy digital revenue growth’ amid H1 Covid-19 hit

What does Reach’s balance sheet look like?

• Between January and June, pre-tax profit at Reach sank into freefall, slumping from £58.2m to £25.2m, while the firm’s revenues slid 18% to £290.8m.

• These negative indicators fed through to a corresponding collapse in statutory operating profits which declined to £28.9m, against £63.7m 12 months prior.

• In a sign that Reach's books are heading in the right direction, third-quarter revenue fell by a mere 15%, almost half the rate of decline (27.5%) recorded in the second half.

• Digital proved to be Reach’s saving grace, pulling the company into positive territory with a 12.9% rise on the back of a strong digital advertising sector and increased customer engagement, partially offsetting the 14.8% decline racked up over the previous quarter.

• Print continues to fade, slipping a further 19.9% over the quarter –although this represents an improvement on the 29.5% fall registered over the previous three months as circulation revenues ticked up.

• Through August, Reach reported receiving 42.9m unique visitors across its portfolio of titles, equivalent to a 63% market share of the UK's regional publishing audience.

A return to healthy digital revenue growth

• The coronavirus outbreak upended a promising start to 2020 for the publisher. Reach was knocked for six upon imposition of a national lockdown, precipitating a collapse in ad revenue and circulation.

• Reach now senses that its fortunes have turned around over the past three months, after posting results which were materially ahead of analyst expectations.

Where does Reach go from here?

• Reach had been reaping the benefits of a transformation programme announced last year which sought to streamline editorial, advertising and office functions – producing annualised savings of at least £35m.

• That process has not yet reached its end, and the company has now turned its attention to third-party print contract renewals, volumes and capacity in the fourth quarter.

• Despite these cutbacks, the publishing giant recorded a 27.2% year-on-year increase in average monthly loyal users between March and August.

• Increased eyeballs translated to increased advertising and content consumption, presaging introduction of a single Reach customer view in the final quarter, to better measure the impact of improved data on advertising returns.

• Reacting to the figures Jim Mullen, Reach chief executive, said: “We have seen a strong recovery in the digital advertising market since the worst impacts of Covid-19 in April which have driven a return to healthy digital revenue growth since July, assisted by increased customer engagement and loyalty.“

• Mullen went on: “Following the implementation of the major parts of the transformation programme, Reach now has a strong foundation to drive the next phase of the customer value strategy with increased efficiency and agility in our advertising and editorial operations.“

• Renewed confidence has led Mullen to recommend an issue of bonus shares to shareholders.