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.
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.