Reach, the UK’s largest commercial news publisher with titles including the Daily Mirror and Daily Express, said pretax profits almost halved last year owing to a slump in advertising and a sharp drop in digital readership for its newspapers.
Annual pretax profits dropped 45 per cent to £36.7 million (€43 million), with a 24 per cent fall in digital page views following a decision by Facebook last year – one of its largest traffic referrers – to stop supporting news, and a series of disruptive updates to algorithms used by Google that dictate where on a search page news stories are ranked.
Reach said the fall in referral traffic would also hit its first-quarter results, but it expected “growing momentum across our digital business”. Revenue fell more than 5 per cent to £568.6 million.
However, shares in the group rose more than a tenth on Tuesday after the company said it had resolved two overhanging financial issues. Reach said it had set aside about £18 million to cover phone-hacking claims from victims, but that a high court decision in December should bring these cases largely to an end.
The company also reached a deal with its pension trustees that should reduce pension payment commitments by about £40 million from 2028.
Analysts at Numis said it was a “significant positive that both the pension triennials have been agreed, and historic legal issues are expected to be settled at a materially lower cost than previously forecast”.
Facebook parent Meta shocked news publishers after withdrawing its support for news content in many parts of the world, leading to a fall in traffic across the industry. In Australia, where the change has only just happened, the government has threatened legal action.
Jim Mullen, Reach chief executive, called on the UK government to bring together news groups and US tech companies such as Google to discuss what would be the “fair share” of revenues driven by news provided by British media.
The free model of digital news is under pressure given this shift in social media traffic, but Mullen committed to providing free content from its local newspapers rather than introducing paywalls.
In recent months, groups such as the Daily Mail and the Guardian have begun to experiment with subscription-based content.
Reach’s titles are sometimes criticised for the extent of intrusive advertising, but Mullen said this was a necessary deal with the reader to get news for free.
The sharp fall in digital views has exacerbated the broader decline in the advertising market, which led to Reach being forced to cut about 450 jobs last year.
On Tuesday, it said the cuts would reduce costs this year by about 5 to 6 per cent, a similar number to last year.
The company is also starting to use artificial intelligence technology alongside its journalists to produce content. By the end of last year, more than a dozen newsrooms were set up to use AI tools to support journalism, but Mullen said that no jobs would be replaced using the technology. – Copyright The Financial Times Limited 2024
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