Announcing its full year results for the year ending 25 December 2022, the PLC said that newsprint prices had increased by more than 40%, or 60% on a like-for-like basis last year. Its newsprint bill increased from £52.9m to £75.4m.

The group had already warned in January that its results would fall short of market expectations, with a further round of cost cutting required and around 200 jobs to go.

Overall sales slipped by 2.3% to £601.4m, while operating profit was down 10.1% at £71.3m. 

Adjusted operating profit including restructuring charges and provisions for historical legal issues was down 27.4% at £106.1m.

Revenues at Reach’s digital business – the group’s focus for the future as it transforms its offering – rose by just 1% to £149.8m. 

Reach said that despite growth of 56% in data-led revenues within its digital wing, this had been offset by “macro related decline in market yield for ad space sold programmatically in the open market”  which was down around 33% during the year and by circa 40% in the second half.

Print revenue fell by 3.5% to £448.6m, while print circulation slipped 1.7% and print advertising was down 15.9% – during the second half of last year there was an industry-wide advertising blackout following the death of HM Queen Elizabeth II.

Reach publishes more than 130 national and regional titles including the Mirror, Daily Express, Daily Star, Birmingham Mail and Manchester Evening News. 

The group said that circulation had been strengthened by cover prices increases with “minimal impact on [the] long term trend in print volumes”.

CEO Jim Mullen commented: “While digital data is key to growing customer engagement, it's print that makes our investment in data possible. Circulation trends have remained steady and broadly predictable, benefiting from relative price resilience and our ability to drive production efficiencies, which support significant cash generation over the medium term.

“Inflationary headwinds during the year have been felt largely within print, where we've seen production cost increases in energy, ink, plates and particularly newsprint. The newsprint market has been severely impacted by changing demand and supply dynamics in the aftermath of Covid, in addition to then being hit by the increase in energy prices that resulted from the outbreak of the war in Ukraine.”

Mullen said that cover prices had been increased by more than average in order to protect Reach’s print margins. 

“As part of our cost reduction plan for 2023, we expect to make savings in our print supply chain, driven by more efficient raw materials sourcing and distribution planning,” he stated.

The turbulent trading period also included the dramatic collapse of YM Group’s web offset operations, which had printed time-sensitive supplements for Reach. 

As part of its risk analysis for the business, Reach stated that it was now monitoring key suppliers more closely: “A number of our print suppliers are seeing the longer-term trend of declining demand being exacerbated in recent times by the Covid pandemic and followed more recently by increases in the costs of materials and energy. 

“This in turn increases the risk of supply chain disruption and price increases. During the year we have increased the monitoring of our key suppliers, reviewed our contingency arrangements and ensured there are contingency measures in place with our suppliers, and reviewed and enhanced our stock management processes.”

Reach shares, which had recovered somewhat since the profit warning, fell back by 11.14% on the news to 80.55p (52-week high: 203.48p, low: 64.40p).