Reach plc says it believes there are “significant benefits” to its regional publishing operation despite having written down the value of its regional portfolio by £150m.
In its half-yearly financial report for the 26 weeks ended 1 July 2018, Reach said the current trading environment has led to “greater uncertainty” over the medium term outlook for its regional businesses – but added its belief that there were “opportunities” to grow revenue and profit in the longer term.
In the report, the company revealed a non-cash ‘goodwill impairment charge’ of £150 million has been made against the carrying value of its regional publishing rights and titles.
Such charges are recorded by companies after they identify that there is persuasive evidence that certain intangible assets, or ‘goodwill’, can no longer demonstrate financial results that were expected from them at the time of their purchase.
The company recorded a statutory operating loss of £107.3m, reflecting the impact of the charge on the business.
Reach’s portfolio includes some of the biggest city dailies in the UK including the Manchester Evening News, Liverpool Echo, Newcastle Chronicle and Nottingham Post.
The report states: “During the period, a non-cash impairment charge of £150m (£140.2m net of deferred tax) has been made against the carrying value of the goodwill and publishing rights and titles in respect of the regional businesses.
“This reflects the more challenging than expected trading environment for local advertising and, as a result, greater uncertainty over the medium term outlook as well as the requirements of accounting standards to take into account the group’s latest forecasts and projections.
“However, we continue to believe there are significant benefits in the scale of our local digital audiences and there are opportunities to grow revenue and profit in the longer term.”
The report also revealed group revenue increased by 10.6pc to £353.8m following Reach’s acquisition of Express and Star in February.
On a like for like basis, publishing digital revenue increased by 6pc while publishing print revenue fell by 9.3pc.
Adjusted operating profit increased by 6.2pc to £66.5m.
Chief executive Simon Fox said: “We have delivered a positive financial performance in what remains a difficult trading environment for the industry, in particular the regional businesses.
“The benefit of improved performance from national print advertising coupled with further cost mitigation will support profits over the year despite a further increase in newsprint prices for the second half.
“We have started the process of integrating Express & Star in order to accelerate the benefits that our combined scale will deliver and have a clear strategy which fully reflects the changing shape of the group.”
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Has it dawned on them that local advertisers are abandoning regional papers and their websites because they don’t see any value in advertising through a medium many people now view lwith contempt and local digital ads are lost in the morass of national placements on the websites.
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Advertisers have got to know just how dramatically paper sales have dropped. On some local/regional papers sales have slumped about 90 per cent against peak, which means advertisers are reaching a tiny proportion of the population. And advertisers remain unconvinced about websites, having no doubt seen some of the confused efforts.
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Chief executive Simon Fox said: “We have delivered a positive financial performance…”
No. You haven’t.
You cannot paint £140.2m net of deferred tax up against the side of a building, step back and say: “Well, that’s a beautiful work of art, and to me it says ‘positive financial performance’ – Banksy would be so proud.”
DP
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If Simon Fox accepts this as a ‘positive financial performance’ he must either be wildly misinformed about the true state of the business or willing to accept under performance on this scale as being satisfactory which must be a relief to those on the commercial departments who’ve presided over yet another half year of failure.
And just how long is he prepared to wait for these “opportunities to grow revenue and profit in the longer term.” when after all these years they’ve spectacularly failed to monetise digital?
Jam tomorrow and complete denial today it seems
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TM/Reach regional papers I’ve seen around the country are now 6 pages of local news, a couple of sport, and the rest is centralised generic feature puff, for which Reach are trying to charge for 85p to £1.50, daily or weekly. No wonder they are having to devalue them by £150million, there’s not much left, and local buyers and readers can see how their local papers have shrivelled away to what freesheets (that term used specifically) used to be.
If Reach made an effort to produce good papers of true local worth and interest, instead of focussing on increasing cost savings to £20million, they might be publishing some products of value.
And don’t start on how rubbish their websites are…..
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When Fox says:
“…..the requirements of accounting standards to take into account the group’s latest forecasts and projections”
To me that’s his way of saying the forecasts his commercial managers and bean counters have given him were completely inaccurate and as such he’s ended up with egg on his face having to explain another shocking start to a year by passing it off as “ a positive performance”
In my experience,forecasts are usually based on a department head being given a required end figure which they then forecast their people delivering just to keep their bosses off their backs.
The only positive aspect of that mess is the certainty that if things don’t improve further down the managerial food chain,heads will roll.
It also indicates how out of touch he is with what’s actually happening if he accepts forecasts and projections based on wishful thinking rather than the reality of having to forecast and project a loss,something yes men can’t bring themselves to do.
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