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.
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.”