Mirror owner slashes value of regional titles

Newspaper business Reach falls to £113.5m first-half loss amid mixed print and digital advertising markets

SIMON FOX, chief executive of Reach, warned that the local print advertising market is “not going well at all” as he wiped £150m off the book value of the newspaper publisher’s regional titles, including the Manchester Evening News and Birmingham Post.

The non-cash impairment tipped Reach, formerly known as Trinity Mirror, into a £113.5m pre-tax loss for the first half of the year, compared with a profit of £38.2m last year. Mr Fox said revenues from the traditional pillars of local newspaper advertising – property, used car and job listings – had eroded by around a quarter year on year. The decline also hit Reach’s digital classifieds business, where sales were down by a fifth.

“Those three massive pillars, cash machines for the local press for so many years, are eroding very, very fast,” Mr Fox said. “Advertisers are increasingly just moving all their spend to Rightmove, Zoopla, Autotrader and the jobs platforms.”

It forced Reach to slash the carrying value of its local newspaper portfolio in line with lower advertising income forecasts. The trend contributed to a 7.2pc decline in like-for-like turnover across the publisher. Its national titles, including the Daily Mirror, fared better as print advertising sales were boosted by the World Cup.

Mr Fox said major advertisers including Tesco had also reassigned advertising budgets to print amid concerns over the effectiveness of some digital spending. It meant print advertising revenue at Reach’s national titles was down by only a “low singledigit percentage”, despite steep circulation declines.

Figures published overnight by the Advertising Association showed that national print display advertising spending rose for the first time in seven years in the first quarter of 2018.

Sales of digital display advertising were up strongly and outweighed the decline of digital classifieds. Overall like-for-like digital revenues were up 6pc, which Mr Fox said was “slower than we would have liked” as a result of reduced traffic from Facebook.

The social network has relegated news so its members see more updates from friends and family, although Reach said its local titles had not been as badly hit as its national newspapers.

The Government has appointed the economist Dame Frances Cairncross to examine the impact of Facebook and Google on funding for local and national journalism.

Mr Fox said Reach would call for an expansion of the BBC local democracy reporters service, in which £8m a year is diverted from the licence fee to fund coverage of councils and courts by newspaper publishers. He warned against “unintended consequences” of funding news via a levy on Google and Facebook and said: “Personally I would be perfectly happy for them to pay their taxes and let the Government decide how it wants to spend the money.”

Reach is attempting to navigate the brutal decline of its regional print business by cutting costs and launching websites in cities it did not previously cover, including in Johnston Press strongholds Leeds and Edinburgh.

Earlier this year, it completed the takeover of the Daily Express and Daily Star from Richard Desmond. Mr Fox is targeting £20m of cuts to editorial and back office functions by 2020 and said there were signs a broader digital audience would attract advertisers.