The value of the publisher of the Daily Mirror and Daily Express newspapers plunged by a quarter on Tuesday after it warned that inflationary pressure and soaring newsprint costs would hit profits this year.
The London-listed publisher, which also owns 200 regional print and digital titles, including the Manchester Evening News and Liverpool Echo, warned that it expects to see a “modest” drop in operating profits this year.
“This is not a profits warning,” said Jim Mullen, the chief executive of Reach. “This is a moderation in profits due to inflation.”
Shares fell 25% to 169p after the guidance was announced, wiping about £180m from its market value.
The company said that the existing issue of rising newsprint costs, due to growing distribution costs and supply issues, is now being affected by a “significant” increase in energy prices. Newsprint costs rose from £45.8m to £52.9m last year.
“The impact from inflation, which began to affect the business towards the end of 2021, has now intensified, particularly in print production,” the company said. “This has primarily been reflected in the cost of newsprint … which is being heavily impacted by rising energy costs. We expect this to continue in 2022.”
The forecast of reduced profits this year, after a healthy rise to £143.5m last year from £131.3m in 2020, means the company is not able to completely offset the rising costs with savings plans.
Mullen would not comment on whether the company may need to look at rising the price of its papers or job cuts this year as a result. Reached hired 400 new editorial staff last year taking its total employee base to 5,200, with more than 50% in journalist roles.
Labour costs rose from £217m to £232m last year, although the company will
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