Daily Mirror publisher warns soaring print costs to hit earnings

Reach said inflation pressures had ‘intensified’ due to rocketing energy prices.
Reach said inflation pressures had ‘intensified’ due to rocketing energy prices.

The publisher of the Mirror and Express newspapers has seen shares plunge as it warned that higher printing costs are set to impact profits this year.

Reach, which also owns a raft of regional titles including the Manchester Evening News, revealed that inflation pressures had recently “intensified”.

It said rising costs were being felt the most across newspaper print production, with soaring energy prices adding to supply chain challenges.

Shares lost nearly a quarter of their value at one stage as the group cautioned this is expected to see a “modest” fall in operating profits over 2022, with ongoing cost saving actions only partly able to offset the impact.

The warning took the shine off figures showing its first like-for-like growth in revenue for 14 years.

Reach said: “The impact from inflation, which began to affect the business towards the end of 2021, has now intensified, particularly in print production.

“This has primarily been reflected in the cost of newsprint (paper for printed products), which having previously been impacted by rising distribution costs and supply challenges, now also reflects the significant increase in energy prices.

“As a result, the gross impact of inflation in 2022 is expected to be higher than in recent years.”

Its annual results showed the group already saw a “significant” rise in newsprint costs last year, up 16% at £52.9 million.

Investors in the group headed for the exit, despite Reach revealing revenues rose 2.6% to £615.8 million last year, marking the first top line growth since 2007.

It posted a rise in underlying pre-tax profits to £143.5 million in 2021, up from £131.3 million in 2020.

The publisher has been shifting its focus online, with digital sales growth of 25.4% more than offsetting a 4.7% decline in print revenues.

But online revenue growth has pared back since the year-end, up 10.3% in the first eight weeks of 2022, while print saw a 4.2% drop, leaving overall group turnover 0.7% lower.

“We expect digital revenue growth to again offset print decline, with total revenue flat for the full year 2022,” added Reach.

Analysts at Peel Hunt said they expect the inflation hit to see pre-tax profits drop to £134.3 million in 2022.

“We feel the inflationary impact may well endure, so impacting 2023 as well, though further cost-saving measures will surely be brought to bear,” they said.