The UK’s largest regional news group Reach has said it will pay a dividend for 2020 in spite of falling profits and sales, citing confidence in its online business.
The London-listed group on Monday reported that revenues in the year ending December fell nearly 15 per cent to £600m. Profit before tax, adjusted for costs from a restructuring and the closure of print sites, dropped 8 per cent to £131m.
Digital sales grew by just over a fifth to £118m in the same period. Reach said it expected online sales to double in the “medium term”, but at the moment they were worth only a quarter of print newspaper revenues that were badly hit by the pandemic.
“Revenue performance was exceptional for a year with Covid-19,” said chief executive Jim Mullen, adding that digital revenue growth was evidence that his strategy to turn the publisher into a digital media group “is now coming through”.
Newspaper publishers have been struggling to make money from online readers for years, while print circulation figures and previously lucrative advertising revenues have plummeted.
Reach has avoided paywalls and focused on getting online readers to register so they can be tracked across its different titles, which include the Manchester Evening News, Liverpool Echo as well as the Daily Mirror.
The company’s board said that, considering its latest performance, it would propose a final dividend of 4.26 pence a share, up 5.2 per cent on the 2019 dividend that the company subsequently cancelled citing the pandemic.
Reach furloughed roughly 20 per cent of its staff up until September, receiving roughly £7m from the government in wage support. It expects the proposed dividend to cost just over £13m.
Mullen said the company did not plan to pay back the furlough money, explaining “we used the furlough money in an appropriate way, the way it was intended”.
“Back then we didn’t know what the end of the month would look like and used furlough to keep people working,” he said, adding that the cash boost helped the company restructure its newsrooms.
Natasha Brilliant, analyst at Citi, said she was not surprised by the dividend “given that they’ve made a focus on cash generation”. On Reach paying a dividend after furlough support she said: “I guess they might argue they are still a challenged business, although digital is doing well, print is still in significant decline”.
The company’s share price, which has more than quadrupled since August, was down roughly 2 per cent on Monday morning.
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