Reach PLC FY2025: profit up on an adjusted basis, big paper loss from impairment, dividend held
Reach plc has posted a very mixed set of full-year numbers for 2025. Under the bonnet, profitability and cash discipline improved. On the face of it, the statutory result shows a large loss after a sizeable non-cash impairment. The dividend is maintained.
| Key numbers (FY2025) | |
|---|---|
| Revenue | £518.4m (-3.7%) |
| Adjusted operating profit | £104.7m (+2.4%) |
| Adjusted operating margin | 20.2% (2024: 19.0%) |
| Statutory operating result | £(160.1)m loss (after £222.8m impairment) |
| Adjusted EPS | 26.8p (+5.9%) |
| Statutory EPS | (41.9)p |
| Net debt | £34.9m (2024: £14.2m) |
| Dividend | 7.34p (maintained) |
| Operating cash conversion | 99% (2024: 105%) |
Why the statutory loss isn’t the whole story
The headline statutory operating loss of £160.1m is driven by a £222.8m impairment (non-cash). Management has reset long‑term assumptions given weaker referral traffic – notably a 46% year-on-year drop from Google in H2 – and a tougher macro backdrop. That’s cautious but sensible accounting. It doesn’t hit cash, but it does tell you management expects lower long‑term growth than before (the long‑term growth rate used in testing moved to -2.3%).
On an adjusted basis – which strips out that impairment, restructuring and pension finance costs – Reach actually improved. Adjusted operating profit rose 2.4% to £104.7m, and the margin climbed to 20.2% thanks to a 5.2% reduction in operating costs, ahead of the 4‑5% target. That is real progress.
Revenue mix: print reliable, digital resilient but under pressure
- Total revenue fell 3.7% to £518.4m.
- Print revenue: £388.1m (-4.6%). Within that, circulation was relatively steady at £288.4m (-3.4%) as cover price increases offset volume decline. Print advertising fell 14.8%, in line with weaker volumes.
- Digital revenue: £128.9m (-0.9%). On‑platform page views fell 8% for the year, but revenue per thousand page views (RPM) rose 8% as monetisation improved.
- Digital direct revenue (sold directly to advertisers or consumers) declined 5.9%; diversified streams within that – subscriptions, affiliates, ecommerce and partnerships – grew 4.5%.
- Digital indirect revenue (programmatic and off‑platform) grew 2.8% for the year, although Q4 saw an 8.4% decline as referral volumes tightened.
Q4 told the story of the year’s endgame: Group revenue down 5.6%, digital down 7.8% as the Google hit bit harder, and print down 4.7% but still steady.
Strategy check-in: video, subscriptions and off‑platform distribution
Management has leaned into three priorities – connecting with audiences, accelerating tech and AI, and diversifying revenues – and there’s evidence of execution:
- Video push: over 100 new specialist video roles, around 300 social videos a day, and franchises such as All Out Football and the Daily Expresso show. Social/off‑platform traction is improving, with off‑platform page views up 20% and social referrals to Reach’s sites up 21% (H225 vs H224). Direct video, social video and sponsorship posted strong double‑digit revenue growth, although total video revenue dipped 3% due to weaker programmatic.
- Subscriptions: six launches so far (including the Manchester Evening News and the Express), offering ad‑lite access and exclusives. About 15,000 subscribers at year end, plus 17,000 e‑edition subscribers, with a target of more than 75,000 subscribers in 2026.
- AI and tech: in‑house tools like Guten now support 26% of articles and Google Gemini has high adoption (>40% frequent users). A pay‑per‑usage AI content deal with Amazon AWS introduces a new recurring revenue stream; further platform discussions are ongoing.
This is the right kind of diversification for a publisher whose on‑platform volumes have been dented by search algorithm changes. The early signals (off‑platform growth, sponsor-led video, and subscriber uptake) are encouraging, but we’ll need to see revenue scale through 2026.
Cash, debt and pensions: still tight, but moving in the right direction
Cash generation remains a strength. Adjusted operating cash flow was £103.5m (conversion 99%). Net debt increased to £34.9m, reflecting heavy obligations: £59.1m of pension contributions, restructuring (£23.2m), and steady dividends. The £145.0m Revolving Credit Facility was extended to December 2029 and leverage closed 2025 at a prudent 0.3x.
Pensions are a perennial focus. On the accounting basis, the schemes moved to a £6.9m surplus (from a £45.3m deficit). Post year end, the Trinity scheme’s buy‑in means Reach will no longer make certain scheduled funding contributions, trimming expected outflows by £8.6m. Even so, management expects £59m in 2026 and £58m in 2027 before a material step down in 2028. Bridging that period is a key objective.
Print consolidation: fewer sites, lower risk, upfront cash cost
After year end, Reach decided to close its Saltire and Watford print sites, concentrating production at Oldham and using long‑term third‑party contracts where needed. Management expects a compelling internal rate of return and a two‑year cash payback, plus lower operational risk. The estimated cash cost of change is about £25m, with property disposals anticipated in 2027.
2026 outlook: deliver on costs, stay cautious on digital
Trading in the first two months has continued to face lower referral volumes and a subdued ad market. Reach aims to reduce adjusted operating costs by 5‑6% and is “on track to deliver market expectations” – consensus adjusted operating profit for 2026 is £96.4m. That’s below 2025’s £104.7m, reflecting the near-term digital headwinds, but cost actions should soften the blow.
What I think matters for investors
Positives
- Cost execution is credible: adjusted costs down 5.2% and margin up to 20.2%.
- Cash discipline is strong: 99% cash conversion, with extended debt facilities to 2029.
- Diversification is real, not theoretical: subscriptions launched at pace; social/off‑platform audiences growing; sponsor‑led video gaining traction.
- Pension de‑risking continued and the IAS 19 position moved to a £6.9m surplus.
- Dividend maintained at 7.34p, comfortably covered by adjusted EPS of 26.8p.
Watch-outs
- The impairment flags lower long‑term growth assumptions. It’s non‑cash, but it’s a message.
- Digital direct revenues fell 5.9% and Q4 was notably softer. Stabilising search referrals is outside Reach’s control.
- Net debt rose and 2026 carries chunky cash items: c.£25m for print site closures and £59m of pension contributions.
- Print advertising remains under pressure (-14.8% in 2025), even as circulation revenue holds up.
Bottom line: resilience now, proof of diversification next
Reach has done the hard yards on cost, cash and balance sheet hygiene. The statutory loss is an accounting reset; the operational engine delivered slightly higher profit and sustained cash generation. The next leg of the story is about scaling new digital revenues – subscriptions, sponsor‑led video and off‑platform deals – quickly enough to outpace what search and macro throw at them.
If management hits the 2026 cost targets and keeps subscription and video momentum, Reach can navigate the pension “bridge” and protect cash returns. If platform referrals weaken further, expect more reliance on sponsorship, social and subs to do the lifting. Execution over the next 12 months will be the decider.
