The Daily Mirror, Daily Express and Daily Star front pages laid out
Reach has avoided paywalls and focused on getting online readers to register so they can be tracked by advertisers © EPA

The publisher of the Daily Mirror and Daily Express newspapers has warned of rising inflation, with price rises in paper and energy expected to hit profits this year.

London-listed Reach said on Tuesday that inflation, which started to affect it at the end of 2021, had now “intensified, particularly in print production” and would lead to a “modest” reduction in operating profit.

Inflation is surging in many countries and recently hit a 30-year high in the UK. Reach has felt the change through higher paper prices, as well as in “the significant increase in energy prices”.

Jim Mullen, chief executive, told the Financial Times that “it’s not a small thing, but I think we’ve got a healthy business to manage it”.

The company’s share price fell more than 23 per cent to 174.8p on Tuesday morning. It is worth less than now half compared with a peak in August last year, when investors’ spirits were buoyed by Mullen’s digital strategy that showed signs it was bearing fruit.

Newspaper publishers have struggled with falling revenues and profits for years, with print circulation and advertising sales plummeting and a digital readership proving harder to make money from.

Reach has avoided paywalls and focused on getting online readers to register so they can be tracked by advertisers across its titles, which include the Manchester Evening News and the Liverpool Echo.

Digital revenues now make up just under a quarter of total revenues, compared with 15 per cent in 2019 when Mullen began as chief executive.

Reach said that growth in digital readers and revenues was “more than offsetting” the declining sales of newspapers. It has reached its goal of 10mn registered readers ahead of its original target set for the end of 2022, with the additional information on readers supporting its data-led advertising products.

Revenues in the year to December 26 increased 2.6 per cent to £616mn. Operating profit rose 9.2 per cent to £146mn, when adjusted for legal costs related to the historic phone hacking scandal as well as the closure of dozens of offices, following the decision last year to have most staff work from home permanently.

Mullen said the decision to close more than 30 offices across the country had not been motivated by cost, but by a desire to have a “flexible workforce, which is a competitive advantage”.

Analysts at Investec said Reach’s results were “strong . . . with the key line being digital growth, which is on track to double from the [full year 2020] base”. They were not too concerned about print cost inflation “whilst digital continues to be strong”.

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