Reach plc Reports 9% Revenue Drop in H1 2026, Focuses on Digital Subscriptions, Video, and AI Licensing

Revenue Challenges from Referral Traffic Loss and Circulation Decline

Reach's total revenue dropped by a323.1 million (9.0%) to a3232.9 million in H1 2026 compared to the previous year. Print revenue, the larger segment, decreased 8.3% to a3178.0 million, with print circulation revenue down 6.6% to a3134.7 million and print advertising revenue falling 11.1% to a324.6 million. Circulation volumes declined 22% year-on-year, highlighting ongoing challenges in the print sector.

Digital revenue, a strategic growth focus, fell 11.4% to a354.2 million from a361.1 million in H1 2025. This was mainly due to a 55% year-on-year drop in referral traffic from Google, causing a 40% reduction in on-platform page views. However, the company noted digital revenue remained relatively stable given the scale of referral traffic loss, reflecting effective mitigation strategies. Direct digital revenues, generated through direct advertiser, agency, or consumer engagement, declined 3.9%, but excluding local advertising, direct revenues increased 6.0%, benefiting from investments in video content and diversified revenue streams.

Improved Operating Margins Despite Profit Decline

Reach improved its adjusted operating margin to 18.5% in H1 2026 from 17.5% the prior year, driven by disciplined cost management. Adjusted operating costs fell 10.3% to a3190.4 million, exceeding the target 5 6% savings, supported by efficiencies from the 2025 restructure, overhead controls, print site rationalisation, and lower newsprint costs. These savings offset inflation and company-wide pay increases.

Adjusted operating profit declined 4.1% to a343.0 million. The company generated a348.8 million in adjusted operating cash flow, up from a345.8 million year-on-year, with a cash conversion rate of 113% versus 102% previously. Net debt increased to a347.5 million from a326.0 million, with a leverage ratio of 0.4 times. CEO Piers North stated the company remains "on track to deliver on market expectations for the year and remain confident in our ability to navigate uncertainty," focusing on financial discipline amid ongoing industry disruption expected through 2027.

Digital Subscription Growth Surpasses 40,000 Paid Users

Reach accelerated its digital subscription strategy, launching offerings across 15 brands and attracting over 40,000 paid subscribers within a year, progressing toward a 75,000 annual subscriber target. Diversified revenues—including subscriptions, affiliates, ecommerce, and partnerships—increased 2.5%, driven by subscription growth. The company plans to introduce subscription models on selected additional brands in H2 2026 while slowing future launches to refine offerings and enhance marketing.

Investment in quality video content complements the subscription strategy. The Daily Expresso video podcast, launched less than a year ago, was June's most-watched UK news podcast on YouTube. Other video projects like the Hotline Live Scottish football podcast secured sponsorships from Pure Gold Company and Scottish Water. The CEO emphasized a shift from volume-based approaches to original, brand-distinctive content supported by marketing investment, reflected in early commercial success for subscription and video initiatives.

Emerging AI Licensing Revenue Stream

Reach has begun securing AI content licensing deals with major technology firms, including Amazon Web Services, expanding into mid-sized B2B agreements such as with a financial services company. Early revenues also come from real-time large language model marketplaces like Tollbit, establishing a sustainable pay-per-use framework for AI firms to legally access Reach's content.

CEO Piers North highlighted that "AI firms are using our content in their products many millions of times a day," marking a fundamental shift in content access. Reach developed Launchpad, a platform integrating generative AI, video creation, and analytics to streamline publishing and enable rapid launches of new community brands. Launchpad will trial paid community brands, described as "lean and finely targeted products," some serving as online homes for legacy print titles like the Southport Visitor, aiming to diversify revenue while leveraging Reach's content and brand assets.

Print Segment Faces Structural Volume Decline Despite Price Increases

The print business continues to experience structural challenges, with circulation volumes down 22% year-on-year, exceeding historical trends. Price increases implemented twice during the period, combined with cost-of-living pressures, contributed to the sharper volume decline. Print circulation revenue decreased 6.6% to a3134.7 million. Management is "carefully monitoring and examining pricing plans to optimise returns over the medium term," balancing volume protection with revenue optimisation.

Print manufacturing consolidation is underway, described as "an important step towards simplifying our business, driving savings and reducing operational risks," progressing ahead of plan with early closure of the Scottish site. The company recorded a statutory operating loss of a343.5 million, including a a336.1 million non-cash impairment charge from two print site closures, a321.7 million amortisation of publishing rights and titles, and a318.9 million restructuring costs. These exceptional charges reflect significant structural changes adapting to the declining print market while positioning for future growth in digital and video.

Dividend Policy Rebased to Support Investment and Financial Flexibility

The Board announced a dividend policy rebasing to enhance financial flexibility for organic growth investments. The interim dividend was cut to 1.44 pence per share from 2.88 pence in the prior year period. The Board considered dividend levels in light of current trading and the need to fund growth initiatives. The company faces a325 million in cash costs for print site consolidation, a357 million in pension contributions in 2026, and ongoing investments in strategic priorities.

2026 is the penultimate year for significant deficit reduction payments on closed defined benefit pension schemes, with a357 million scheduled. Payments are expected to reduce to a315 million from 2028 and end thereafter. The defined benefit pension scheme was in a a34.9 million surplus on an IAS 19 basis as of 30 June 2026, with the next triennial valuation due by 31 March 2027. The Board commits to reviewing capital allocation, especially post-2028 as pension payments decline, balancing shareholder returns with strategic investment and balance sheet strength.

Cautious Outlook Amid Continued Referral Traffic Decline in 2027

Reach provided a cautious outlook for late 2026 and 2027, expecting ongoing industry headwinds. On-platform page views stabilized in Q2, but digital performance is approached conservatively for the remainder of the year. Operating margins are expected to remain similar to 2026, with persistent headwinds including further circulation volume declines. CEO Piers North emphasized adherence to strategic priorities, continuing investment in brands, original video content, subscriptions, AI tools, and AI licensing opportunities to build a sustainable digital business.

The company remains on track to meet 2026 full-year market expectations, with consensus adjusted operating profit forecast at a395.9 million. Cost discipline will continue, with full-year adjusted operating cost savings expected to mirror H1 levels, supported by print site closures, aiming to maintain "market-leading operating margins." The strategy focuses on shifting from volume to original content, distinctive brands, and improved returns, reflecting structural industry changes and evolving content consumption.

Reach's Market Presence and Audience Engagement Amid Industry Challenges

Despite a difficult trading environment, Reach holds a strong market position in UK and Irish publishing, operating 120 trusted brands and reaching over 66% of the UK online population monthly, 6% of the US population, and boasting over 115 million global social followers. The company engages 35 million adults monthly, with social video views up 55% and social followers up 15% year-on-year, indicating sustained content appeal despite a 40% decline in revenue-generating on-platform page views due to referral traffic changes.

Editorial quality underpins Reach's digital strategy, with examples including Manchester Evening News' by-election coverage and the Mirror's Orwell Prize-winning "Island of Strangers" video. The company aims to build "stronger, more distinctive brands" and create value through original content, benefiting commercial partners. CEO North acknowledged navigating "a huge amount of change" in H1 2026 amid significant market dynamics. Reach's brand strength and audience scale support execution of strategic priorities in digital subscriptions, premium video, and revenue diversification, contingent on converting engagement into sustainable, less volume-dependent revenue.