Media group Reach has warned that “print driven cost inflation” will hit its 2022 profits, and it could increase cover prices or look at product changes to mitigate the impact.

Announcing its results for 2021, the publisher of national and regional newspapers said that like-for-like print revenues were down 4.7%, with circulation down 4.6% and advertising down nearly 5%. 

However, Reach also said that the print recovery had been “better than original anticipated” and its investment in availability, marketing and product enhancement had supported  “resilient circulation”.

Digital revenues grew by 25.4% to £148.3m and now account for 24% of overall sales. The group has an online audience of 10m registered users, which it is monetising by selling data-led products to brands and advertising agencies. 

Overall sales rose by 2.6% to £615.8m, with operating profit up 7.6% at £79.3m.

While much of the focus is on Reach’s digital growth strategy, chief executive Jim Mullen commented: “Our print titles continued to generate the bulk of our revenues during 2021 and saw a resilient performance despite the ongoing challenges of Covid-19, with a like-for-like revenue decline of 4.7% for the year. We increased availability of our titles and have closely managed distribution based on latest data sets from the various outlet types. The regular use of front-page free offers for customers has also helped support sales including free books, free bets and shopping discounts.

“We began to see the impact of increasing inflation towards the end of the year, particularly in the cost of newsprint, which is being heavily impacted by rising energy costs. We expect this to continue in 2022.”

Printing revenue was down 19% on a like-for-like basis due to a further reduction in contract print volumes and the closure of two of Reach’s print plants – Luton and Fort Dunlop – during 2020/21, which leaves the group with four sites: Cardonald, Teesside, Oldham and Watford. 

Reach said that other print revenue increased by 9.2% on a like-for-like basis as event-driven enterprise revenues and sports contract printing returned in the second half of last year.

Talking about the newsprint situation, CFO Simon Fuller said the group was monitoring and measuring newsprint prices and related factors very carefully. 

He said: “Newsprint is a significant cost line for us and it has seen a bit of a perfect storm of things affecting it. 

“We’re expecting a more than £20m gross inflation year-on-year. We’ve offset more than half of it, more like two-thirds of it through becoming a bigger digital business and through efficiency programmes,” he explained. 

“But it is a significant year-on-year increase and we’ve not seen the scale of newsprint increases like this in recent years. 

“Should there be further inflation in newsprint we have got the opportunity to look at cover prices of other product changes that could offset that. It’s certainly something that we’re very mindful of.”

Reach’s share price fell 25.7% from 227.50p to 169p following the results announcement, and is down nearly 30% over the past month.