- Reach estimates it will spend £18.2m to resolve so-called ‘historical legal issues’
- The Daily Mirror told investors that it would release a further £20.2m provision
Reach anticipates paying about £20million less than previously expected to settle claims of phone hacking and unlawful information gathering.
Britain’s largest commercial news publisher said it had set aside £18.2million related to ‘historical legal issues’ following a High Court ruling on the matter in December.
The Daily Express and Mirror owner was ordered by the court to pay £140,000 in compensation to Prince Harry after a judge found evidence of ‘extensive’ phone hacking by Mirror Group Newspapers.
Forecast: Media business Reach anticipates paying £20million less than previously expected to settle claims of phone hacking and unlawful information gathering
But the judge also declared a time limit on claims for phone hacking, meaning most cases are likely to be dismissed unless in exceptional circumstances.
As a result, Reach told investors it would release a further £20.2million provision and envisions most claims, if not all of them, to be finalised by the end of next year.
It said: ‘The judgment we received in December set out very clear parameters on time limitation, which enables us to draw a line under these issues.
‘Simply, this means we now have a much clearer view on the estimated cost of resolving these long-standing issues and, crucially, these costs are expected to be materially lower than our previous estimates.’
The London-listed firm further revealed that it took ‘decisive action’ regarding its pension schemes, ‘which has similarly given us a firm end in sight for an obligation that has hindered this organisation for several decades’.
It said ‘an agreed pathway to fully funding the schemes’ was established, meaning pension commitments by 2028 are predicted to be approximately £40million lower.
Reach shares rose 11.4 per cent to 67.25p by late Tuesday afternoon following this announcement, making them one of the FTSE All-Share Index’s top risers.
The group’s shares surged on the back of greater cost clarity for investors after a prolonged period of uncertainty.
It helped overshadow a 35.3 per cent slump in operating profits to £46.1million last year, due partly to restructuring costs and the sublease of a former print plant.
Total turnover dipped by 5.4 per cent to £568.6million because of weaker advertising revenues across both print and digital formats.
Reach blamed the 15 per cent fall in like-for-like online revenues on macroeconomic uncertainty and a decline in referral traffic from technology platforms, such as Google and Facebook.
It noted that Google had made multiple updates to its core algorithm, while Facebook has started deprioritising news content.
Adam Vettese, analyst at investment platform eToro, said: ‘Seeing as most of us get our news from a screen these days, digital transformation has been the key to publishers managing to evolve and adapt.’
He added that despite Reach’s declining profits, ‘resolving well-publicised litigation against the firm will allow for more effective planning going forward as uncertainty eases.’
