Judge gives the go-ahead to Reach financial move after recent job cuts

In a recent development, a judge in a specialist court has given the nod to a financial manoeuvre proposed by Daily Mirror publisher Reach, just weeks after the company announced a significant number of job cuts.

During an online hearing in the Insolvency and Companies Court, Judge Sally Barber approved the “cancellation” of the company’s “share premium account”. A lawyer representing Reach outlined the proposal, and Judge Barber expressed her satisfaction, stating that there was “no real likelihood” of the company being “unable to discharge” debts when they fell due.

The company, which has ownership of the Express newspapers, the Daily Star, as well as various regional newspapers including the Manchester Evening News, had recently presented the proposal to shareholders.

Reach had announced that the proposed reduction of capital would not involve any payment or return of capital to shareholders or any change in the company’s dividend policy. The purpose of the move, as stated in an online notice, was “to give reasonable assurance” that the company would be able to continue to make “distributions to shareholders”.

Furthermore, it was emphasized that the reduction of capital would result in the cancellation of the balance standing to the credit of the company’s share premium account (£605.4 million) and the creation of distributable reserves of the same amount.

This development comes in the wake of Reach announcing the axing of about 450 jobs earlier this month. The company cited the need to trim operating costs by 5%-6% in 2024, underlining its plans to boost its online offering.

Reach had previously announced two rounds of job cuts in January and March, with the recent reduction of capital being presented as a way to secure the company’s ability to continue providing returns to shareholders and meet its commitments to pension trustees.

It is worth noting that in July, Reach reported a significant drop in half-year profits, attributing this decline to a decrease in digital sales following alterations made by Facebook in displaying news content. The company reported underlying operating profits plummeting by nearly 25% to £36.1 million, alongside statutory pre-tax profits falling to £6.7 million from £32 million a year ago.

In conclusion, the approval of Reach’s financial proposal by the judge represents a significant stride for the company, particularly in the midst of the challenges posed by the evolving digital landscape and the need for operational efficiency. As Reach continues to navigate these changes, the decision emphasises the company’s commitment to its shareholders and its vision for growth and sustainability in the evolving media industry.