Annual Results 2020 1 March 2021
Reach plc - FY20 Prelim Results 1 Disclaimer
This presentation has been prepared by Reach plc (the Forward-looking statements speak only as of the date of such “Company”) and its subsidiaries or associated companies or its statements reflecting the knowledge and information available or their affiliates (the “Group”) in connection with the publication and, except as required by the Financial Conduct Authority, of the Company’s annual results for the 52 weeks ended 27 the London Stock Exchange or applicable law, the Company December 2020. undertakes no obligation to update or revise publicly any forward Certain statements in this presentation may constitute forward- looking statements, whether as a result of new information, future looking statements. Any statement in this presentation that is not events or otherwise. a statement of historical fact, including without limitation, those Nothing in this presentation should be construed as a profit regarding statements, estimates, opinions and projections with forecast or profit estimate and no statement in this presentation respect to anticipated future performance of the Group may be should be interpreted to mean that future earnings per share forward-looking statements which reflect various assumptions or of the Company for the current or future years will necessarily opinions concerning anticipated results taken from the Group’s match or exceed the historical or published earnings per share of current business plan or from public sources which may or the Company. may not prove to be correct. Such forward-looking statements No reliance may be placed for any purpose whatsoever on reflect current expectations based on the current business plan the completeness or accuracy of the information or opinions and various other assumptions and involve significant risks and contained in this presentation and no member of the Group uncertainties and should not be read as guarantees of future or any of their respective officers, directors, employees, performance or results and will not necessarily be accurate representatives, agents or advisers take any responsibility for, or indications of whether or not such results or other financial accepts any liability in respect of, the accuracy or completeness condition or performance measures will be achieved. of such information. As a result, recipients of this presentation, should not rely on such forward-looking statements due to the inherent uncertainty therein.
Reach plc - FY20 Prelim Results 22 Jim Mullen CEO
Reach plc - FY20 Prelim Results 33 1 2020 Highlights Jim Mullen, CEO
2 2020 Financial Update Simon Fuller, CFO
3 Strategic Delivery Jim Mullen, CEO
4 Editorial - Embracing Strategy Lloyd Embley, Group Editor-in-Chief
5 Summary Jim Mullen, CEO
6 Q&A
Reach plc - FY20 Prelim Results 4 Highlights Financial Strategic Editorial Summary Update Delivery Key 2020 highlights Momentum in digital strategy
5.0m registrations c.2m SUBSCRIBED Growing customer ReachID ReachID over 10% of audience engagement launched in launchedLaunched in suite of December Decembernew commercial 5.0 PVs per user products to drive 2.8 rd 3 MOST DOWNLOADED NOWrevenue LIVE ACROSS Target 2020 Dec 2020 NEWS APP +29% MAJORITY OF SITES
Digital revenue Major business Return to cash reorganisation momentum dividend +40% No.1 underpins margin +20% in H2 increase in number Sports publisher and accelerates demonstrates of live sites in UK growth confidence +26% in Q4
Reach plc - FY20 Prelim Results 5 Highlights Financial Strategic Editorial Summary Update Delivery 2020: An unparalleled year of change Creating platform for long-term sustainable growth
Our People Transformation Strategic Focus
• Adaptable, determined & • More efficient & sustainable • Leverage scale as largest commercial resourceful people business model national & regional news publisher • Exceptional effort from all our • Radical evolution supports • Evolving our culture – from colleagues - thank you! growth agenda maintain to grow • Focus on wellbeing, flexibility & • Removes historic silos • Increasing investment in talent increased communications & capability • Transforming from transactional • Placing diversity & inclusion at business to data led • Building data led content business centre of business with customer at core
Reach plc - FY20 Prelim Results 6 2020 Financial Update Simon Fuller CFO
Reach plc - FY20 Prelim Results 7 Highlights Financial Strategic Driving Summary Update Delivery Customer Robust performance for year
Group adjusted results 2019 £m 2020 £m Var £m Var % • Improving revenue trajectory post Q2 COVID impact Revenue 702.5 600.2 (102.3) (14.6%) Costs (550.9) (469.0) 81.9 14.9% • Strategy driving digital revenue 1.8 2.6 0.8 44.4% Associates momentum Operating profit 153.4 133.8 (19.6) (12.8%) Operating margin 21.8% 22.3% 50bps • Evolution of operating model yields further efficiency gains EBITDA 174.9 161.2 (13.7) (7.8%) • Growing digital mix and lower costs EPS 39.4p 34.4p (5.0p) (12.7%) support increased margin
DPS 2.50p 4.26p N/A N/A • Strong and sustainable cash generation supports investment, Operating cash flow 133.1 121.8 (11.3) (8.5%) pensions and reinstatement of Net cash 20.4 42.0 21.6 105.9% Net pensions deficit (242.9) (255.5) (12.6) (5.2%) dividend
Reach plc - FY20 Prelim Results 8 Highlights Financial Strategic Driving Summary Update Delivery Customer Operating profit Reconciliation of adjusted to reported
Adjusted Operating Profit 133.8
Restructuring charges (36.4) Transforming • Majority of charges related Reach Print closure impairment (48.4) to business transformation Increased historical legal issues provision (12.5) • HLI continues to be Property development (15.5) closely managed Managing Historical Pension costs (6.1) Commitments • Property development relates to historical contract; no future Goodwill impairment (6.1) exposure Items included in associates (1.2) • Expect reduction in scale of Adjusting items total (126.2) future cash adjusting items
Statutory Operating Profit 7.6
Reach plc - FY20 Prelim Results 9 Highlights Financial Strategic Driving Summary Update Delivery Customer Group revenue Improving trajectory after worst of COVID impact
-7.4% -8.5% Group Revenue (£m) -14.8% 27 40 • Acceleration in revenue -27.5% 30 decline driven by 21 COVID-19 impact from mid-March
• Steady recovery in both 134 122 107 116 print and digital since April
Digital
Print Q1 Q2 Q3 Q4
Reach plc - FY20 Prelim Results 10 Highlights Financial Strategic Driving Summary Update Delivery Customer Print revenue Impacted by COVID; mix points to moderating decline over time
Print Revenue (£m) 6% 5% 6% 6% 7% 5% Print 8% 6% 6% 6% 6% 5% £591m Revenue mix 39 2015 - 2020 23% LFL -18.9% 38 £479m 36% 40% 35% 30% 26% 26 152 25
108
152 Other 67% 58% 61% 152 50% 53% 152 Printing 49% 108 Advertising Other 362 320 Circulation Printing 2015 2016 2017 2018 2019 2020 Advertising Circulation • Print revenue -18.9%, H2 -17.7% FY19 FY20 • H2 improvement supported by promotions and home delivery • Circulation growing % of mix; lower advertising drag over time Reach plc - FY20 Prelim Results 11 Highlights Financial Strategic Driving Summary Update Delivery Customer Print revenue by quarter Recovery in both circulation & advertising post Q2
-10.7% Advertising -29.5% Circulation -19.7% -15.8%
£591m -4.7% -12.6% -10.9% -18.2% £479m -17.6% -18.9% -34.8% -45.7% FY19 Print Revenue FY20 Print Revenue Q1 Q2 Q3 Q4
Reach plc - FY20 Prelim Results 12 Highlights Financial Strategic Driving Summary Update Delivery Customer Mix of revenue Strategy supports progression of digital mix
5% 8% 11% 13% 15% 20%
£593m £600m
2015 2016 2017 2018 2019 2020
Digital revenue 4x greater than 5 years ago within business of similar size
Reach plc - FY20 Prelim Results 13 Highlights Financial Strategic Driving Summary Update Delivery Customer Strong digital performance metrics
Digital revenue (£m) Worldwide page views per month (m) UK monthly unique visitors Dec (m) +10.6% +32.2% +4.5%
118 42 1,680 40 1,271 107
FY19 FY20 2019 2020 Dec 19 Dec 20
• Page views growing strongly; up +135% over 3 years • Audience expansion continuing; unique visitors +4.5%
Reach plc - FY20 Prelim Results 14 Highlights Financial Strategic Driving Summary Update Delivery Customer Digital revenue accelerating
Yield in open market place (OMP) Digital growth & mix
160 Dec 40% > Jan rate 24.7% 142 20.5% 140 16.6% 16.5% 120 100 26.0% 80 13.7% 107 13.4% 60 51 40 Q1 Q3 Q4
Numbers rebased to 100 -14.8% 20 Digital % of Digital YOY 0 total revenue Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • Marked COVID-19 impact on yield during Q2 • H2 revenue grew at 20.3% • OMP revenue in Q4 2x that in Q2 • Exited year with best ever quarter • Dec yield 40% greater than Jan • Digital revenue c.25% of group revenues in Q4
Open Market Place (OMP) refers to advertising space sold via online auction - currently our largest source of digital revenue Reach plc - FY20 Prelim Results 15 Highlights Financial Strategic Driving Summary Update Delivery Customer Operating margin Significant reduction in cost base drives margin progression
22.3% 21.8% Adjusted operating £551m Adjusted operating profit margin (%) costs (£m) 20.1% 39 20.0% 38 £469m 19.3% 216 26 14.9% 152 25 reduction 179 in cost base 22 108 152 73 27 2016 2017 2018 2019 2020 15246 Other 108 362 Depreciation 320 • Margin up 50bps on FY19 240 217 Newsprint • Track record of improving operating margin
Labour • Highly efficient operating model supports growth investment 2019FY19 FY202020
Reach plc - FY20 Prelim Results 16 Highlights Financial Strategic Driving Summary Update Delivery Customer Transformation of our business model
• Proactive response to unprecedented business challenge Annualised • Best in class operating model savings of • No compromise in quality of content
Printing £46m • Severance and cash closure Facilities costs c.£33m Operating Model • Payback within one year
Reach plc - FY20 Prelim Results 17 Highlights Financial Strategic Driving Summary Update Delivery Customer Strong adjusted operating cash flow
Increase in net cash position Operating cash flow 161 (14) £122m (18)
(2) (9) 4 122 (26)
(54) £ million 42 (20) 20 42
22
Tax Lease EBITDA Capital Pension Net CF Opening Financing Net Cash payments Net Cash Surplus expenditure repaymentsWC and otherOperating CF Cash retained Restructuring Historicalcontract legal issues and Reach plc - FY20 Prelim Results 18 Highlights Financial Strategic Driving Summary Update Delivery Customer Consistently strong in cash conversion
Adjusted operating cash flow(£m) Dividend • Business remains net 151 Pension 133 133 payments cash positive Other 122 • Cash supports;
101 49 Net cash flow - Increased strategic investment
54 Cash - Pension commitments conversion % 19 - Shareholder returns 3 26 62 • Strong balance sheet provides 42 optionality for bolt-on 94% 70% 79% 76% 76% investments to accelerate strategy 2016 2017 2018 2019 2020
Note: (1) Adjusted operating CF = Adjusted EBITDA less net interest, tax, restructuring, capital expenditure, lease repayments, working capital and other (2) Cash conversion ratio = Adjusted operating CF / Adjusted EBITDA
Reach plc - FY20 Prelim Results 19 Highlights Financial Strategic Driving Summary Update Delivery Customer Our capital allocation framework
Positive net cash & strong balance sheet provides optionality Guidance: up to 1x leverage (currently 0x) • Prioritising greater organic investment to accelerate digital growth Increasing investment to accelerate Customer Value Strategy • Supported by transformation efficiencies Supported by efficient operating model • Balance sheet strength - flexibility for bolt-on M&A
Committed to funding pension schemes • Pension net deficit £255.5m (FY19: £242.9m) Funding plan in place • Strong cash generation underpins: › Delivery of strategy Recognise importance of growing returns for › Pension funding shareholders › Growing dividends Reinstatement of cash dividends
Reach plc - FY20 Prelim Results 20 Highlights Financial Strategic Driving Summary Update Delivery Customer Current trading & outlook Performing in-line with management expectations for the year
• Trading broadly consistent with Q4 • Revenue year to date down 10.7%; digital +20.4% • Expect full year operating margin % to increase • Increased investment in strategy enabled by efficiency gains • Reinstatement of cash dividend demonstrates confidence
Reach plc - FY20 Prelim Results 21 Highlights Financial Strategic Editorial Summary Update Delivery
We will DOUBLE digital revenue over the medium term
Reach plc - FY20 Prelim Results 22 Highlights Financial Strategic Editorial Summary Update Delivery Our Customer Value Strategy - 4 Pillars
A Single View Of Harnessing Talent The Customer & Teams
Increased Customer A unified view of the Revenue Diversification A customer-centric culture customer across Reach underpinned by data Engagement & Growth
Improved customer experience, Innovation to grow & deepening relationships diversify our revenue base
23 Highlights Financial Strategic Editorial Summary Update Delivery Agenda
1 Driving Registration & Engagement
2 Diversifying Revenue
3 Transforming to Deliver
4 Editorial Embracing Strategy
Reach plc - FY20 Prelim Results 24 Highlights Financial Strategic Editorial Summary Update Delivery 1 Growing direct traffic to our digital content UK page views up over 40% to c.15bn
InYourArea registered users Newsletters driving engagement now over 2m Newsletter page views (m) • 92m page views referred • Now sending c.35m to Reach sites during 2020 newsletters per week • c.60% of users clicking • Newsletter readers visit 2,018k through into news sites are our websites c.30% more registered 22.2 • 3rd most downloaded 8.4 292k News App in the UK
Jan 20 Jan 21 Jan 20 Jan 21
Reach plc - FY20 Prelim Results 25 Highlights Financial Strategic Editorial Summary Update Delivery 1 And increasing engagement
Engagement Index Page Views for our Top 10 Titles Page view multiple – registered v non-registered Indexed page views per user
Loyal* customers using The most comment functionality Growing the engaged view 7-8x more pages value of c.3x customers view registered c.2x over 600% customers more pages Page With Registered & Registered, Sept 20 Feb 21 Views Newsletters Commenting Commenting & Loyal
Group Audience Measures Loyalty Versus Total Users Per visitor Dec 20 YOY YOY growth in loyal customers versus total
+29% +32% The 92% Mirror Growing 21% Customer level of loyalty is engagement PVs per Mins per Live 41% Loyal Users growing visitor visitor Network 27% All Users
Engagement and loyalty data from Comscore, Chartbeat and Google Analytics. 26 Reach plc - FY20 Prelim Results Loyal customers defined as those accessing content on at least 8 days in every 16 Highlights Financial Strategic Editorial Summary Update Delivery 2 ReachID Customer insight key to future growth
How we will grow revenue per customer
Analyse • Customer understanding data forming single view Customer informs campaigns segmentation • Higher frequency, lower
Data fed into churn and increased arpu customer data platform Continuous learning drives higher ARPU • Increasing investment to build on momentum • Integrating best expertise Consumption Enhanced of content Personalisation and technology generates data
Reach plc - FY20 Prelim Results 27 Highlights Financial Strategic Editorial Summary Update Delivery 2 How we will grow revenue per customer ReachID key to new products
ReachID
Audience+ Customer+ Geo+ Partnerships Niche Sites Enriched Cross-matching First party geo Direct New sites based on audience product user info to targeted data commercial specific user using declared data create targeted sets relationship & interests data set rev share
Reach plc - FY20 Prelim Results 28 Highlights Financial Strategic Editorial Summary Update Delivery 2 Audience+ Deepening audience segmentation Supports engagement & growing yield
Campaign 1 REGISTER
Unique data points Identify more specific • Recent trial with high Fashion enhance performance Visited womens’ Working from detail & overlay – allows tracking of fashion tips competition or home fashion contextual pages with declared signals to survey positive sentiment street fashion retailer email address • Strong pipeline Behavioural & Customer Declared Recency & across automotive, Engagement Interest Frequency Data Mantis Data Set Targeted property, travel, Fashion womens & Home fashion financial and fast food Shop creatives • Trials so far showing uplift of 10% - 40%
No. times user has Visited fashion Sign up for visited fashion & Women’s fashion: content 4x in one OK! Magazine beauty content in jeans & trainers week newsletter last 30 days
Customer Journey Reach plc - FY20 Prelim Results 29 Highlights Financial Strategic Editorial Summary Update Delivery 2 Customer+ Customer matched data
Campaign 2
• Recent trial with leading User match Reach Grocery loyalty UK grocer declared users scheme • Their loyalty data overlaid with our registered users • Targeting loyal customers • Highest match rate of any news publisher • Strong pipeline in year to go • Email match to understand business overlap • Customer retains full control of data • Modelling matched data enables increase scale • Bespoke messages as part of campaign
Reach plc - FY20 Prelim Results 30 Highlights Financial Strategic Editorial Summary Update Delivery 2 Geo+ Hyper local postcode targeting
Campaign 3
• Mix of hyperlocal, regional and national assets creates solution unique to Reach
• Working with multiple local/regional advertising campaigns 2m • Tested traditional IP address registered targeting versus Geo+ postcodes • Enables campaign specific to customers’ local area
Reach plc - FY20 Prelim Results 31 Highlights Financial Strategic Editorial Summary Update Delivery 2 Niche Sites Partnerships
Developing new sites Direct commercial targeting niche interests partnerships
• Focus on specialist areas of ‘passions’ • Using niche customer data to direct as basis • Optimised for affiliate revenue, brand for relationships endorsements and partnerships • Direct payment/revenue share model • Expect increased yield from target audience • Craft beer pilot with Innis and Gunn • Looking at trials in energy switching, price comparison and others
Live this month • Reach network serves 12.5m dog owners • Branded content and advice hub from experts
Reach plc - FY20 Prelim Results 32 Highlights Financial Strategic Editorial Summary Update Delivery 3 Transforming to deliver Unified model supports acceleration of strategy
• Radical reorganisation of business model • Removes historic operational silos • Maximises true potential of business model Highly efficient e.g Reach Wire & agile operation • Drives operational efficiency and accelerates strategy focused on strategic • Evolving a growth focused culture delivery
Reach plc - FY20 Prelim Results 33 Editorial Embracing Strategy Lloyd Embley Group Editor-in-Chief
Reach plc - FY20 Prelim Results 34 Highlights Financial Strategic Editorial Summary Update Delivery 4 The Reach Wire Content sharing across platforms to maximise assets
NATIONAL NEWSPAPER OF WALES PAPUR CENEDLAETHOL CYMRU
Monday, November 30, 2020 www.walesonline.co.uk £1.10 DAILY NEWSPAPER OF THE YEAR ‘kEEP THE Sunday newSpaper CARDIFF ISIS FAITH of the year £1.80 TERRORIST ’ NOVEMBER 29, 2020 bEgS Content also RETURN HOME TO PLEA Mirror pages 8&9 Call for Wales used in South fans to remain exclusive on patient as wE aRE with yOu controversy fREE £1 Wales Echo, dogs England Why my AJ Cardiff born ISIS clash shop ticket CHALLENg ES FACINg NEW SEE SPORT FOR FIv is so happy Western Mail & EDUCATION PAgES OF bIg E fighter in prison MINISTER REACTION AND-MATCH pages 16&17 ANALYSIS Your chance to strip off tiers & pages 8&9 to win up to Er aBBiE Walesonline vailable at participating retailers. Terms apply. Terms retailers. participating at vailable By lov a £100k voucher page 24 anger 18+ tories rebel over covid: pages 6&7 Talks over closing schools isis brit exclusive early ahead of Christmas LIFE IN OME councils have confirmed they are considering closing HARD- Sschools early for Christmas to abbie wightwick HIT help cut the risk of spreading coronavi- Education editor CO rus and people having to self isolate [email protected] vID TOWN over the festive period. Discussions about what date schools pages 22&23 will go back after Christmas are also Others say they have no plans to ing on local decisions. shut early, so what happens to the end understood to be taking place. Covid-19 cases in Wales. Options being looked at vary from “Everything is under review,” said of term will vary across Wales depend- Unions have already called for from closing one week early on one council leader. December 11 to shutting two or three schools to be shut on December 11, It comes as First Minister Mark days early. one week ahead of the planned end of Drakeford is expected to announce term date of December 18. new, wider restrictions today in a Mr Drakeford has made clear bid to curtail a rising number of he wants schools to stay open but
»»He bleats that the recruiter »turn to page 4 »»We track down he missed out on the fanatic who seeing gay man persuaded dozens thrown off roof to join terror group »»He says he has »»His brother was human rights and killed by a drone deserves to come and he blames HIM notorious back into thesee UK pages 4&5 aseel Muthana for radicalisation rowan griffiths Chris hughes in Syria. Pictures by Special dispatch from our Defence Editor
Reach plc - FY20 Prelim Results 35 4 Award winning journalism
Scoop of the year Regional campaign of the year
Campaign of the year
Regional website of the year Reach plc - FY20 Prelim Results 36 4 And something a little lighter too
Reach plc - FY20 Prelim Results 37 Highlights Financial Strategic Editorial Summary Update Delivery 4 Investing in our Content County Northumberland SunderlandLive Durham Live Live Significant expansion of regional live sites
March & August 2020. 6 journalists Jan 21: 6m pvs Just Launched
Newport MyBolton edinburgh YorkshireLive Online Live Buckinghamshire 32 journalists Live 3 journalists 8 journalists 7 new journalists Jan 21: 33m pvs Jan 21: 4m pvs Jan 21: 10m pvs Jan 21: 14m pvs
BuckinghamshireLive, BedfordshireLive, PeterboroughLive. MyLondon 10 journalists Northants HertsLive Hampshire Live 26 journalists Live Jan 21: 24m pvs 4 journalists 6 journalists 5 journalists Jan 21: 3m pvs Jan 21: 8m pvs Jan 21: 4m pvs Bedfordshire Live
Sussex Live 4 journalists Jan 21: 4m pvs
Reach plc - FY20 Prelim Results 38 Highlights Financial Strategic Embracing Summary Update Delivery Strategy Priorities for 2021
Continued progress towards registered user target of 10m by end 2022 Leverage ReachID to drive engagement and grow ARPU Progress commercial partnerships as part of revenue diversification Leverage Reach Wire & launch further sites to enhance content
39 Highlights Financial Strategic Editorial Summary Update Delivery
Summary Investment in people & capabilities will accelerate digital growth agenda Business transformation supports agility & strength of profit margin Return to cash dividend demonstrates confidence in sustainable cashflow We will double digital revenue over medium term
Reach plc - FY20 Prelim Results 40 Appendices
1 Group income statement
2020 2019 2020 2019 Statutory Statutory Adjusted(1) Adjusted(1) £m £m £m £m
Revenue 600.2 702.5 600.2 702.5
Operating profit 7.6 131.7 133.8 153.4
Adjusted operating profit 133.8 153.4 133.8 153.4 Operating adjusted items (126.2) (21.7) - -
Profit before taxation 0.4 120.9 131.3 150.6
Operating profit 7.6 131.7 133.8 153.4 Interest income 0.1 0.1 0.1 0.1 Finance costs (2.6) (2.9) (2.6) (2.9) Pension finance charge (4.7) (8.0) - -
(Loss)/earnings per share (8.6) 30.5 (2) 34.4 39.4 (2)
Notes: (1) See reconciliation between statutory and adjusted results. (2) Earnings per share for 2019 has been restated following the bonus issue to shareholders.
42 Group balance sheet
2020 2019 £m £m Intangible assets 854.6 852.0 Property, plant and equipment 168.4 224.9 Right-of-use assets 25.3 - Investment in associates 18.1 21.9 Retirement benefit assets 50.4 31.2 Deferred tax assets 60.5 55.9 Non-current assets 1,177.3 1,185.9
Cash and cash equivalents 42.0 20.4 Trade and other payables greater than a year (24.1) (40.1) Retirement benefit obligations (364.8) (327.1) Deferred tax liabilities (172.4) (159.3) Lease liabilities (41.6) - Provisions (56.7) (36.0) Net current other assets/(liabilities) 7.0 (8.6) Non-current liabilities and net current assets/(liabilities) (610.6) (550.7)
Net assets 566.7 635.2
Share capital (32.2) (30.9) Share premium account (605.4) (606.7) Merger reserve (17.4) (17.4) Capital redemption reserve (4.4) (4.4) Retained earnings and other reserves 92.7 24.2 Equity (566.7) (635.2)
43 Group revenue trends 2020
2020 Q1 Q2 H1 Q3 Q4 H2 FY Print (10.7%) (29.5%) (20.1%) (19.7%) (15.8%) (17.7%) (18.9%) Circulation (4.7%) (18.2%) (11.5%) (12.6%) (10.9%) (11.8%) (11.6%) Advertising (18.9%) (45.7%) (31.9%) (34.8%) (17.6%) (25.9%) (28.9%) Printing (26.3%) (53.4%) (40.1%) (30.4%) (27.5%) (29.0%) (34.5%) Other (19.8%) (48.5%) (35.8%) (18.7%) (38.0%) (29.6%) (32.6%) Digital 13.7% (14.8%) (1.0%) 13.4% 26.0% 20.3% 10.6% Other (13.9%) (41.7%) (23.8%) (50.1%) (50.4%) (50.2%) (38.6%) Revenue (7.4%) (27.5%) (17.5%) (14.8%) (8.5%) (11.6%) (14.6%)
44 Group revenue trends 2019
2019 Q1 Q2 H1 Q3 Q4 H2 FY Print 7.7% (9.3%) (1.5%) (8.7%) (8.5%) (8.6%) (5.1%) Circulation 18.9% (5.3%) 5.4% (5.6%) (5.0%) (5.3%) (0.1%) Advertising (14.1%) (22.3%) (18.2%) (20.2%) (20.4%) (20.3%) (19.3%) Printing 16.0% 9.3% 12.6% 9.5% (0.9%) 4.1% 8.1% Other 19.0% (2.1%) 6.7% (2.9%) 11.4% 4.7% 5.5% Digital 22.6% 12.8% 17.3% 10.0% 23.5% 17.0% 17.2% Other (65.0%) (62.6%) (64.4%) (55.5%) (5.6%) (39.7%) (54.8%) Revenue 8.1% (7.5%) (0.3%) (6.9%) (4.0%) (5.4%) (3.0%)
2019 Like for like (1) Q1 Q2 H1 Q3 Q4 H2 FY Print (8.2%) (8.2%) (8.2%) (7.7%) (7.4%) (7.6%) (7.9%) Circulation (2.8%) (5.1%) (3.9%) (5.3%) (4.9%) (5.1%) (4.5%) Advertising (22.5%) (19.4%) (21.1%) (17.4%) (17.7%) (17.6%) (19.4%) Printing 9.5% 9.3% 9.4% 9.5% (0.9%) 3.9% 6.6% Other 0.1% (1.7%) (0.5%) (2.5%) 11.4% 4.3% 1.8% Digital 5.6% 13.6% 9.7% 10.7% 21.3% 16.4% 13.2% Other (41.6%) (35.7%) (40.0%) (6.1%) (2.8%) (4.5%) (26.3%) Revenue (6.9%) (5.9%) (6.3%) (5.3%) (3.3%) (4.3%) (5.3%)
Note: (1) The like for like revenue trends for 2019 assume Express & Star was owned from the beginning of 2018, excludes revenue from Communicator Corp which was sold in 2018 and other portfolio changes.
45 Reconciliation of statutory to adjusted results
Operating Pension adjusted finance Statutory items charge Tax Adjusted results (a) (b) (c) results £m £m £m £m £m
2020 Revenue 600.2 - - - 600.2 Operating profit 7.6 126.2 - - 133.8 Profit before tax 0.4 126.2 4.7 - 131.3 (Loss)/profit after tax (26.7) 110.3 3.8 19.0 106.4 Basic (loss)/earnings per share (pence) (8.6) 35.7 1.2 6.1 34.4
2019 Revenue 702.5 - - - 702.5 Operating profit 131.7 21.7 - - 153.4 Profit before tax 120.9 21.7 8.0 - 150.6 Profit after tax 94.3 20.9 6.5 - 121.7 Basic earnings per share (pence) restated (d) 30.5 6.8 2.1 - 39.4
(a) Operating adjusted items relate to the items charged or credited to statutory not adjusted operating profit. (b) Pension finance charge relates to the defined benefit pension schemes. (c) Tax items relate to the impact of tax legislation changes due to the change in the future corporation tax rate on the opening deferred tax position. (d) Basic earnings per share for 2019 has been restated following the bonus issue to shareholders.
46 Operating adjusted items
2020 2019 £m £m Restructuring charges in respect of cost reduction measures (36.4) (10.7) Impairment of property, plant and equipment (34.7) (2.7) Impairment of right-of-use assets (13.7) - Impairment of goodwill (6.1) - Pension administrative expenses and past serice costs for GMP equalisation (6.1) (2.9) Provision for historical legal issues (12.5) (11.0) Provision for historical property development (15.5) - Operating adjusted items included in administrative expenses (125.0) (27.3) Operating adjusted items included in share of results of associates (1.2) 5.6 Total operating adjusted items (126.2) (21.7)
47 Adjusted cash flow
2020 2019 Var £m £m £m Adjusted operating profit 133.8 153.4 (19.6) Depreciation 27.4 21.5 5.9 Adjusted EBITDA 161.2 174.9 (13.7) Net interest paid on bank borrowings (1.1) (3.2) 2.1 Income tax paid (14.2) (11.7) (2.5) Restructuring payments (18.0) (13.6) (4.4) Net capital expenditure (1.6) (3.4) 1.8 Interest paid on leases (1.5) - (1.5) Repayments of obligations under leases (7.7) - (7.7) Working capital and other 4.7 (9.9) 14.6 Adjusted operating cash flow 121.8 133.1 (11.3) Historical legal issues payments (10.6) (3.5) (7.1) Historical contract issues payments (15.5) - (15.5) Dividends paid - (18.6) 18.6 Pension funding payments (53.9) (48.9) (5.0) Adjusted net cash flow 41.8 62.1 (20.3) Bank facility drawdown 25.0 - 25.0 Bank facility repayment (25.0) (60.0) 35.0 Acquisition related cash flow (20.2) (0.9) (19.3) Net increase in cash and cash equivalents 21.6 1.2 20.4
48 IFRS16 impact on balance sheet
2019 (audited) IFRS 16 adjustment 2019 (unaudited) £m £m £m Intangible assets 852.0 - 852.0 Property, plant and equipment 224.9 - 224.9 Right-of-use assets - 45.6 45.6 Investment in associates 21.9 - 21.9 Retirement benefit assets 31.2 - 31.2 Deferred tax assets 55.9 - 55.9 Non-current assets 1,185.9 45.6 1,231.5
Cash and cash equivalents 20.4 - 20.4 Lease liabilities - (48.7) (48.7) Trade and other payables greater than a year (40.1) - (40.1) Retirement benefit obligations (327.1) - (327.1) Deferred tax liabilities (159.3) - (159.3) Provisions (36.0) 0.4 (35.6) Net current other assets (8.6) 2.7 (5.9) Non-current liabilities and net current assets/(liabilties) (550.7) (45.6) (596.3)
Net assets 635.2 - 635.2
Share capital (30.9) - (30.9) Share premium account (606.7) - (606.7) Merger reserve (17.4) - (17.4) Capital redemption reserve (4.4) - (4.4) Retained earnings and other reserves 24.2 - 24.2 Equity (635.2) - (635.2)
49 Financing
2020 2019 Change £m £m £m Cash balances 42.0 20.4 21.6 Net cash 42.0 20.4 21.6 Financial covenants Minimum Maximum Minimum Interest Cover Net Debt to EBITDA Cash Flow* Bank facilities Throughout term of facilities 5.0x 1.75x £25m * Cash flow before interest, debt repayment, acquisitions and dividends
Consideration for Express & Star
2018 2019 2020 2021 2022 2023 Total £m (1) £m £m £m £m £m £m Cash consideration 47.6 (1) - 18.9 (2) 16.0 17.1 7.0 106.6 Equity issued 20.0 - - - - - 20.0 Total 67.6 - 18.9 16.0 17.1 7.0 126.6
(1) £42.7m paid on completion of the acquisition of the UK publishing assets of Express & Star on 28 February 2018 and £5.0m paid for the Irish publishing assets of Express & Star on 6 December 2018 following Irish regulatory clearance partially offset by a £0.1m working capital adjustment. (2) The £18.9m was paid out in February 2020.
50 Pensions 2020 2019 Change £m £m £m Fair value of scheme assets 2,597.3 2,400.8 196.5 Present value of scheme liabilities (2,864.1) (2,663.9) (200.2) Impact of IFRIC 14 (47.6) (32.8) (14.8) Net scheme deficit (314.4) (295.9) (18.5) Net scheme deficit after deferred tax (255.5) (242.9) (12.6)
Pension scheme assets 2020 % 2019 % £m of total £m of total Total equities 433.6 16.7% 368.9 15.4% Property 40.2 1.5% 24.4 1.0% Corporate bonds 320.6 12.3% 242.1 10.1% Gilts 171.7 6.6% 256.1 10.7% Liability driven investments 819.8 31.6% 773.9 32.2% Cash and other 492.8 19.0% 409.4 17.0% Total non equities 1,845.1 71.0% 1,705.9 71.0% Insurance contracts 318.6 12.3% 326.0 13.6% Total value of scheme assets 2,597.3 100.0% 2,400.8 100.0% Total value of scheme assets excluding insurance contracts 2,278.7 87.7% 2,074.8 86.4% Total equities as % of assets excluding insurance contracts 19.0% 17.8% Total non equities as % of assets excluding insurance contracts 81.0% 82.2%
Committed forward pension payments* 2021-2023 2024-2026 2027 £m £m £m Annual committed pension payment 55.1 54.9 52.9
*The Group has six defined benefit pension schemes. For five of these schemes the valuation as at 31 December 2019 is ongoing and the above contributions are per the current schedule of contributions in respect of these schemes. In addition, a payment of £9.6m was made in February 2021 in respect of the remaining scheme and no further contributions are expected to be made to this scheme.
51 Reduced discount rate has been a key driver of deficit increase since 2011
4.90% 800 5% 4.50% 4.40% 700 4% 3.70% 3.65% 3.20% 600 3.15% 3.20% 2.96% 3.35% 3% 2.65% 2.50% 2.76% 500 3.05% 3.05% 3.05% 2.80% 2.86% 1.94% 400 2% 1.49%
300 1%
200
0% 100 230.1 297.7 252.2 301.2 305.2 466.0 377.6 348.6 242.9 314.4 - -1% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net scheme deficit Discount rate Inflation (RPI)
52 Provisions Share-based Historical legal payments Property Restructuring issues Other Total £m £m £m £m £m £m At 29 December 2019 (0.7) (5.7) (1.4) (21.1) (7.1) (36.0) IFRS16 Adjustment - 0.4 - - - 0.4 Restated at 30 December 2019 (0.7) (5.3) (1.4) (21.1) (7.1) (35.6) Acquisition of subsidiary undertaking - - - - (0.7) (0.7) Charged to income statement (0.9) (0.9) (36.4) (12.5) (17.6) (68.3) Utilisation of provision - 1.1 18.0 10.6 18.2 47.9 At 27 December 2020 (1.6) (5.1) (19.8) (23.0) (7.2) (56.7)
Associates
PA Media Other Total PA Media Other Total 2020 2020 2020 2019 2019 2019 £m £m £m £m £m £m Opening balance 17.2 4.7 21.9 20.2 5.1 25.3 Investment 0.2 - 0.2 0.9 - 0.9 Dividends received - (0.5) (0.5) - (0.5) (0.5) Share of results: 1.2 0.2 1.4 7.0 0.4 7.4 Results before adjusted items 2.4 0.2 2.6 1.3 0.5 1.8 Adjusted items (1.2) - (1.2) 5.7 (0.1) 5.6 Share of other comprehensive loss (0.5) - (0.5) (10.9) (0.3) (11.2) Deemed disposal of associate interest - (4.4) (4.4) - - - Closing balance 18.1 - 18.1 17.2 4.7 21.9
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