Half-yearly Financial Report September 28, 2020 RNS Number : 2186A Reach PLC 28 September 2020 28 September 2020 Reach plc Reach plc ('Reach', 'the Company', 'the Group'), the largest commercial naonal and regional news publisher in the UK, today announces its half-yearly results for the 26-week period ended 28 June 2020. Performing materially ahead of 2020 market expectaons Results Adjusted results(1) Statutory results 2020 2019 2020 2019 £m £m £m £m Revenue 290.8 352.6 290.8 352.6 Operang profit 54.9 71.3 28.9 63.7 Profit before tax 53.5 69.9 25.2 58.2 Earnings/(loss) per share 14.6p 19.1p (0.8)p 15.9p Key highlights · Strong recovery in digital adversing and increased customer engagement across all channels secured year on year digital revenue(2) growth in Q3 of 12.9%. · Effecve strategic and operaonal delivery with over 3.5m customer registraons, with new and improved plaorms driving record digital audiences and increased page views. · Transformaon programme across editorial, adversing and central operaons provides a strong foundaon to accelerate customer value strategy, with cost base reduced by at least £35m. · The Group is currently performing materially ahead of market expectaons for the full year though management remain fully aware that COVID-19 sll represents a significant macro-economic challenge to the UK economy, with the potenal for subsequent negave impacts on the business. Commenng on the interim results for 2020, Jim Mullen, Chief Execuve Officer, Reach plc, said: "We have seen a strong recovery in the digital adversing market since the worst impacts of COVID-19 in April which has driven a return to healthy digital revenue growth since July, assisted by increased customer engagement and loyalty. This illustrates the significant potenal of the customer value strategy as our websites, apps and newsleers aract increased page views from our scale audience, helping to drive forward digital revenues. Circulaon sales have also stabilised and shown a gradual recovery during Q2 and Q3. Following the implementaon of the major parts of the transformaon programme, Reach now has a strong foundaon to drive the next phase of the customer value strategy with increased efficiency and agility in our adversing and editorial operaons. Award-winning journalism and content enable our news brands to shape the daily conversaons of millions of people. Moving forward we will see connued momentum from new and improved products. Our strengthened customer insight and innovaon teams will assist us in driving stronger and deeper customer relaonships, increasing our appeal to adversers and driving revenue growth. This will enable Reach to connue to deliver for stakeholders over the long-term. With the business currently performing materially ahead of market expectaons, the Board is recommending an issue of bonus shares to shareholders." Financial highlights · H1 Revenue of £290.8m, down 17.5%, reflecng the impact of COVID-19 on all revenue categories. This compared to a like-for-like fall of 6.3% in the first half of 2019. · Adjusted operang profit of £54.9m with adjusted operang margin of 18.9% benefing from strong management acon on costs. · Statutory operang profit of £28.9m impacted by provisions for historical legal issues and historical contract issues with loss per share also impacted by deferred tax charge relang to the reversal of the corporaon tax rate decrease. · Accounng pension deficit (IAS 19 net of deferred tax) decreased by £33.0m to £209.9m, helped by cash contribuons and strong asset returns. · Strong cash generated from operaons(3) of £47.9m with half-year net cash(4) posive posion of £41.9m reflecng the proacve steps taken to preserve cash. This provides the Group with sufficient cash to fund the transformaon, to invest in the customer value strategy and to provide a level of protecon in the event of further COVID-19 impacts. Operaonal and strategic highlights · The transformaon programme announced in July to reshape the Group into a streamlined, more efficient organisaon across editorial, adversing and central operaons is now materially complete with ancipated annualised savings of at least £35m. With ongoing uncertainty over third-party print contract renewals and future volumes we will now also review our print capacity requirements during Q4. · The customer value strategy is deepening engagement with our users and increasing loyalty with average monthly loyal users in March to August increasing by 27.2% year on year. This is delivering a related digital revenue acceleraon through increased adversing and content consumpon. In Q4 we will introduce a single Reach customer view to enable us to measure the impact of enhanced data on adversing yields. Current trading and outlook · For Q3, Group revenue declined by 15.0% year on year, a significant improvement on the 27.5% decline seen in Q2. Print declined by 19.9% in Q3, improving on the 29.5% decline in Q2, helped by gradual improvements in circulaon revenue. The digital business grew 12.9% in Q3, compared with a Q2 decline of 14.8%, benefing from a strong recovery in digital adversing and increased customer engagement across all channels. · While an interim dividend of 2.50p was paid in 2019, cash dividends remain suspended due to COVID-19 uncertainty. However, with the Group currently performing materially ahead of market expectaons for 2020, the Board is recommending a proposed bonus issue to shareholders, in lieu of and with a value equivalent to, an interim dividend of 2.63p, subject to shareholder approval. The Board intends to resume cash dividends at an appropriate me, subject to market condions. Enquiries Reach 020 7293 3000 Jim Mullen, Chief Execuve Officer [email protected] Simon Fuller, Chief Financial Officer Ciaran O'Brien, Communicaons Director Tulchan Communicaons 020 7353 4200 David Allchurch / Giles Kernick [email protected] About Reach plc Reach plc is the UK's largest commercial news publisher, with over 43 million unique visitors to its live sites and apps during August 2020. Its 150 naonal and regional news brands including the Mirror, Express, Star, Daily Record, Manchester Evening News, Liverpool Echo, WalesOnline, MyLondon, 48 Live branded sites, local community and informaon plaorm InYourArea, and naonal magazine brands OK! and New!. For more informaon visit www. reachplc.com. Results and strategic update presentaon A conference call facility and live webcast for analysts and instuonal investors will be held today at 9am. Details are as follows: ● Conference call - telephone number: 0800 279 6619 or +44 (0) 2071 928338; conference ID number: 4319989 ● Webcast - URL: hps://edge.media-server.com/mmc/p/x4z4t2vj A copy of the presentaon and a replay recording of the presentaon via audio webcast will be available at www.reachplc.com later today. Notes (1) Set out in note 18 is the reconciliaon between the statutory and adjusted results. The current period is for the 26 weeks ended 28 June 2020 ('2020') and the comparave period is for the 26 weeks ended 30 June 2019 ('2019'). (2) Revenue trends on an actual and like-for-like basis are the same for 2020. Q3 relates to the period from 29 June to 27 September 2020 which September represenng the latest esmate of revenues. (3) Cash generated from operaons has been extracted from the consolidated cash flow. An adjusted cash flow is presented in note 19 which reconciles the adjusted operang profit to the net change in cash and cash equivalents. Set out in note 20 is the reconciliaon between the statutory and adjusted cash flow. (4) Cash and cash equivalents of £66.9m less £25.0m drawings on RCF (note 14). (5) The Group has implemented IFRS 16 'Leases' with effect from 30 December 2019 using the modified retrospecve approach to transion and has accordingly not restated prior periods. Revenue is not impacted by the adopon of IFRS 16. The impact of IFRS 16 on the consolidated Balance Sheet, consolidated Income Statement and consolidated Cash flow Statement is shown in note 2. Forward looking statements This announcement has been prepared in relaon to the financial results for the 26 weeks ended 28 June 2020. Certain informaon contained in this announcement may constute 'forward-looking statements', which can be idenfied by the use of terms such as 'may', 'will', 'would', 'could', 'should', 'expect', 'seek, 'ancipate', 'project', 'esmate', 'intend', 'connue', 'target', 'plan', 'goal', 'aim', 'achieve' or 'believe' (or the negaves thereof) or words of similar meaning. Forward-looking statements can be made in wring but also may be made verbally by members of management of the Company (including, without limitaon, during management presentaons to financial analysts) in connecon with this announcement. These forward-looking statements include all maers that are not historical facts and include statements regarding the Company's intenons, beliefs or current expectaons concerning, among other things, the Company's results of operaons, financial condion, changes in global or regional trade condions, changes in tax rates, liquidity, prospects, growth and strategies. By their nature, forward-looking statements involve risks, assumpons and uncertaines that could cause actual events or results or actual performance or other financial condion or performance measures of the Company to differ materially from those reflected or contemplated in such forward-looking statements. No representaon or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forward-looking statements. The forward-looking statements reflect knowledge and informaon available at the date of this announcement and the Company does not undertake any obligaon to update or revise any forward-looking statement, whether as a result of new informaon or to reflect any change in circumstances or in the Company's expectaons or otherwise. Chief Execuve's Review Strong response to COVID-19, accelerang customer value strategy Whilst COVID-19 presented operaonal and financial challenges to Reach during the first half, we enter the final quarter of the year as a strong, profitable business that has accelerated the delivery of the customer value strategy that will drive our future growth.