TIDMRCH
RNS Number : 5229G
Reach PLC
27 July 2021
Reach plc - Interim Results - 26 weeks to 27 June 2021
27 July 2021
Customer Value Strategy driving stronger digital growth &
enabling investment
-- Ongoing momentum in Customer Value Strategy is transforming our prospects
-- Strong growth in registrations and digital revenue enabling
increased investment in journalism, data and technology
-- Digital revenue now 23% of business, up from just 15% in 2019
-- Trading ahead of market expectations with strong digital
performance and recovery in circulation sales
Financial Summary
--------------------- -------------------------------------------------------------
26 weeks to 27 Jun Adjusted results(1) Statutory results
2021
------- ------------------------ --------------------------
2021 2020 Change 2021 2020 Change
--------------------- ------- ------- ------ ------- -------- ------- -------
Revenue GBPm 302.3 290.8 4.0% 302.3 290.8 4.0%
===================== ======= ======= ====== ======= ======== ======= =======
Operating profit GBPm 68.9 54.9 25.5% 28.6 28.9 (1.0)%
===================== ======= ======= ====== ======= ======== ======= =======
Earnings/(loss) per
share(2) Pence 17.8p 14.0p 27.1% (11.2)p (0.8)p N/A
===================== ======= ======= ====== ======= ======== ======= =======
Dividend per share Pence 2.75p N/A N/A 2.75p N/A N/A
--------------------- ------- ------- ------ ------- -------- ------- -------
Financial Highlights
-- Group Revenue LFL(3) up 2.6%, with digital up 42.7% and print down 5.2%
-- Adjusted operating profit of GBP68.9m up by 25.5%
-- Adjusted operating profit margin 22.8% (H1'20: 18.9%)
-- Adjusted operating cash flow(4) of GBP82.6m (H1'20: GBP63.5m)
-- Statutory profit and earnings impacted by property rationalisation and change in tax rate
-- Interim dividend of 2.75p pence per share
Business and Strategic Highlights
-- Sustained momentum of Customer Value Strategy supporting growth of digital revenues
-- Ongoing investment in journalism and expansion of regional
network to all counties of England and Wales
-- Registrations now at 6.7m c150% greater than a year ago;
confident of achieving 10m by the end of 2022
-- Reach ID and investment in data capabilities supporting delivery of more targeted campaigns
-- Strong start to commercialisation of 'plus' products; c50
campaigns run with significant uplift in consumer response
-- Strong cash generation and balance sheet supports pensions,
shareholder returns and investment optionality
-- Increasing focus on wellbeing and culture; new diversity
& inclusion plan across the organisation
Jim Mullen Chief Executive Officer
Reach is transforming its prospects and with strong momentum in
the Customer Value Strategy we now have a clear pathway to
sustainable growth. Our people continue to deliver on our core
purpose as champions, campaigners and changemakers. Award-winning
national and local journalism is delivering consistently higher
audience engagement, supported by increased customer insight. As a
result, we have been able to increase investment in journalism and
the applied data technology that is key to us achieving our
ambition of doubling digital growth over the medium term. The
business remains strongly cash generative and is committed to
delivering growth for the benefit of all stakeholders.
Results Overview
-- Revenue of GBP302.3m grew by 2.6% LFL with digital growth of
42.7% and print declining by 5.2%
-- Strong progress in delivery of Customer Value Strategy;
increased investment underpins growth agenda
-- Adjusted operating profit margin up 390 bps supported by
efficiencies from prior year transformation programme
-- Adjusted operating cash flow of GBP82.6m, an increase of GBP19.1m
-- Net cash(5) of GBP54.7m up GBP12.7m on FY20 closing position (GBP42.0m)
Revenue
-- Year on year revenue growth reflects strong digital
performance and softer comparatives during Q2 as we annualised the
first COVID lockdown which began towards the end of March 2020
-- Digital revenue of GBP68.8m grew 42.7%, with growth on a
two-year basis up by 41.4% (H2'20 equivalent 39.8%)
-- Print revenue GBP232.4m down 5.2%; circulation GBP160.0m down by 5.1%, both grew during Q2
-- On a two-year basis, print and circulation down 23.9% and
16.0% respectively, consistent with H2'20 two-year rate
Profit
-- Adjusted operating profit of GBP68.9m up GBP14.0m or 25.5% (H1'20: GBP54.9m)
-- Adjusted operating costs of GBP234.9m (H1'20 GBP236.2m) with
savings from 2020 transformation programme, in-part offset by
increased investment and the annualisation of one-offs
-- Statutory numbers impacted by property rationalisation charge
following decision to exit a number of properties and the future
change in the UK rate of corporation tax which affects the value of
deferred tax liabilities.
Cash & Balance Sheet
-- Adjusted operating cash flow of GBP82.6m represents cash
conversion of 105%, driven by positive working capital inflow which
is expected to substantially reverse during H2
-- Net cash increased by GBP12.7m to GBP54.7m from GBP42.0m at the prior year-end
Dividend
-- Interim dividend 2.75p; 4.6% greater than value of non-cash
bonus issue of shares issued in lieu of interim last year
-- Board recognises importance of growing dividends for
shareholders, while also investing to grow the business and meeting
pension funding requirements; expect to continue to pay dividends
in line with Group free cash position
Outlook and Current Trading
While macro uncertainty remains, the business is well placed to
progress further against our strategic objectives and is trading
ahead of full year expectations. Trading during H1, specifically
Q2, benefited from relatively soft comparatives due to the impact
of the first UK lockdown during spring last year. This benefit will
unwind during H2 as we begin to annualise a more normal pattern of
trading. Despite this, we expect underlying momentum will continue,
in particular the improvement we're seeing in print circulation and
growth in digital revenues, which has also been supported by the
broader sector shift to online. Efficiencies, driven by last year's
transformation programme, will continue to support increased
digital investment, further expansion of our profit margin and a
strong cash position.
Quarterly and Half Year LFL Year-on-Year and 2 Year Revenue
Movements
2021 Q1 YOY Q2 YOY HY YOY H1 2yr* H220 2yr**
% % % % %
Digital Revenue 25.2% 65.0% 42.7% 41.4% 39.8%
-------- ------- ------- -------- -----------
Print Revenue (15.2)% 7.3% (5.2)% (23.9)% (23.3)%
-------- ------- ------- -------- -----------
* circulation revenue (11.3)% 1.9% (5.1)% (16.0)% (16.7)%
-------- ------- ------- -------- -----------
* advertising revenue (20.7)% 20.8% (4.3)% (33.7)% (36.3)%
-------- ------- ------- -------- -----------
Group Revenue (8.7)% 16.8% 2.6% (14.9)% (14.7)%
-------- ------- ------- -------- -----------
* 2yr movement for H1 2021 is a like-for-like comparison versus
the same period in 2019
** 2yr movement for H2 2020 is a like-for-like comparison versus
the same period in 2018
Notes
(1) Set out in note 19 is the reconciliation between the
statutory and adjusted results. The current period is for the 26
weeks ended 27 June 2021 ('2021') and the comparative period is for
the 26 weeks ended 28 June 2020 ('2020').
(2) Earnings per share for 2020 has been restated following the
bonus issue to shareholders, in lieu of and with a value equivalent
to a 2020 interim dividend of 2.63 pence per share.
(3) Set out in note 22 is the reconciliation between the
statutory and like-for-like revenue. The like-for-like trends
exclude the Independent Star acquisition and the impact of
portfolio changes.
(4) An adjusted cash flow is presented in note 20 which
reconciles the adjusted operating profit to the net change in cash
and cash equivalents. Set out in note 21 is the reconciliation
between the statutory and adjusted cash flows.
(5) Net cash balance comprises cash and cash equivalents of
GBP54.7m (note 15) less bank borrowings of nil (note 15) but
excludes lease obligations.
Enquiries
Reach
Jim Mullen, Chief Executive Officer
Simon Fuller, Chief Financial Officer
Ciaran O'Brien, Director of Communications communications@reachplc.com
Matt Sharff, Investor Relations Director 07341 470 722
Tulchan Communications reachplc@tulchangroup.com
David Allchurch / Giles Kernick 020 7353 4200
Jim Mullen, Chief Executive Officer, and Simon Fuller, Chief
Financial Officer will present the results at 9:00am (BST) on 27
July 2021. It will be followed by a live question and answer
session. The presentation slides, script and recording will be
available on www.reachplc.com from 9.00am (BST).
You can join the webcast via
https://edge.media-server.com/mmc/p/vwz7wphi . Please copy and
paste the link into your browser.
Please either listen to the Q&A session via the webcast or
to ask a question, please use the dial-in details below. Please
dial-in at least 15 minutes prior to the start time to provide
sufficient time to access the event. You will be asked to provide
the conference ID number below.
Conference ID No: 1258311
United Kingdom: +44 (0) 20 7192 8338 or toll free: 0800 279
6619
Forward looking statements
This announcement has been prepared in relation to the financial
results for the 26 weeks ended 27 June 2021. Certain information
contained in this announcement may constitute 'forward-looking
statements', which can be identified by the use of terms such as
'may', 'will', 'would', 'could', 'should', 'expect', 'seek,
'anticipate', 'project', 'estimate', 'intend', 'continue',
'target', 'plan', 'goal', 'aim', 'achieve' or 'believe' (or the
negatives thereof) or words of similar meaning. Forward-looking
statements can be made in writing but also may be made verbally by
members of management of the Company (including, without
limitation, during management presentations to financial analysts)
in connection with this announcement. These forward-looking
statements include all matters that are not historical facts and
include statements regarding the Company's intentions, beliefs or
current expectations concerning, among other things, the Company's
results of operations, financial condition, changes in global or
regional trade conditions, changes in tax rates, liquidity,
prospects, growth and strategies. By their nature, forward-looking
statements involve risks, assumptions and uncertainties that could
cause actual events or results or actual performance or other
financial condition or performance measures of the Company to
differ materially from those reflected or contemplated in such
forward-looking statements. No representation 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 information available at the date
of this announcement and the Company does not undertake any
obligation to update or revise any forward-looking statement,
whether as a result of new information or to reflect any change in
circumstances or in the Company's expectations or otherwise.
Chief Executive's Review
Transforming prospects with clear pathway to sustainable
growth
Our focus on the Customer Value Strategy has led to significant
progress and a strong commercial performance in H1 2021. We are in
a much stronger position as a business; more efficient, more data
driven and with an editorial focus on insight driven content. We
are now increasing our investment in our core purpose of
journalism, as well as in data and technology to take advantage of
the opportunities ahead of us. The Customer Value Strategy is
ensuring we are well placed to benefit from the general recovery in
the UK advertising market as well as the more general consumer
shift to online. The result is that, for the first time in many
years, Reach has a clear pathway to sustainable and profitable
growth and its prospects are being transformed.
Strategic progress gathering momentum
Our focus on growing customer registrations has continued to be
successful, with total registrations now at 6.7 million - over 150%
greater than just a year ago. We are confident of achieving our
target of 10 million by the end of 2022.
Registrations are key to providing the enriched first party data
that underpins our 'plus' portfolio of targeted advertising
products, enabling us to attract new advertisers at both a national
and local level while also growing business from existing
customers. This, in addition to a market-wide shift to digital
advertising is seeing us achieve strong growth in our digital
business.
We continue to invest in the data and insights that will allow
us to create increasingly personalised content. Earlier this year
we partnered with data specialist BlueVenn and are working with
them to develop the data platform which will enable more targeted
campaigns, enhanced business intelligence and advanced CRM,
capabilities which will help us maximise customer engagement and
loyalty.
This would not be possible without our exceptional portfolio of
brands and the passion and commitment of our Reach colleagues,
including an editorial team of over 2,500. We continue to foster a
culture that is inclusive and supportive of our people's well-being
as well as one that is results focused and embraces our core
purpose as champions, campaigners and change-makers in the
communities across England, Scotland, Ireland and Wales. I am
pleased to report that after months of investment in our journalism
we now employ more journalists than we did in 2019.
Customer Value Strategy delivering digital revenue growth
The business has strong growth momentum with a strong H1
performance meaning the business is trading ahead of full year
expectations. Group revenue in H1 was up 2.6%, with digital revenue
growing 42.7%, outpacing print revenue decline of 5.2%. Adjusted
operating profit of GBP68.9m was up by 25.5%.
While we have undoubtedly benefited from softer comparatives
against the peak COVID-19 impacts of Q2 2020, there is clear
momentum in delivery of the strategy with strong growth in
registrations, engagement and digital revenue. In addition, the UK
digital advertising market continues to advance with increased
growth forecasts giving us further confidence in our ability to
double digital revenue over the medium-term. While advertising
yields suffered, in particular, during the first lockdown in 2020
we did see historically high page view numbers during that period
as audiences sought out news and information about the virus and
its impacts. In page view terms the comparative period last year
would be difficult to match but looking at a two-year basis our
progress is clear with an increase in worldwide page views of
37%.
Digital advertising has continued to grow strongly, with notable
first half campaigns in the energy, telecoms, media and sports
betting sectors, and the return of sporting events like Royal Ascot
and the Euros also contributing to growth during the period.
We have also seen a marked improvement in the local digital
advertising market, with the hospitality sector in particular
benefiting from the gradual lifting of pandemic restrictions. This
has also benefited advertising revenues on our hyper-local app
InYourArea.
Our new more targeted 'plus' range of advertising products
continue to attract new advertisers and we are benefiting from
increased business from existing clients on these more efficient,
data-led campaigns. A number of local brands have also adopted our
new 'plus' products for campaigns and the local digital advertising
market in general began to pick up towards the end of the period as
businesses began to open after lockdown restrictions eased.
We have now run c.50 campaigns using new 'plus' products with
advertisers in a broad range of sectors including retail, travel
and betting and gaming. Through our growing ability to refine the
customer groups receiving this marketing we are already seeing a
significant improvement in ad effectiveness with increases in click
through rates of up to 300% greater than average.
The success of our commercial team in building on our Customer
Value Strategy was recognised during H1 by the industry Campaign
Publishing awards with Reach winning both the Commercial Team of
the Year and Business of the Year awards.
Recovery in print circulation demonstrates resilience and
provides sustainable cash flows
Having declined by 11.3% in the first quarter of this year,
circulation revenue has recovered during Q2, ending the half down
just 5.1%. The two-year movement in circulation has remained
broadly stable throughout the period, down around 16%, which is
also consistent with the equivalent two-year rate in the second
half of 2020 (-16.7%). This relative resilience demonstrates the
strength of our national and regional brands which continue to set
the agenda as champions, campaigners and changemakers in their
communities.
Print advertising decreased by 4.3% year-on-year, benefitting
from the easing of lockdown in Q2 when it grew by 20.8%. Despite an
ongoing structural shift away from print advertising towards
digital, the two-year rate of decline has remained broadly stable
over the past twelve months. On a two-year basis revenue is down
33.7%, similar to the H2 2020 two-year rate of decline of 36.3%. We
continue to see lower spend from a number of key sectors, like
travel which did not make a significant contribution during the
period due to ongoing restrictions. The team have however continued
to win some excellent campaigns from the likes of Barclays, BT and
Tesco with an encouraging growth in print activity from digital
platforms such as Google and eBay - demonstrating the ongoing power
of print in awareness building campaigns. We have also continued to
benefit from the industry-wide Government advertising spend around
COVID.
Investment in agenda-setting journalism and engaging content
This spring we announced our plans to expand our regional
digital network to cover England and Wales at a county by county
level and we're on track to achieve this goal. This week alone we
launch four regional newsbrands with the arrival of NorfolkLive,
DarlingtonLive, DorsetLive and MyShropshire. In Herefordshire,
Shropshire, Rutland and Darlington new channels are being built
into existing sites to provide full coverage for these areas.
As well as new sites and channels we are continuing to expand
existing services such as MyLondon which has seen strong audience
growth and was one of the most visited sites for Mayoral election
news. Having attracted around 15 million page views towards the end
of 2020, MyLondon has now grown to around double that number.
Starting the year with 20 journalists covering mainly lifestyle
stories, the team is now 55 strong and is covering a much broader
range of stories including transport, local democracy and court
reporting, with coverage of every London borough.
While we continue to extend our geographic reach we are also
strengthening the depth of our local reporting, for example the
Northern Agenda newsletter, which brings together our best
political reporting from the North along with exclusive insights
from journalists including Jen Williams, Liam Thorp and Rob Parsons
with a focus on the Red wall seats that are likely to determine the
next election.
Reach remains the largest partner of the BBC's Local Democracy
Reporter Scheme which aims to ensure key events like council and
court proceedings receive ongoing coverage. 75 of the 165 reporters
in the scheme are allocated to Reach and we invest in training and
infrastructure for these roles to promote local news and to nurture
some of the brightest journalistic talent in the UK. Our editorial
teams now deliver over 300 newsletters which remain a key driver of
our Customer Value Strategy and provide our readers with tailored
content on everything from baking to football to stories of
inspirational women. These newsletters not only support our
Customer Value Strategy and drive traffic, but also cement that
all-important daily relationship between reader and title which
fuels everything we do. Any reporter can suggest a theme for a
newsletter and we are launching a number of 'obsession' titles to
capitalise on events such as popular TV series' or sporting and
cultural events. Latest examples include newsletters on
crypto-currencies, one themed on House of Dragons, (the sequel to
Game of Thrones), as well as a cooking-themed newsletter and one on
the Olympics.
Both our national and regional titles have continued to hold
power to account, campaign for change, and set the national agenda.
The Express made headlines with their first ever Green issue this
year, sending a clear message that concern for the climate crisis
has truly gone mainstream. Their two-year "End This Injustice"
campaign has successfully campaigned for better safeguards for
abuse victims, resulting in the Domestic Abuse Bill passed this
April.
Meanwhile, the Mirror set the agenda for days this spring with
their world exclusive from Jennifer Arcuri. Recently the title
launched a focus on positive journalism with the 1,000 Acts of
Kindness initiative across print and digital. The title secured
five awards at the annual press awards and was highly commended in
the Daily Newspaper of the Year category. The Manchester Evening
News stood out for their relentless and thorough coverage of the
Manchester bomb inquiry reflecting the concern of the local
community about the tragedy.
On the sports desk, our national and regional sports teams
worked together to swiftly "Stop the ESL" and to take a stand
against racism in football when they boycotted social media for
three days. Our leadership in Sport continued to strengthen during
the year and we have invested in the team with the planned
recruitment of over 70 sports journalists during July.
Amid our push to expand and deepen engagement, we remain the
UK's largest national and regional commercial publisher, the only
publisher with a digital reach of over 40 million unique visitors a
month and the fifth largest digital property in the UK. We
consistently attract the leading monthly audience for sport and
continue to attract more 18-24s than any other commercial digital
publisher. Put simply, despite the ongoing narrative of news being
in decline, the fact is that our content has never been read by
more people at a national and local level.
Key to our audience growth are the technology platforms and we
continue to work with Google and Facebook on their respective news
initiatives for which we now receive regular monthly fees. We
continue to work with the wider industry on resolving the wider
payment for content issues across all platforms, with the aim of
establishing a sustainable eco-system for readers, publishers and
platforms.
Building a culture geared for growth
Entrepreneurial, data-led approach
We are embedding an entrepreneurial culture at Reach with
colleagues encouraged to suggest ideas for content to bring our
strategy to life.
We continue to encourage a test and learn approach, underpinned
by an investment programme with colleagues all having the
opportunity to suggest content projects that support our audience
goals and ultimately the wider Customer Value Strategy. Initiatives
include Dragon's Den style pitches and a weekly editorial prize
pool for the best ideas.
This entrepreneurial environment has enabled our contextual
advertising tool Mantis to flourish. This is a Reach advertising
tool developed in house with the assistance of IBM Watson. While
initially conceived as an industry brand safety tool, we've
realised its potential for sophisticated advertising targeting and
have already rolled these trials out with big brands in the
betting, fashion and gaming spaces. This spring, the Independent
and Evening Standard signed on to license Mantis from us. We have
made a name for ourselves as experts in the publishing ad tech
space. While Google's planned changes to cookies has been delayed
until 2023 we are well placed to navigate the advertising landscape
when these changes do eventually happen.
Increased focus on ESG
As Reach rebuilds its value it is key we grow in a responsible
and sustainable way and we have instigated an increased focus on
Environment, Social and Governance actions to ensure this.
Environment
Reach is committed to minimising our environmental impact and we
are already using 100% renewable electricity. We have also set a
target for reducing our Greenhouse Gas emissions by 75% between now
and 2025. Together with a number of industry peers we have
committed to the Ad net zero commitment through Newsworks which
will see us ensure we produce our advertising without impacting the
environment through carbon emissions.
Social
Our core purpose is to serve our communities as champions,
campaigners and changemakers. Every year we celebrate ordinary
people achieving extraordinary things through our Pride awards and
the Mirror is building on this positive approach to news through
its 'Mirror hopeful' campaign that saw the paper run 1,000 positive
stories from lockdown recently.
Our titles play key roles in championing social causes whether
it be exposing and challenging the flawed plans for a European
Super League to the successful Daily Express campaign to change the
benefits system to ensure the terminally ill no longer have to wait
weeks to receive help.
Colleague well-being has continued to be a focus with both
Sanctus mental health coaching and free access to the meditation
app Headspace proving popular. We initiated a mental health
well-being champions programme last year and this continues to be
valuable in creating an environment where our people can talk
openly about the challenges of lockdown or personal mental health
issues.
Online abuse towards journalists has become a concerning trend,
so we surveyed our people to better understand the scale of the
problem. As a result, last month we also took an industry-leading
step to tackle online abuse - by appointing an Online Safety
Editor, dedicated to supporting colleagues and working with social
media platforms to find solutions.
We have also made big steps this year toward our goal to
becoming a more inclusive company. We have established our
Inclusion strategy and we're trying to better understand the
make-up of our colleagues by asking colleagues about their
experiences and origins. This insight will continue to feed our
strategy moving forward. We continue to develop forums for sharing
experiences and information about inclusion issues through the
formation of six inclusion groups and a network of Inclusion
champions. We also signed the Valuable 500 pledge and Race at Work
charter, making ourselves more externally accountable to our
promises. As this work continues we have already begun to see some
hugely positive steps such as MyLondon hiring their first Race and
Diversity Correspondent, and across the titles we're seeing more
journalists feeling empowered to sit up and take part in shaping
more inclusive editorial guidelines.
At a time when many companies are grappling with what the return
to the office looks like, we are also leading the way with our
hybrid "Home and Hub" working plan. This plan followed extensive
consultation with colleagues about the future of work at Reach.
Building on their input we will be able to offer colleagues more
flexibility across 15 workspaces, as restrictions allow and when
buildings are refurbished.
This has begun to bear fruit in our recruitment efforts as we
are able to consider a more diverse pool of applicants, with far
fewer needing to commute into regional hubs. Increasingly our local
journalists can be based in their local community rather than
commute into a regional centre. Importantly we have kept the link
with regional offices however so that around a third of colleagues
will be office based, a third will be mostly home based with
regular office attendance and a third working from home.
Governance
Good governance ensures companies act responsibly, in a
sustainable way, whilst also monitoring the impact of culture
initiatives that are underway. A good example of such governance in
action has been this year's focus on D&I where the Board
established working groups on the issue and have ensured that
commitments on D&I are embedded in executive remuneration. The
Board also approved a specific Board Diversity Policy in May.
Colleague wellbeing is closely monitored by the Board and the risk
assurance programme has this year been expanded which has also
involved overseeing a comprehensive review of our cybersecurity and
data protection policies and procedures. The Board will also be
formally constituting a Board Sustainability Committee to oversee
the content and approach to Reach's sustainability strategy.
Investing in the opportunities ahead
With the Customer Value Strategy continuing to gather momentum
we are increasing investment in our journalists, content and
technology. We currently have fourteen investment projects live
within the business and across 2020 and 2021 have committed an
additional GBP20 million of investment in these areas. The
additional data and insight we are gathering through our registered
customer base is helping us build on what is already strong growth
in digital advertising with the future prospects for the Group
better than for many years.
Our digital revenue is now roughly 37% bigger than print
advertising and continues to grow strongly, while print circulation
continues to demonstrate resilience and post-lockdown recovery. The
business is well-placed to deliver on its strategy with future
benefits to customer engagement and loyalty from enhanced data and
personalisation as well as the ongoing expansion in the geographic
coverage of our local digital news sites.
We continue to build an inclusive and entrepreneurial culture at
Reach and the passion and commitment of our people and the
award-winning journalism that is core of our purpose provide us
with strong foundations for long-term sustainable growth.
Jim Mullen
Chief Executive Officer
27 July 2021
Financial Review
A strong half year adjusted performance driven by revenue
growth, mix change and the benefit of cost savings; with the
statutory performance impacted by adjusted items and the future
change in the tax rate. The Group has continued to maintain a
strong balance sheet with adequate liquidity.
Income statement
Adjusted Adjusted Statutory Statutory
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
--------------------- ----------- ----------- ------------ ------------
Revenue 302.3 290.8 302.3 290.8
Costs (234.9) (236.2) (274.5) (261.7)
Associates 1.5 0.3 0.8 (0.2)
Operating profit 68.9 54.9 28.6 28.9
Finance costs (1.1) (1.4) (2.9) (3.7)
--------------------- ----------- ----------- ------------ ------------
Profit before tax 67.8 53.5 25.7 25.2
Tax charge (12.6) (10.3) (60.5) (27.6)
--------------------- ----------- ----------- ------------ ------------
Profit/(loss) after
tax 55.2 43.2 (34.8) (2.4)
--------------------- ----------- ----------- ------------ ------------
Earnings/(loss) per
share - basic 17.8 14.0 (11.2) (0.8)
--------------------- ----------- ----------- ------------ ------------
Group Revenue increased by GBP11.5m or 4.0% driven by digital
revenue growth which fully mitigated the print revenue decline.
Adjusted costs decreased by GBP1.3m or 0.6% due to the cost
savings from the transformation programme more than offsetting the
costs associated with the higher revenue and the reversal of the
one-offs in 2020 such as salary reductions, bonus suspension and
furlough. Statutory costs increased by GBP12.8m or 4.9% due to
adjusted items of GBP39.6m compared to GBP25.5m in 2020.
The higher revenue and lower adjusted costs drove a GBP14.0m or
25.5% increase in adjusted operating profit and an adjusted
operating margin of 22.8% compared to 18.9% for the first half of
2020. Statutory operating profit decreased by GBP0.3m or 1.0%.
Adjusted earnings per share increased by 3.8p or 27.1% with
lower adjusted finance costs and an adjusted tax rate broadly in
line with the corporation tax rate of 19%. Statutory loss per share
of 11.2p was due to the GBP53.9m deferred tax charge from the
multi-year impact of the future change in the corporation tax
rate.
Revenue
Revenue is presented on an actual and like-for-like basis which
excludes the impact of the Irish Daily Star acquisition from 2021
and the impact of portfolio changes from 2020.
2021 2020 2021 2020
Actual Actual like-for-like like-for-like
GBPm GBPm GBPm GBPm
--------------- -------- -------- --------------- ---------------
Print 232.4 241.0 227.0 239.5
--------------- -------- -------- --------------- ---------------
Circulation 160.0 163.9 155.5 163.9
Advertising 50.3 53.1 49.4 51.6
Printing 9.6 11.8 9.6 11.8
Other 12.5 12.2 12.5 12.2
--------------- -------- -------- --------------- ---------------
Digital 68.8 48.2 68.8 48.2
Other 1.1 1.6 1.1 1.6
Total revenue 302.3 290.8 296.9 289.3
--------------- -------- -------- --------------- ---------------
Revenue increased by GBP11.5m or 4.0% on an actual basis and by
GBP7.6m or 2.6% on a like-for-like basis. Digital which is the same
on an actual and like-for-like basis increased by GBP20.6m or 42.7%
while print declined by GBP8.6m or 3.6% on an actual basis and by
GBP12.5m or 5.2% on a like-for-like basis. Other revenue is derived
from our specialist digital recruitment websites.
Revenue trends began to be significantly impacted by the
COVID-19 pandemic towards the end of March 2020 and although this
gradually eased as we moved into the second half, it significantly
affected performance, particularly during Q2. Because of this and
in order to provide additional insight into our performance, we
include revenue trends on a two-year like-for-like basis, in
addition to year on year movements versus 2020.
Q1 2021 YOY Q2 2021 YOY HY 2021 YOY HY 2yr*
% % % %
Digital Revenue 25.2% 65.0% 42.7% 41.4%
------------ ------------ ------------ --------
Print Revenue (15.2)% 7.3% (5.2)% (23.9)%
------------ ------------ ------------ --------
Group Revenue (8.7)% 16.8% 2.6% (14.9)%
------------ ------------ ------------ --------
* 2yr movement is a like-for-like comparison versus the same
period in 2019
Digital revenues increased by 42.7% to GBP68.8m on an actual and
like-for-like basis (2020: down 1.0%).
The strong growth in digital revenues has been driven by
improved yields, the Customer Value Strategy and a general sector
shift towards digital advertising. Page views have decreased
compared to those seen as the COVID-19 pandemic broke and the
country entered into the first lockdown which drove significant
one-off traffic.
Print revenue decreased by GBP8.6m or 3.6% on an actual basis
and by GBP12.5m or 5.2% on a like-for-like basis (2020: down
20.1%).
Circulation revenue declined by 5.1% on a like-for-like basis
(2020: down 11.5%).
Circulation volumes for the Group's national daily titles
(excluding the impact of sampling) fell by 10.3%. The Group's
national Sunday titles (excluding the impact of sampling) fell by
11.5%. Volume declines for our regional titles were 12.2% for
paid-for dailies, 21.9% for paid-for weeklies and 12.8% for
paid-for Sundays. The circulation volume trend is impacted by cover
price differentials and our strategy to increase cover prices each
year to protect revenue performance.
Print advertising revenue declined by 4.3% on a like-for-like
basis (2020: down 31.9%).
Our nationally sourced advertising performed better than locally
sourced advertising. Nationally, while volumes continue to be down
in a number of sectors there were some sectors which have continued
to be active throughout, such as Food Retail and Home
Entertainment, and we have also benefited from additional
Government spend. Although a number of sectors are recovering,
non-food retail and travel are still a significant drag. The impact
on locally sourced advertising was greater with the majority of
smaller advertisers not advertising at all combined with much
reduced classified activity.
Within print, printing revenue decreased by 18.6% on a
like-for-like basis driven by continued pressure on contract print
volumes and the closure of two print plants at the end of 2020. O
ther revenue increased by 2.5% as enterprise revenues such as
holidays, fewer events and reduction in other contract printing
such as sports all continued to be impacted.
Costs
2021 2020 2021 2020
Adjusted Adjusted Statutory Statutory
GBPm GBPm GBPm GBPm
-------------- ---------- ---------- ----------- -----------
Labour 115.0 109.0 115.0 109.0
Newsprint 25.2 23.3 25.2 23.3
Depreciation 9.9 13.5 9.9 13.5
Other 84.8 90.4 124.4 115.9
Total costs 234.9 236.2 274.5 261.7
-------------- ---------- ---------- ----------- -----------
Adjusted costs decreased by GBP1.3m or 0.6% due to the benefits
of the costs actions taken more than offsetting the costs
associated with the higher revenue and the reversal of the one-offs
in 2020 such as salary reductions, bonus suspension and
furlough.
In the second half of 2020 the Group implemented an end to end
transformation programme which improved operational efficiency and
reviewed our print capacity which resulted in the closure of two
print plants, together delivering annualised savings of GBP46m.
In the first half of 2021 the Group implemented a Home and Hub
project which set out the vision for how the future offices would
look and where job roles would be based. As a consequence of the
project a number of offices or floors will no longer be required.
The project has resulted in charges of GBP23.7m (impairments of
GBP2.3m relating to fixed assets and GBP10.5m to right-of-use
assets and a GBP10.9m property rationalisation charge relating to
future costs of vacant properties). Annual savings of GBP8m are
expected to be delivered through the income statement.
Statutory costs increased by GBP12.8m or 4.9% due to adjusted
items of GBP39.6m compared to GBP25.5m in the equivalent period in
2020.
Reconciliation of statutory to adjusted results
Operating Pension
Statutory adjusted finance Adjusted
results items charge Tax results
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------------- ------------- ----------- ------- ------------
Revenue 302.3 - - - 302.3
Operating profit 28.6 40.3 - - 68.9
Profit before tax 25.7 40.3 1.8 - 67.8
(Loss)/profit after tax (34.8) 34.6 1.5 53.9 55.2
Basic (loss)/earnings per
share (p) (11.2) 11.1 0.5 17.4 17.8
--------------------------- ------------- ------------- ----------- ------- ------------
The Group excludes from the adjusted results: operating adjusted
items (note 5), pension finance charge (note 14) and tax changes
arising from changes in the corporation tax rate (note 8). Adjusted
items relate to costs or incomes that derive from events or
transactions that fall within the normal activities of the Group,
but are excluded from the Group's adjusted profit measures,
individually or, if of a similar type in aggregate, due to their
size and/or nature in order to better reflect management's view of
the performance of the Group.
Items are adjusted for where they relate to material items in
the year (impairment, restructuring, disposals, closures, tax rate
changes) or relate to historic liabilities (historical legal and
contractual issues, defined benefit pension schemes which are all
closed to future accrual). These include items which have occurred
for a number of years and may continue in future years. Management
exclude these from the results that it uses to manage the business
and on which bonuses are based to reflect the underlying
performance of the business and believes that the adjusted results,
presented alongside the statutory results, provides users with
additional useful information.
Restructuring charges and closure costs incurred to deliver
specific cost reduction measures. These costs are principally
severance related, but may also include system integration costs
and print plant closure costs. They are included in adjusted items
on the basis that they are material and can vary considerably each
year, distorting the underlying performance of the business.
Provision for historical legal issues relates to the cost
associated with dealing with and resolving civil claims for
historical phone hacking and unlawful information gathering. This
is included in adjusted items as the amounts are material, it
relates to historical matters and movements in the provision can
vary year to year.
Impairments to non-current assets arise following impairment
reviews or where a decision is made to close or retire offices or
printing assets. These non-cash items are included in adjusted
items on the basis that they are material and vary considerably
each year, distorting the underlying performance of the
business.
The Group's defined benefit pension schemes are all closed to
new members and to future accrual and are therefore not related to
the current business. The pension administration expenses, the past
service costs for GMP equalisation and the pension finance charge
are included in adjusted items as the amounts are significant and
they relate to the historical pension commitment.
The opening deferred tax position is recalculated in the period
in which a change in the standard rate of corporation tax has been
enacted or substantively enacted by parliament or when a decision
is reversed. The impact of the change in rates are included in
adjusted items, on the basis that when they occur they are
material, distorting the underlying performance of the
business.
Other items may be included in adjusted items if they are
material, such as transaction costs incurred on significant
acquisitions or the profit or loss on the sale of subsidiaries,
associates or freehold buildings or liabilities arising from
historical contractual issues. They are included in adjusted items
on the basis that they are material and can vary considerably each
year, distorting the underlying performance of the business.
Balance Sheet
Strong cash generation
Net cash increased by GBP12.7m from GBP42.0m at the prior year
end to a net cash position of GBP54.7m at the half-year.
Historical legal issues
The historical legal issues provision relates to the cost
associated with dealing with and resolving civil claims in relation
to historical phone hacking and unlawful information gathering.
There are three parts to the provision: known claims, potential
onerous claims and common court costs with estimates based on
historical trends and experience of claims and costs. Certain cases
and other matters relating to the issue can be subject to court
proceedings, the outcome of which can impact on how much is
required to settle the remaining claims and on the number of
claims. The Group has recorded an increase in the provision every
year since 2014 which highlights the challenges in making a best
estimate and the time taken to resolve this historical matter. Due
to uncertainty relating to potential future claims, a contingent
liability note has been highlighted in note 18. The provision has
been increased by GBP13.0m in the period. At the period end, a
provision of GBP32.4m remains outstanding and this represents the
current best estimate of the amount required to resolve this
historical matter. The provision is expected to be utilised over
the next few years.
Decrease in accounting pension deficit
The IAS 19 pension deficit (net of deferred tax) in respect of
the Group's six defined benefit pension schemes decreased by
GBP136.8m from GBP255.5m to GBP118.7m. The decrease was driven by
an increase in the discount rate and as a result of Group
contributions . Changes in the accounting pension deficit do not
have an immediate impact on the agreed funding commitments. The
triennial valuation for funding of the defined benefit pension
schemes as at 31 December 2019 would usually be completed by 31
March 2021. We have agreed the funding of the West Ferry Printers
Pension Scheme (the 'WF Scheme') and the discussions with the
remaining five schemes are ongoing, having been delayed by
COVID-19.
Group contributions in respect of the defined benefit pension
schemes in the first half were GBP37.1m (2020: GBP22.0m). This
comprised GBP9.6m to the WF scheme and GBP27.5m under the current
schedule of contributions of the remaining five schemes. The
payment of GBP9.6m enabled the Trustees of the WF scheme to
purchase a bulk annuity and the scheme now has all pension
liabilities covered by annuity policies. No further funding to the
WF scheme is expected. Contributions in the second half are
expected to be GBP27.6m under the current schedule of contributions
for the remaining five schemes.
Deferred consideration
Deferred consideration is in respect of the acquisition of
Express & Star. Payment of the second payment of GBP16.0m was
made on 28 February 2021. Of the remaining amount of GBP24.1m,
GBP17.1m is classified as current liabilities (payable on 28
February 2022) and GBP7.0m is classified as non-current liabilities
(payable on 28 February 2023).
Employee benefit trust
The Group intends to fund the Trustees of the Employee Benefit
Trust in the second half to enable the Trustees to purchase shares
up to a value of GBP3m. The shares will be held by the Trustees and
used to satisfy in respect of awards granted under the Company's
employee share plans that are expected to vest in future years.
Cash Flow
Continued good cash generation
Cash generated from operations on a statutory basis was GBP95.7m
(2020: GBP78.2m). This includes a positive working capital movement
of GBP42.8m (2020: GBP32.9m) due to the first half cut-off and
seasonality which benefits the first half of the year and is
expected to substantially reverse over the second half of the
year.
The Group presents an adjusted cash flow which reconciles the
adjusted operating profit to the net change in cash and cash
equivalents. Set out in note 21 is the reconciliation between the
statutory and the adjusted cash flow. The adjusted operating cash
flow was GBP82.6m (2020: GBP63.5m).
Dividends
The Group paid a final dividend for 2020 of 4.26 pence per share
in June 2021. An interim dividend for 2021 of 2.75 pence per share
will be paid on 24 September 2021 to shareholders on the register
on 13 August 2021 (an increase of 4.6% compared to non-cash bonus
issue of shares to shareholders, in lieu of and with a value
equivalent to an interim dividend for 2020 of 2.63 pence per
share).
The Board recognises the importance of growing dividends for
shareholders while also investing to grow the business and meeting
our funding commitments to the defined benefit pension schemes. The
Board expects to continue to adopt a policy of paying dividends
which are aligned to the free cash generation of the Group. Free
cash generation for this purpose is the net cash flow generated by
the Group before the repayment of debt, dividend payments, other
capital returns to shareholders and additional contributions made
to the defined benefit pension schemes because of any substantial
increase in dividends and/or capital returns to shareholders.
Principal risks and uncertainties
The Group recognises the importance of the effective
understanding and management of risk in enabling us to identify
factors, both externally and internally that may materially affect
our ability to achieve our goals. There is an ongoing process for
the identification, evaluation and management of the principal
risks faced by the Group, including emerging risks. Appropriate
mitigating actions are in place to minimise the impact of the risks
and uncertainties which are identified as part of the risk process.
All risks are considered in the context of our strategic
objectives, the changing regulatory and compliance landscape and
enabling the continuity of our operations.
These principal risks and uncertainties, the risk appetite in
relation to these and the resulting actions are set out in the
Reach plc 2020 Annual Report which is available on our website at
www.reachplc.com .
The principal risks and uncertainties continue to be:
Macro-economic deterioration; Print revenue decline acceleration;
Insufficient digital revenue growth; Cyber security breach; Data
protection; Supply chain failure; Health and safety issue; Lack of
funding capability; Inability to recruit and retain talent and
Brand reputation damage.
Going concern statement
The directors assessed the Group's prospects, both as a going
concern and its longer term viability, at the time of approval of
the Group's 2020 Annual Report. Further information is set out in
the Reach plc 2020 Annual Report.
At the half year, the directors have reviewed the going concern
assessment, specifically the ongoing impact of COVID-19 and the
implementation of the Group's Customer Value Strategy. The Group
undertakes regular forecasts and projections of trading identifying
areas of focus for management to improve delivery of the Strategy
and mitigate the impact of any deterioration in the economic
outlook. The Group has a strong balance sheet and liquidity with a
net cash positive position of GBP54.7m. This represents a cash
balance of GBP54.7m with no draw down from the Group's revolving
credit facility of GBP65.0m.
Accordingly, the directors have adopted the going concern basis
of accounting in the preparation of the Group's half-yearly
financial report.
Statement of directors' responsibilities
The directors are responsible for preparing the half-yearly
financial report in accordance with applicable laws and
regulations. The directors confirm to the best of their
knowledge:
a) that the interim condensed consolidated financial statements
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and that the interim management report includes a
fair review of the information required by DTR 4.2.7 and DTR 4.2.8
namely:
i. an indication of important events that have occurred during
the first six months and their impact on the interim condensed
consolidated financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
ii. material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
By order of the Board of Directors
Simon Fuller
Chief Financial Officer
27 July 2021
Condensed interim consolidated financial statements
Consolidated income statement
for the 26 weeks ended 27 June 2021 (26 weeks ended 28 June 2020
and 52 weeks ended 27 December 2020)
Adjusted Adjusted Adjusted
Adjusted Items Statutory Adjusted Items Statutory Adjusted Items Statutory
26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks 52 weeks
notes ended ended ended ended ended ended ended ended ended
27 June 27 June 27 June 28 June 28 June 28 June 27 27 27
2021 2021 2021 2020 2020 2020 December December December
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2020 2020 2020
GBPm GBPm GBPm GBPm GBPm GBPm (audited) (audited) (audited)
GBPm GBPm GBPm
----------------- ------- ------------- ------------ ------------- ------------- ------------ ------------- ----------- ---------- -----------
Revenue 4 302.3 - 302.3 290.8 - 290.8 600.2 - 600.2
Cost of sales (160.0) - (160.0) (153.9) - (153.9) (303.2) - (303.2)
----------------- ------- ------------- ------------ ------------- ------------- ------------ ------------- ----------- ---------- -----------
Gross profit 142.3 - 142.3 136.9 - 136.9 297.0 - 297.0
Distribution
costs (21.7) - (21.7) (23.5) - (23.5) (46.2) - (46.2)
Administrative
expenses (53.2) (39.6) (92.8) (58.8) (25.5) (84.3) (119.6) (125.0) (244.6)
Share of results
of
associates 1.5 (0.7) 0.8 0.3 (0.5) (0.2) 2.6 (1.2) 1.4
Operating profit 68.9 (40.3) 28.6 54.9 (26.0) 28.9 133.8 (126.2) 7.6
Interest income 6 - - - - - - 0.1 - 0.1
Pension finance
charge 14 - (1.8) (1.8) - (2.3) (2.3) - (4.7) (4.7)
Finance costs 7 (1.1) - (1.1) (1.4) - (1.4) (2.6) - (2.6)
----------------- ------- ------------- ------------ ------------- ------------- ------------ ------------- ----------- ---------- -----------
Profit before
tax 67.8 (42.1) 25.7 53.5 (28.3) 25.2 131.3 (130.9) 0.4
Tax charge 8 (12.6) (47.9) (60.5) (10.3) (17.3) (27.6) (24.9) (2.2) (27.1)
----------------- ------- ------------- ------------ ------------- ------------- ------------ ------------- ----------- ---------- -----------
Profit/(loss)
for the
period
attributable
to equity
holders of
the parent 55.2 (90.0) (34.8) 43.2 (45.6) (2.4) 106.4 (133.1) (26.7)
Restated Restated
Earnings per 2021 2021 2020 2020 2020 2020
share notes Pence Pence Pence Pence Pence Pence
----------------- ------- ------------- ------------ ------------- ------------- ------------ ------------- ----------- ---------- -----------
Earnings/(loss)
per
share - basic 10 17.8 (11.2) 14.0 (0.8) 34.4 (8.6)
Earnings/(loss)
per
share - diluted 10 17.3 (11.2) 13.8 (0.8) 33.6 (8.6)
----------------- ------- ------------- ------------ ------------- ------------- ------------ ------------- ----------- ---------- -----------
The above results were derived from continuing operations. Set
out in note 19 is the reconciliation between the statutory and
adjusted results.
Earnings per share for 26 weeks ended 28 June 2020 has been
restated following the bonus issue to shareholders, in lieu of and
with a value equivalent to an 2020 interim dividend of 2.63 pence
per share.
Consolidated statement of comprehensive income
for the 26 weeks ended 27 June 2021 (26 weeks ended 28 June 2020
and 52 weeks ended 27 December 2020)
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
notes
------------------------------------------- ------- ------------------ ------------------ --------------
Loss for the period (34.8) (2.4) (26.7)
------------------------------------------- ------- ------------------ ------------------ --------------
Items that will not be reclassified to
profit and loss:
Actuarial gain/(loss) on defined benefit
pension schemes 14 125.6 16.6 (61.6)
Tax on actuarial gain/(loss) on defined
benefit pension schemes 8 (31.4) (3.1) 11.7
Deferred tax credit resulting from change
in tax rate 8 13.9 5.9 5.9
Share of items recognised by associates - - (0.5)
------------------------------------------- ------- ------------------ ------------------ --------------
Other comprehensive income/(loss) for
the period 108.1 19.4 (44.5)
Total comprehensive income/(loss) for
the period 73.3 17.0 (71.2)
------------------------------------------- ------- ------------------ ------------------ --------------
Consolidated cash flow statement
for the 26 weeks ended 27 June 2021 (26 weeks ended 28 June 2020
and 52 weeks ended 27 December 2020)
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
notes
------------------------------------------------- ------- ------------------ ------------------ --------------
Cash flows from operating activities
Cash generated from operations 11 95.7 78.2 121.3
Pension deficit funding payments 14 (37.1) (22.0) (53.9)
Income tax paid (9.2) (8.3) (14.2)
------------------------------------------------- ------- ------------------ ------------------ --------------
Net cash inflow from operating activities 49.4 47.9 53.2
------------------------------------------------- ------- ------------------ ------------------ --------------
Investing activities
Interest received - - 0.1
Dividends received from associated undertakings - - 0.5
Proceeds on disposal of property, plant
and equipment - 0.3 0.3
Purchases of property, plant and equipment (2.8) (1.8) (1.9)
Deferred consideration payment (16.0) (18.9) (18.9)
Acquisition of subsidiary undertaking - - (3.4)
Acquisition of associate undertaking - (0.2) (0.2)
Cash acquired on acquisition of subsidiary
undertaking - - 2.3
Net cash used in investing activities (18.8) (20.6) (21.2)
Financing activities
Dividends paid (13.2) - -
Interest paid on bank borrowings (0.4) (0.6) (1.2)
Drawdown of bank borrowings - 25.0 25.0
Repayment of bank borrowings - - (25.0)
Interest paid on leases (0.7) (0.8) (1.5)
Repayments of obligations under leases (3.6) (4.4) (7.7)
Net cash (used in)/received from financing
activities (17.9) 19.2 (10.4)
------------------------------------------------- ------- ------------------ ------------------ --------------
Net increase in cash and cash equivalents 12.7 46.5 21.6
------------------------------------------------- ------- ------------------ ------------------ --------------
Cash and cash equivalents at the beginning
of the period 15 42.0 20.4 20.4
------------------------------------------------- ------- ------------------ ------------------ --------------
Cash and cash equivalents at the end of
the period 15 54.7 66.9 42.0
------------------------------------------------- ------- ------------------ ------------------ --------------
Consolidated statement of changes in equity
for the 26 weeks ended 27 June 2021 (26 weeks ended 28 June 2020
and 52 weeks ended 27 December 2020)
Retained
Share Capital earnings
Share premium Merger redemption and other
capital account reserve reserve reserves Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
At 27 December 2020 (audited) (32.2) (605.4) (17.4) (4.4) 92.7 (566.7)
Loss for the period - - - - 34.8 34.8
Other comprehensive income
for the period - - - - (108.1) (108.1)
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
Total comprehensive income
for the period - - - - (73.3) (73.3)
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
Credit to equity for equity-settled
share-based payments - - - - (0.8) (0.8)
Dividends paid - - - - 13.2 13.2
At 27 June 2021 (unaudited) (32.2) (605.4) (17.4) (4.4) 31.8 (627.6)
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
At 29 December 2019 (audited) (30.9) (606.7) (17.4) (4.4) 24.2 (635.2)
Loss for the period - - - - 2.4 2.4
Other comprehensive income
for the period - - - - (19.4) (19.4)
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
Total comprehensive income
for the period - - - - (17.0) (17.0)
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
Credit to equity for equity-settled
share-based payments - - - - (0.6) (0.6)
At 28 June 2020 (unaudited) (30.9) (606.7) (17.4) (4.4) 6.6 (652.8)
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
At 29 December 2019 (audited) (30.9) (606.7) (17.4) (4.4) 24.2 (635.2)
Loss for the period - - - - 26.7 26.7
Other comprehensive loss for
the period - - - - 44.5 44.5
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
Total comprehensive loss for
the period - - - - 71.2 71.2
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
Bonus issue of shares (1.3) 1.3 - - - -
Credit to equity for equity-settled
share-based payments - - - - (2.7) (2.7)
--------
At 27 December 2020 (audited) (32.2) (605.4) (17.4) (4.4) 92.7 (566.7)
------------------------------------- ---------- ---------- ---------- ------------- ----------- --------
Consolidated statement of changes in equity
for the 26 weeks ended 27 June 2021 (26 weeks ended 28 June 2020
and 52 weeks ended 27 December 2020)
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
notes
--------------------------------------------- ------- ------------------ ------------------ --------------
Non-current assets
Goodwill 35.9 42.0 35.9
Other intangible assets 818.7 810.0 818.7
Property, plant and equipment 12 161.2 216.4 168.4
Right-of-use assets 13 12.9 42.6 25.3
Investment in associates 18.9 21.9 18.1
Retirement benefit assets 14 100.1 74.6 50.4
Deferred tax assets 41.0 55.0 60.5
1,188.7 1,262.5 1,177.3
--------------------------------------------- ------- ------------------ ------------------ --------------
Current assets
Inventories 3.9 5.1 4.6
Trade and other receivables 102.9 91.9 110.5
Cash and cash equivalents 15 54.7 66.9 42.0
--------------------------------------------- ------- ------------------ ------------------ --------------
161.5 163.9 157.1
--------------------------------------------- ------- ------------------ ------------------ --------------
Total assets 1,350.2 1,426.4 1,334.4
--------------------------------------------- ------- ------------------ ------------------ --------------
Non-current liabilities
Deferred consideration 15 (7.0) (24.1) (24.1)
Lease liabilities 15 (32.6) (38.4) (35.5)
Retirement benefit obligations 14 (255.1) (336.2) (364.8)
Deferred tax liabilities (226.2) (178.9) (172.4)
Provisions 16 (41.7) (17.5) (25.2)
(562.6) (595.1) (622.0)
--------------------------------------------- ------- ------------------ ------------------ --------------
Current liabilities
Trade and other payables (112.5) (91.8) (92.1)
Deferred consideration 15 (17.1) (16.0) (16.0)
Borrowings 15 - (25.0) -
Lease liabilities 15 (5.6) (6.4) (6.1)
Current tax liabilities 8 - (4.7) -
Provisions 16 (24.8) (34.6) (31.5)
(160.0) (178.5) (145.7)
--------------------------------------------- ------- ------------------ ------------------ --------------
Total liabilities (722.6) (773.6) (767.7)
--------------------------------------------- ------- ------------------ ------------------ --------------
Net assets 627.6 652.8 566.7
--------------------------------------------- ------- ------------------ ------------------ --------------
Equity
Share capital 17 (32.2) (30.9) (32.2)
Share premium account 17 (605.4) (606.7) (605.4)
Merger reserve 17 (17.4) (17.4) (17.4)
Capital redemption reserve 17 (4.4) (4.4) (4.4)
Retained earnings and other reserves 17 31.8 6.6 92.7
--------------------------------------------- ------- ------------------ ------------------ --------------
Total equity attributable to equity holders
of the parent (627.6) (652.8) (566.7)
--------------------------------------------- ------- ------------------ ------------------ --------------
Notes to the consolidated financial statements
for the 26 weeks ended 27 June 2021 (26 weeks ended 28 June 2020
and 52 weeks ended 27 December 2020)
1 . General information
The financial information in respect of the 52 weeks ended 27
December 2020 does not constitute statutory accounts within the
meaning of Section 434 of the Companies Act 2006. A copy of the
statutory accounts for that period has been delivered to the
Registrar of Companies and is available at the Company's registered
office at One Canada Square, Canary Wharf, London E14 5AP and on
the Company's website at www.reachplc.com. The auditors' report was
unqualified, did not include reference to any matters to which the
auditors drew attention by way of emphasis without qualifying the
report and did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
The financial information for the 26 weeks ended 27 June 2021
and the 26 weeks ended 28 June 2020 do not constitute statutory
accounts within the meaning of Section 434 of the Companies Act
2006 and have not been audited. No statutory accounts for these
periods have been delivered to the Registrar of Companies.
This half-yearly financial report constitutes a dissemination
announcement in accordance with Section 6.3 of the Disclosure and
Transparency Rules.
The auditors, PricewaterhouseCoopers LLP, have carried out a
review of the condensed set of financial statements and their
report is set out at the end of this announcement.
The half-yearly financial report was approved by the directors
on 27 July 2021. This announcement is available at the Company's
registered office at One Canada Square, Canary Wharf, London E14
5AP and on the Company's website at www.reachplc.com.
2 . Accounting policies
Basis of preparation
The Group's annual consolidated financial statements are
prepared in accordance with international accounting standards in
conformity with the Companies Act 2006 and IFRS as adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union. The condensed consolidated financial statements included in
this half-yearly financial report have been prepared in accordance
with IAS 34 'Interim Financial Reporting' as adopted by the
European Union. Taxes on income in the interim period are accrued
using the tax rate that would be applicable to expected total
annual profit or loss.
Going concern
The directors assessed the Group's prospects, both as a going
concern and its longer term viability, at the time of approval of
the Group's 2020 Annual Report. Further information is set out in
the Reach plc 2020 Annual Report.
At the half year, the directors have reviewed the going concern
assessment, specifically the ongoing impact of COVID-19 and the
implementation of the Group's Customer Value Strategy. The Group
undertakes regular forecasts and projections of trading identifying
areas of focus for management to improve delivery of the Strategy
and mitigate the impact of any deterioration in the economic
outlook. The Group has a strong balance sheet and liquidity with a
net cash positive position of GBP54.7m. This represents a cash
balance of GBP54.7m with no draw down from the Group's revolving
credit facility of GBP65.0m.
Accordingly, the directors have adopted the going concern basis
of accounting in the preparation of the Group's half-yearly
financial report.
Changes in accounting policy
The same accounting policies, presentation and methods of
computation are followed in the interim condensed consolidated
financial statements as applied in the Group's latest annual
consolidated financial statements.
Alternative performance measures
The Company presents the results on a statutory and adjusted
basis and revenue trends on a statutory and like-for-like basis.
The Company believes that the adjusted basis and like-for-like
trends will provide investors with useful supplemental information
about the financial performance of the Group, enable comparison of
financial results between periods where certain items may vary
independent of business performance, and allow for greater
transparency with respect to key performance indicators used by
management in operating the Group and making decisions. Although
management believes the adjusted basis is important in evaluating
the Group, they are not intended to be considered in isolation or
as a substitute for, or as superior to, financial information on a
statutory basis. The alternative performance measures are not
recognised measures under IFRS and do not have standardised
meanings prescribed by IFRS and may be different to those used by
other companies, limiting the usefulness for comparison purposes.
Note 19 sets out the reconciliation between the statutory and
adjusted results. An adjusted cash flow is presented in note 20
which reconciles the adjusted operating profit to the net change in
cash and cash equivalents. Set out in note 21 is the reconciliation
between the statutory and adjusted cash flow. Note 22 shows the
reconciliation between the statutory and like-for-like
revenues.
Adjusted items
Adjusted items relate to costs or incomes that derive from
events or transactions that fall within the normal activities of
the Group, but are excluded from the Group's adjusted profit
measures, individually or, if of a similar type in aggregate, due
to their size and/or nature in order to better reflect management's
view of the performance of the Group. The adjusted profit measures
are not recognised profit measures under IFRS and may not be
directly comparable with adjusted profit measures used by other
companies. Details of adjusted items are set out in notes 5 and
19.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed
below:
Provisions (notes 8 and 16)
There is uncertainty as to liabilities arising from the outcome
or resolution of the ongoing historical legal issues and in
addition there is uncertainty as to the amount of expenditure that
may be tax deductible and additional tax liabilities may fall due
in relation to earlier years. Provisions are measured at the best
estimate of the expenditure required to settle the obligation based
on the assessment of the related facts and circumstances at each
reporting date. In particular, we note that there is uncertainty in
relation to the size and length of the property related
restructuring provisions.
Retirement benefits (note 14)
Actuarial assumptions adopted and external factors can
significantly impact the surplus or deficit of defined benefit
pension schemes. Valuations for funding and accounting purposes are
based on assumptions about future economic and demographic
variables. These result in risk of a volatile valuation deficit and
the risk that the ultimate cost of paying benefits is higher than
the current assessed liability value. Advice is sourced from
independent and qualified actuaries in selecting suitable
assumptions at each reporting date.
Impairment review
There is uncertainty in the value-in-use calculation. The most
significant area of uncertainty relates to expected future cash
flows for each cash-generating unit. Determining whether the
carrying values of assets in a cash-generating unit are impaired
requires an estimation of the value in use of the cash-generating
unit to which these have been allocated. The value-in-use
calculation requires the Group to estimate the future cash flows
expected to arise from the cash-generating unit and a suitable
discount rate in order to calculate present value. Projections are
based on both internal and external market information and reflect
past experience. The discount rate reflects the weighted average
cost of capital of the Group. The Group tests the carrying value of
assets at the cash-generating unit level for impairment annually or
more frequently if there are indicators that assets might be
impaired. For the 26 weeks to 27 June 2021, there have been no
indicators of impairment and therefore no review has been
undertaken.
Critical judgements in applying the Group's accounting
policies
In the process of applying the Group's accounting policies,
described above, management has made the following judgements that
have the most significant effect on the amounts recognised in the
financial statements:
Indefinite life assumption in respect of publishing rights and
titles
There is judgement required in continuing to adopt an indefinite
life assumption in respect of publishing rights and titles. The
directors consider publishing rights and titles (with a carrying
amount of GBP818.7m) have indefinite economic lives due to the
longevity of the brands and the ability to evolve them in an
ever-changing media landscape. At each reporting date management
review the suitability of this assumption.
Identification of cash-generating units
There is judgement required in determining the cash-generating
unit relating to our Publishing brands. At each reporting date
management review the interdependency of revenues across our
portfolio of Publishing brands to determine the appropriate
cash-generating unit. The Group operates its Publishing brands such
that a majority of the revenues are interdependent and revenue
would be materially lower if brands operated in isolation. As such,
management do not consider that an impairment review at an
individual brand level is appropriate or practical. As the Group
continues to centralise revenue generating functions and has moved
to a matrix operating structure over the past few years all of the
individual brands in Publishing have increased revenue
interdependency and are assessed for impairment as a single
Publishing cash-generating unit.
3. Segments
The performance of the Group is presented as a single reporting
segment as this is the basis of internal reports regularly reviewed
by the Board and chief operating decision maker (executive
directors) to allocate resources and to assess performance. The
Group's operations are primarily located in the UK and the Group is
not subject to significant seasonality during the year.
4. Revenue
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
--------------- ------------------ ------------------ --------------
Print 232.4 241.0 479.3
--------------- ------------------ ------------------ --------------
Circulation 160.0 163.9 319.7
Advertising 50.3 53.1 108.4
Printing 9.6 11.8 25.2
Other 12.5 12.2 26.0
--------------- ------------------ ------------------ --------------
Digital 68.8 48.2 118.3
Other 1.1 1.6 2.6
Total revenue 302.3 290.8 600.2
--------------- ------------------ ------------------ --------------
The Group's operations are located primarily in the UK.
5. Operating adjusted items
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------------------- ------------------ ------------------ --------------
Restructuring charges in respect of cost reduction
measures (note 16) (1.4) (3.0) (36.4)
Impairment of property, plant and equipment
(note 12) (2.3) - (34.7)
Impairment of right-of-use assets (note 13) (10.5) - (13.7)
Impairment of goodwill - - (6.1)
Pension administrative expenses and past service
costs for GMP equalisation (note 14) (1.5) (2.0) (6.1)
Provision for historical legal issues (note
16) (13.0) (5.0) (12.5)
Provision for property rationalisation (note (10.9) -
16) -
Provision for historical property development
(note 16) - (15.5) (15.5)
Operating adjusted items included in administrative
expenses (39.6) (25.5) (125.0)
Operating adjusted items included in share
of results of associates (0.7) (0.5) (1.2)
Total operating adjusted items (40.3) (26.0) (126.2)
----------------------------------------------------- ------------------ ------------------ --------------
Operating adjusted items relate to costs or incomes that derive
from events or transactions that fall within the normal activities
of the Group, but are excluded from the Group's adjusted profit
measures, individually or, if of a similar type in aggregate, due
to their size and/or nature in order to better reflect management's
view of the performance of the Group. The adjusted profit measures
are not recognised profit measures under IFRS and may not be
directly comparable with adjusted profit measures used by other
companies. Set out in note 19 is the reconciliation between the
statutory and adjusted results which includes descriptions of the
items included in adjusted items.
In the first half of 2021, the Group implemented a Home and Hub
project which set out the vision for how the Group's offices would
look and where job roles would be based. As a consequence of the
project a number of offices or floors will no longer be used. The
project has resulted in charges of GBP23.7m (impairments of GBP2.3m
relating to fixed assets and GBP10.5m to right-of-use assets and a
GBP10.9m property rationalisation charge relating to future costs
of vacant properties).
The Group incurred GBP1.4m of restructuring costs relating to
the acquisition on 24 November 2020 of the remaining 50% of issued
share capital of Independent Star Limited not previously owned.
Independent Star Limited owns the Irish Daily Star brand in
Ireland.
The Group has recorded a GBP13.0m increase in the provision for
historical legal issues relating to the cost associated with
dealing with and resolving civil claims in relation to historical
phone hacking and unlawful information gathering (note 16).
6. Interest income
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------- ------------------- ------------------- --------------
Interest income on bank deposits - - 0.1
---------------------------------- ------------------- ------------------- --------------
7. Finance costs
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------- ------------------ ------------------ --------------
Interest on bank overdrafts and borrowings (0.4) (0.6) (1.1)
Interest on lease liabilities (0.7) (0.8) (1.5)
-------------------------------------------- ------------------ ------------------ --------------
Finance costs (1.1) (1.4) (2.6)
-------------------------------------------- ------------------ ------------------ --------------
8. Tax
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------------- ------------------ ------------------ --------------
Corporation tax charge for the period (4.7) (4.3) (2.7)
---------------------------------------------- ------------------ ------------------ --------------
Current tax charge (4.7) (4.3) (2.7)
---------------------------------------------- ------------------ ------------------ --------------
Deferred tax charge for the period (1.9) (4.3) (5.7)
Deferred tax charge for rate change (53.9) (19.0) (19.0)
Prior period adjustments - - 0.3
Deferred tax charge (55.8) (23.3) (24.4)
---------------------------------------------- ------------------ ------------------ --------------
Tax charge (60.5) (27.6) (27.1)
---------------------------------------------- ------------------ ------------------ --------------
Reconciliation of tax charge GBPm GBPm GBPm
---------------------------------------------- ------------------ ------------------ --------------
Profit before tax 25.7 25.2 0.4
---------------------------------------------- ------------------ ------------------ --------------
Standard rate of corporation tax (4.9) (4.8) (0.1)
Tax effect of items that are not deductible
in determining taxable profit (1.8) (3.8) (6.1)
Change in rate of deferred tax (53.9) (19.0) (19.0)
Release of deferred tax on losses no longer
expected to be recoverable - - (2.5)
Prior period adjustment - - 0.3
Tax effect of share of results of associates 0.1 - 0.3
Tax charge (60.5) (27.6) (27.1)
---------------------------------------------- ------------------ ------------------ --------------
The standard rate of corporation tax for the period is 19%
(2019: 19%). The tax effect of items that are not deductible in
determining taxable profit includes certain costs where there is
uncertainty as to their deductibility. The current tax receivable
amounted to GBP7.3m (26 weeks ended 28 June 2020: GBP4.7m payable
and 52 weeks ended 27 December 2020: GBP2.8m receivable). At the
reporting date the maximum amount of the unprovided tax exposure
relating to uncertain tax items is some GBP7m (26 weeks ended 28
June 2020: GBP5m and 52 weeks ended 27 December 2020: GBP6m).
The Budget on 5 March 2021 increased the rate of corporation tax
from 19% to 25% with effect from 1 April 2023. At 27 June 2021,
this rate change had been substantively enacted by parliament
meaning that the opening deferred tax position has been
recalculated in the period resulting in a GBP53.9m debit in the
consolidated income statement and a GBP13.9m credit in the
consolidated statement of comprehensive income.
The tax on actuarial gains or losses on defined benefit pension
schemes taken to the consolidated statement of comprehensive income
is a deferred tax charge of GBP31.4m (26 weeks ended 28 June 2020:
charge of GBP3.1m and 52 weeks ended 27 December 2020: credit of
GBP11.7m).
9. Dividends
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2021 (unaudited) 2020 (unaudited) 2020
Pence Pence (audited)
Per share Per share Pence
Per share
------------------------------------------------ ------------------ ------------------ -------------
Dividends paid per share and recognised as
distributions to equity holders in the period 4.26 - -
------------------------------------------------ ------------------ ------------------ -------------
Dividend proposed per share but not paid nor
included in the accounting records 2.75 - 4.26
------------------------------------------------ ------------------ ------------------ -------------
The Board has approved an interim dividend for 2021 of 2.75
pence per share.
On 6 May 2021, the final dividend proposed for 2020 of 4.26
pence per share was approved by shareholders at the Annual General
Meeting and was paid on 2 June 2021. The total dividend payment
amounted to GBP13.2 million.
10. Earnings per share
Basic earnings per share is calculated by dividing profit for
the period attributable to equity holders of the parent by the
weighted average number of ordinary shares during the period and
diluted earnings per share is calculated by adjusting the weighted
average number of ordinary shares in issue on the assumption of
conversion of all potentially dilutive ordinary shares.
Restated
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2021 (unaudited) 2020 (unaudited) 2020
Thousand Thousand (audited)
Thousand
---------------------------------------------- ------------------- ------------------ --------------
Weighted average number of ordinary shares
for basic earnings per share 310,128 309,176 309,430
Effect of potential dilutive ordinary shares
in respect of share awards 9,247 3,596 6,818
Weighted average number of ordinary shares
for diluted earnings per share 319,375 312,772 316,248
---------------------------------------------- ------------------- ------------------ --------------
The weighted average number of potentially dilutive ordinary
shares not currently dilutive was 846,947 (28 June 2020: 5,354,112
and 27 December 2020: 2,542,234).
Statutory earnings per share Restated
2021 2020 2020
Pence Pence Pence
(Loss)/earnings per share - basic (11.2) (0.8) (8.6)
(Loss)/earnings per share - diluted (11.2) (0.8) (8.6)
------------------------------------- -------- --------- --------
Adjusted earnings per share Restated
2021 2020 2020
Pence Pence Pence
------------------------------ -------- --------- --------
Earnings per share - basic 17.8 14.0 34.4
Earnings per share - diluted 17.3 13.8 33.6
------------------------------ -------- --------- --------
Earnings per share for 26 weeks ended 28 June 2020 has been
restated following the bonus issue to shareholders, in lieu of and
with a value equivalent to an 2020 interim dividend of 2.63 pence
per share.
Set out in note 19 is the reconciliation between the statutory
and adjusted results.
11. Cash flows from operating activities
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (audited)
GBPm (unaudited) GBPm
GBPm
-------------------------------------------------- ----------------- ------------- -------------
Operating profit 28.6 28.9 7.6
Depreciation of property, plant and equipment
(note 12) 7.7 10.0 20.2
Depreciation of right-of-use assets (note 13) 2.2 3.5 7.2
Impairment of goodwill - - 6.1
Share of results of associates (0.8) 0.2 (1.4)
Charge for share-based payments 0.9 0.7 3.6
Impairment of property, plant and equipment
(note 12) 2.3 - 36.5
Impairment of right-of-use assets (note 13) 10.5 - 13.7
Write-off of property, plant and equipment - - 1.4
Pension administrative expenses 1.5 2.0 4.6
Pension past service costs - - 1.5
Operating cash flows before movements in working
capital 52.9 45.3 101.0
Decrease in inventories 0.7 0.8 1.3
Decrease in receivables 12.0 23.7 8.9
Increase in payables 30.1 8.4 10.1
-------------------------------------------------- ----------------- ------------- -------------
Cash generated from operations 95.7 78.2 121.3
-------------------------------------------------- ----------------- ------------- -------------
12. Property, plant and equipment
Land and Plant and Assets
buildings equipment under construction Total
GBPm GBPm GBPm GBPm
----------------------------------------- ----------- ----------- -------------------- --------
Cost
At 28 December 2020 204.6 368.9 0.6 574.1
Additions - - 2.8 2.8
----------------------------------------- ----------- ----------- -------------------- --------
At 27 June 2021 204.6 368.9 3.4 576.9
Accumulated depreciation and impairment
At 28 December 2020 (96.7) (309.0) - (405.7)
Charge for the period (1.3) (6.4) - (7.7)
Impairment - (2.3) - (2.3)
At 27 June 2021 (98.0) (317.7) - (415.7)
Carrying amount
At 27 December 2020 107.9 59.9 0.6 168.4
----------------------------------------- ----------- ----------- -------------------- --------
At 27 June 2021 106.6 51.2 3.4 161.2
----------------------------------------- ----------- ----------- -------------------- --------
Impairment of property, plant and equipment of GBP2.3m as a
result of the Home and Hub project which means that a number of
offices or floors will no longer be used.
13. Right-of-use assets
Properties Vehicles Total
GBPm GBPm GBPm
----------------------------------------- ----------- --------- -------
Cost
At 28 December 2020 43.2 3.0 46.2
Additions 0.3 - 0.3
----------------------------------------- ----------- --------- -------
At 27 June 2021 43.5 3.0 46.5
Accumulated depreciation and impairment
At 28 December 2020 (19.9) (1.0) (20.9)
Charge for the period (1.7) (0.5) (2.2)
Impairment (10.5) - (10.5)
At 27 June 2021 (32.1) (1.5) (33.6)
Carrying amount
At 27 December 2020 23.3 2.0 25.3
----------------------------------------- ----------- --------- -------
At 27 June 2021 11.4 1.5 12.9
----------------------------------------- ----------- --------- -------
Impairment of right-of-use assets of GBP10.5m as a result of the
Home and Hub project which means that a number of offices or floors
will no longer be used.
14. Retirement benefit schemes
Defined contribution pension schemes
The Group operates a defined contribution pension scheme for
qualifying employees: The Reach Pension Plan (the 'RPP'). The
assets of the RPP scheme where employees have an individual account
at Fidelity are held separately from those of the Group in funds
under the control of Trustees.
The current service cost charged to the consolidated income
statement for the period of GBP8.2m ( 26 weeks ended 28 June 2020:
GBP8.7m and 52 weeks ended 27 December 2020: GBP17.4m) represents
contributions paid by the Group at rates specified in the scheme
rules. All amounts that were due have been paid over to the schemes
at all reporting dates.
Defined benefit pension schemes
Background
The defined benefit pension schemes operated by the Group are
all closed to future accrual. The Group has six defined benefit
pension schemes:
-- Trinity Mirror schemes (the 'TM Schemes'): the MGN Pension
Scheme (the 'MGN Scheme'), the Trinity Retirement Benefit Scheme
(the 'Trinity Scheme') and the Midland Independent Newspapers
Pension Scheme (the 'MIN Scheme'); and
-- Express & Star schemes (the 'E&S Schemes'): the
Express Newspapers 1988 Pension Fund (the 'EN88 Scheme'), the
Express Newspapers Senior Management Pension Fund (the 'ENSM
Scheme') and the West Ferry Printers Pension Scheme (the 'WF
Scheme').
Characteristics
The defined benefit pension schemes provide pensions to members,
which are based on the final salary pension payable, normally from
age 65 (although some schemes have some pensions normally payable
from an earlier age) plus surviving spouses or dependants' benefits
following a member's death. Benefits increase both before and after
retirement either in line with statutory minimum requirements or in
accordance with the scheme rules if greater. Such increases are
either at fixed rates or in line with retail or consumer prices but
subject to upper and lower limits. All of the schemes are
independent of the Group with assets held independently of the
Group. They are governed by Trustees who administer benefits in
accordance with the scheme rules and appropriate UK legislation.
The schemes each have a professional or experienced independent
Trustee as their Chairman with generally half of the remaining
Trustees nominated by the members and half by the Group.
Maturity profile and cash flow
Across all of the schemes, the uninsured liabilities related 60%
to current pensioners and their spouses or dependants and 40%
related to deferred pensioners. The average term from the period
end to payment of the remaining uninsured benefits is expected to
be around 16 years. Uninsured pension payments in 2020, excluding
lump sums and transfer value payments, were GBP71m and these are
projected to rise to an annual peak in 2033 of GBP103m and reducing
thereafter.
Funding arrangements
The funding of the Group's schemes is subject to UK pension
legislation as well as the guidance and codes of practice issued by
the Pensions Regulator. Funding targets are agreed between the
Trustees and the Group and are reviewed and revised usually every
three years. The funding targets must include a margin for prudence
above the expected cost of paying the benefits and so are different
to the liability value for IAS 19 purposes. The funding deficits
revealed by these triennial valuations are removed over time in
accordance with an agreed recovery plan and schedule of
contributions for each scheme. The funding valuations of the
schemes: at 31 December 2016 for the MGN Scheme showed a deficit of
GBP476.0m, for the Trinity Scheme showed a deficit of GBP78.0m and
for the MIN Scheme showed a deficit of GBP68.2m; at 5 April 2017
for the EN88 Scheme showed a deficit of GBP69.8m and for the ENSM
Scheme showed a deficit of GBP3.2m; and at 31 December 2017 for the
WF Scheme showed a deficit of GBP6.5m. The triennial valuation for
funding of the defined benefit pension schemes as at 31 December
2019 would usually be completed by 31 March 2021. We have agreed
the funding of the WF Scheme (see below) and the discussions with
the remaining five schemes are ongoing. There is no direct link to
the IAS 19 valuations which use different actuarial assumption
derivation methodologies (although a number of assumptions are
consistent) and are updated at each reporting date.
Group contributions in respect of the defined benefit pension
schemes in the first half were GBP37.1m (2020: GBP22.0m). This
comprised GBP9.6m to the WF Scheme and GBP27.5m under the current
schedule of contributions of the remaining five schemes. The
payment of GBP9.6m enabled the Trustees of the WF scheme to
purchase a bulk annuity and the scheme now has all pension
liabilities covered by annuity policies. No further funding to the
WF scheme is expected. Contributions in the second half are
expected to be GBP27.6m under the current schedule of contributions
of the remaining five schemes.
At the prior year end, the deficits in the remaining five
schemes were expected to be removed before or in 2027 by a
combination of the contributions and asset returns. Contributions
(which include funding for pensions administrative expenses) are
payable monthly. Contributions per the current schedule of
contributions (excluding the WF Scheme) are for GBP55.1m pa in 2022
and 2023, GBP54.9m pa in 2024 to 2026 and GBP52.9m in 2027.
The Group agreed that in respect of dividend payments in 2018,
2019 and 2020 that additional contributions would be paid at 75% of
the excess if dividends paid in 2018 were above 6.16 pence per
share. For 2019 and 2020 the threshold increased in line with the
increase in dividends capped at 10% pa. No payments were made in
respect of this agreement.
The future deficit funding commitments are linked to the
three-yearly actuarial valuations. Although the funding commitments
do not generally impact the IAS 19 position, IFRIC 14 guides
companies to consider for IAS 19 disclosures whether any surplus
can be recognised as a balance sheet asset and whether any future
funding commitments in excess of the IAS 19 liability should be
provisioned for. Based on the interpretation of the rules for each
of the defined benefit pension schemes, the Group considers that it
has an unconditional right to any potential surplus on the ultimate
wind-up after all benefits to members have been paid of all of the
schemes except the WF Scheme. Under IFRIC 14 it is therefore
appropriate to recognise any IAS 19 surpluses which may emerge in
future and not to recognise any potential additional liabilities in
respect of future funding commitments of all of the schemes except
for the WF Scheme. For the WF Scheme at the reporting date, the
assets are surplus to the IAS 19 benefit liabilities and the impact
of IFRIC 14 removes this surplus. As no further contributions are
expected to the WF Scheme, the Group no longer recognises a deficit
of the value of its future deficit contribution commitment to the
scheme.
The calculation of Guaranteed Minimum Pension ('GMP') is set out
in legislation and members of pension schemes that were contracted
out of the State Earnings-Related Pension Scheme ('SERPS') between
6 April 1978 and 5 April 1997 will have built up an entitlement to
a GMP. GMPs were intended to broadly replicate the SERPS pension
benefits but due to their design they give rise to inequalities
between men and women, in particular, the GMP for a male comes into
payment at age 65 whereas for a female it comes into payment at the
age of 60 and GMPs typically receive different levels of increase
to non GMP benefits. On 26 October 2018, the High Court handed down
its judgement in the Lloyds Trustees vs Lloyds Bank plc and Others
case relating to the equalisation of member benefits for the gender
effects of GMP equalisation. This judgement creates a precedent for
other UK defined benefit schemes with GMPs. The judgement confirmed
that GMP equalisation was required for the period 17 May 1990 to 5
April 1997 and
provided some clarification on legally acceptable methods for
achieving equalisation. An allowance for GMP equalisation was first
included within liabilities at 30 December 2018 and was recognised
as a charge for past service costs in the income statement. In 2020
further clarification was issued relating to GMP equalisation in
respect of transfers out of schemes and a further allowance for GMP
equalisation was included within liabilities at 27 December 2020
and was recognised as a charge for past service costs in the income
statement. The estimate is subject to change as we undertake more
detailed member calculations, as guidance is issued and/or as a
result of future legal judgements.
Risks
Valuations for funding and accounting purposes are based on
assumptions about future economic and demographic variables. This
results in the risk of a volatile valuation deficit and the risk
that the ultimate cost of paying benefits is higher than the
current assessed liability value.
The main sources of risk are:
-- Investment risk: a reduction in asset returns (or assumed future asset returns);
-- Inflation risk: an increase in benefit increases (or assumed future increases); and
-- Longevity risk: an increase in average life spans (or assumed life expectancy).
These risks are managed by:
-- Investing in insured annuity policies: the income from these
policies exactly matches the benefit payments for the members
covered, removing all of the above risks. At the prior reporting
date the insured annuity policies covered 11% of total
liabilities;
-- Investing a proportion of assets in other classes such as
government and corporate bonds and in liability driven investments:
changes in the values of the assets aim to broadly match changes in
the values of the uninsured liabilities, reducing the investment
risk, however some risk remains as the durations of the bonds are
typically shorter than that of the liabilities and so the values
may still move differently. At the prior reporting date non-equity
assets amounted to 81% of assets excluding the insured annuity
policies;
-- Investing a proportion of assets in equities: with the aim of
achieving outperformance and so reducing the deficits over the long
term. At the prior reporting date this amounted to 19% of assets
excluding the insured annuity policies; and
-- The gradual sale of equities over time to purchase additional
annuity policies or liability matching investments: to further
reduce risk as the schemes, which are closed to future accrual,
mature.
Pension scheme accounting deficits are snapshots at moments in
time and are not used by either the Group or Trustees to frame
funding policy. The Group and Trustees are aligned in focusing on
the long-term sustainability of the funding policy which aims to
balance the interests of the Group's shareholders and members of
the schemes. The Group and Trustees are also aligned in reducing
pensions risk over the long term and at a pace which is affordable
to the Group. The E&S Schemes and the Trinity Scheme have an
accounting surplus at the reporting date, before allowing for the
IFRIC 14 asset ceiling. Across the MGN Scheme and the MIN Scheme,
the invested assets are expected to be sufficient to pay the
uninsured benefits due up to 2044, based on the prior reporting
date assumptions. The remaining uninsured benefit payments, payable
from 2045, are due to be funded by a combination of asset
outperformance and the deficit contributions currently scheduled to
be paid up to 2027. Actuarial projections at the prior reporting
date show removal of the combined accounting deficit by the end of
2027 due to scheduled contributions and asset returns at the
current target rate. From this point, the assets are projected to
be sufficient to fully fund the liabilities on the accounting
basis. The Group is not exposed to any unusual, entity specific or
scheme specific risks. Other than the impact of GMP equalisation,
there were no plan amendments, settlements or curtailments which in
the current and prior period resulted in a pension cost.
Results
For the purposes of the Group's consolidated financial
statements, valuations have been performed in accordance with the
requirements of IAS 19 with scheme liabilities calculated using a
consistent projected unit valuation method and compared to the
estimated value of the scheme assets at 27 June 2021.
Based on actuarial advice, the assumptions used in calculating
the scheme liabilities and the actuarial value of those liabilities
are:
27 June 28 June 27 December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------- -------- -------------
Financial assumptions (nominal % pa)
Discount rate 1.98 1.66 1.49
Retail price inflation rate 3.19 2.82 2.86
Consumer price inflation rate 2.59 1.97 2.26
Rate of pension increase in deferment 2.69 2.11 2.36
Rate of pension increases in payment (weighted
average across the scheme's) 3.34 3.23 3.25
-------------------------------------------------- -------- -------- -------------
Mortality assumptions - future life expectancies
from age 65 (years)
Male currently aged 65 21.8 21.8 21.9
Female currently aged 65 24.2 24.1 24.2
Male currently aged 55 21.6 21.6 21.6
Female currently aged 55 24.2 24.1 24.2
-------------------------------------------------- -------- -------- -------------
The discount rate should be chosen to be equal to the yield
available on 'high quality' corporate bonds of appropriate term and
currency. The Group took actuarial advice in 2020 and updated the
approach to determining the bond constituents for the calculation
of the discount rate. The bond constituents used for the 2020 and
2021 disclosures have been taken from the new Bloomberg
classification system called BCLASS, which provides classification
information on each individual security and which Bloomberg
describes as the "fixed income standard". BCLASS also enables the
inclusion of bonds issued by corporate special purpose vehicles,
thereby increasing the size of the universe used to determine the
discount rate. Our actuaries have determined an appropriate market
bond yield based on a BCLASS extract from Bloomberg which excludes
bonds which have a 'corporate' BCLASS assignment but which have
actual or implied government backing, such as bonds issued by
universities or public transportations systems.
The inflation assumptions are based on market expectations over
the period of the liabilities. The RPI assumption is set based on a
margin deducted from a single equivalent of the break-even RPI
inflation curve. This margin, called an inflation risk premium
reflects the fact that the RPI market implied inflation curve can
be affected by market distortions and as a result it is thought to
overstate the underlying market expectations for future RPI
inflation.
The CPI assumption is set based on a margin deducted from the
RPI assumption, due to lack of market data on CPI expectations. The
Group took actuarial advice for the 2020 and updated the approach
to determining the RPI and CPI assumptions and have applied the
same approach to the 2021 disclosures. Allowing for the extent of
RPI linkage on the schemes benefits pre and post 2030, the average
inflation risk premium has been set at 0.3% (to broadly reflect
0.2% to 2030 and 0.4% thereafter). Based on an analysis of the
CPI-linkage of the cashflow profile of the schemes this is
estimated to be equivalent to a single margin of 0.6% (an assumed
RPI/CPI margin of 1.0% up to 2030 and 0.00% beyond 2030).
The estimated impact on the IAS 19 liabilities and on the IAS 19
deficit at the reporting date, due to a reasonably possible change
in key assumptions over the next year, are set out in the table
below:
Effect on Effect on
liabilities deficit
GBPm GBPm
--------------------------------------------- ------------ ---------
Discount rate +/- 0.5% pa -190/+210 -165/+185
Retail price inflation rate +/- 0.5% pa +40/-39 +26/-25
Consumer price inflation rate +/- 0.5% pa +50/-47 +47/-45
Life expectancy at age 65 +/- 1 year +155/-150 +130/-130
--------------------------------------------- ------------ ---------
The RPI sensitivity impacts the rate of increases in deferment
for some of the pensions in the EN88 Scheme and the ENSM Scheme and
some of the pensions in payment for all schemes except the MGN
Scheme. The CPI sensitivity impacts the rate of increases in
deferment for some of the pensions in most schemes and the rate of
increases in payment for some of the pensions in payment for all
schemes.
The effect on the deficit is usually lower than the effect on
the liabilities due to the matching impact on the value of the
insurance contracts held in respect of some of the liabilities.
Each assumption variation represents a reasonably possible change
in the assumption over the next year but might not represent the
actual effect because assumption changes are unlikely to happen in
isolation. The estimated impact of the assumption variations makes
no allowance for changes in the values of invested assets that
would arise if market conditions were to change in order to give
rise to the assumption variation. If allowance were made, the
estimated impact would likely be lower as the values of invested
assets would normally change in the same directions as the
liability values.
The amount included in the consolidated income statement,
consolidated statement of comprehensive income and consolidated
balance sheet arising from the Group's obligations in respect of
its defined benefit pension schemes is as follows:
26 weeks 26 weeks 52 weeks
ended
27 June ended ended
2021 (unaudited) 28 June 27 December
2020
GBPm 2020 (unaudited) (audited)
Consolidated income statement GBPm GBPm
------------------------------------------- ------------------ ------------------ --------------
Pension administrative expenses (1.5) (2.0) (4.6)
Past service costs - - (1.5)
Pension finance charge (1.8) (2.3) (4.7)
------------------------------------------- ------------------ ------------------ --------------
Defined benefit cost recognised in income
statement (3.3) (4.3) (10.8)
------------------------------------------- ------------------ ------------------ --------------
Consolidated statement of comprehensive income 26 weeks 26 weeks 52 weeks
ended
27 June ended ended
2021 (unaudited) 28 June 27 December
2020
GBPm 2020 (unaudited) (audited)
GBPm GBPm
Actuarial (loss)/gain due to liability experience (0.3) 34.1 48.2
Actuarial gain/(loss) due to liability assumption
changes 153.2 (163.6) (304.6)
---------------------------------------------------- ------------------ ------------------ --------------
Total liability actuarial gain/(loss) 152.9 (129.5) (256.4)
Returns on scheme assets (less)/greater than
discount rate (72.4) 149.5 209.6
Change in impact of IFRIC 14 45.1 (3.4) (14.8)
---------------------------------------------------- ------------------ ------------------ --------------
Total gain/(loss) recognised in statement of
comprehensive income 125.6 16.6 (61.6)
---------------------------------------------------- ------------------ ------------------ --------------
Included in the returns on scheme assets less than discount rate
debit of GBP69.4m is a GBP44.1m debit from the purchase of a bulk
annuity policy by the Trustees of the WF Scheme. This is matched by
a GBP44.1m credit included in the change in impact of IFRIC 14
credit of GBP45.1m.
Consolidated balance sheet 27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------- ------------------ ------------------ ------------
Present value of uninsured scheme liabilities (2,299.1) (2,447.8) (2,545.5)
Present value of insured scheme liabilities (376.4) (318.9) (318.6)
------------------------------------------------- ------------------ ------------------ ------------
Total present value of scheme liabilities (2,675.5) (2,766.7) (2,864.1)
------------------------------------------------- ------------------ ------------------ ------------
Invested and cash assets at fair value 2,146.6 2,222.4 2,278.7
Value of liability matching insurance contracts 376.4 318.9 318.6
------------------------------------------------- ------------------ ------------------ ------------
Total fair value of scheme assets 2,523.0 2,541.3 2,597.3
------------------------------------------------- ------------------ ------------------ ------------
Funded deficit (152.5) (225.4) (266.8)
------------------------------------------------- ------------------ ------------------ ------------
Impact of IFRIC 14 (2.5) (36.2) (47.6)
------------------------------------------------- ------------------ ------------------ ------------
Net scheme deficit (155.0) (261.6) (314.4)
------------------------------------------------- ------------------ ------------------ ------------
Non- current assets - retirement benefit assets 100.1 74.6 50.4
Non- current liabilities - retirement benefit
obligations (255.1) (336.2) (364.8)
------------------------------------------------- ------------------ ------------------ ------------
Net scheme deficit (155.0) (261.6) (314.4)
------------------------------------------------- ------------------ ------------------ ------------
Net scheme deficit included in consolidated
balance sheet (155.0) (261.6) (314.4)
Deferred tax included in consolidated balance
sheet 36.3 51.7 58.9
------------------------------------------------- ------------------ ------------------ ------------
Net scheme deficit after deferred tax (118.7) (209.9) (255.5)
------------------------------------------------- ------------------ ------------------ ------------
Movement in net scheme deficit 26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 2020 (audited)
(unaudited) (unaudited) GBPm
GBPm GBPm
------------------------------------------------- ------------- ------------ -------------
Opening net scheme deficit (314.4) (295.9) (295.9)
Contributions 37.1 22.0 53.9
Consolidated income statement (3.3) (4.3) (10.8)
Consolidated statement of comprehensive income 125.6 16.6 (61.6)
Closing net scheme deficit (155.0) (261.6) (314.4)
------------------------------------------------- ------------- ------------ -------------
Changes in the present value of scheme liabilities 26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 2020 (audited)
(unaudited) (unaudited) GBPm
GBPm GBPm
----------------------------------------------------- ------------- ------------ -------------
Opening present value of scheme liabilities (2,864.1) (2,663.9) (2,663.9)
Past service costs - - (1.5)
Interest cost (20.9) (25.3) (50.5)
Actuarial (loss)/gain- experience (0.3) 34.1 48.2
Actuarial gain/(loss) - change to demographic
assumptions 2.7 (64.3) (93.5)
Actuarial gain/(loss) - change to financial
assumptions 150.5 (99.3) (211.1)
Benefits paid 56.6 52.0 108.2
Closing present value of scheme liabilities (2,675.5) (2,766.7) (2,864.1)
----------------------------------------------------- ------------- ------------ -------------
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 2020 (audited)
(unaudited) (unaudited) GBPm
Changes in impact of IFRIC 14 GBPm GBPm
-------------------------------------------- ------------- ------------ -------------
Opening impact of IFRIC 14 (47.6) (32.8) (32.8)
Decrease/(increase) in impact of IFRIC 14 45.1 (3.4) (14.8)
Closing impact of IFRIC 14 (2.5) (36.2) (47.6)
-------------------------------------------- ------------- ------------ -------------
26 weeks 26 weeks 52 weeks
ended ended ended
27 June 28 June 27 December
2020
2021 2020 (audited)
(unaudited) (unaudited) GBPm
Changes in the fair value of scheme assets GBPm GBPm
------------------------------------------------------ ------------- ------------ -------------
Opening fair value of scheme assets 2,597.3 2,400.8 2,400.8
Interest income 19.1 23.0 45.8
Actual return on assets (less)/greater than
discount rate (72.4) 149.5 209.6
Contributions by employer 37.1 22.0 53.9
Benefits paid (56.6) (52.0) (108.2)
Administrative expenses (1.5) (2.0) (4.6)
Closing fair value of scheme assets 2,523.0 2,541.3 2,597.3
------------------------------------------------------ ------------- ------------ -------------
Fair value of scheme assets 27 June 28 June 27 December
2020
2021 (unaudited) 2020 (audited)
GBPm (unaudited) GBPm
GBPm
----------------------------------------- ----------------- ------------ -------------
UK equities 72.0 43.5 70.6
US equities 178.9 134.6 180.4
Other overseas equities 181.0 184.4 182.6
Property 42.1 21.9 40.2
Corporate bonds 277.8 282.8 320.6
Fixed interest gilts 85.7 132.5 99.0
Index linked gilts 93.0 84.7 72.7
Liability driven investment 888.1 1,080.3 819.8
Cash and other 328.0 257.7 492.8
----------------------------------------- ----------------- ------------ -------------
Invested and cash assets at fair value 2,146.6 2,222.4 2,278.7
Value of insurance contracts 376.4 318.9 318.6
----------------------------------------- ----------------- ------------ -------------
Fair value of scheme assets 2,523.0 2,541.3 2,597.3
----------------------------------------- ----------------- ------------ -------------
The assets of the schemes are primarily held in pooled
investment vehicles which are unquoted. The pooled investment
vehicles hold both quoted and unquoted investments. Scheme assets
include neither direct investments in the Company's ordinary shares
nor any property assets occupied nor other assets used by the
Group.
15. Net cash
The net cash for the Group is as follows:
27 December 27 June
2020 Cash Lease liabilities 2021
(audited) flow movement (unaudited)
GBPm GBPm GBPm GBPm
--------------------------------- ------------ ------- ------------------- -------------
Current assets
Cash and cash equivalents 42.0 12.7 - 54.7
--------------------------------- ------------ ------- ------------------- -------------
Net cash 42.0 12.7 - 54.7
--------------------------------- ------------ ------- ------------------- -------------
Non-current liabilities
Lease liabilities (35.5) - 2.9 (32.6)
--------------------------------- ------------ ------- ------------------- -----------------
Current liabilities
Lease liabilities (6.1) - 0.5 (5.6)
--------------------------------- ------------ ------- ------------------- -----------------
Net cash less lease liabilities 0.4 12.7 3.4 16.5
--------------------------------- ------------ ------- ------------------- -----------------
The Group has a revolving credit facility of GBP65m until
December 2023 reducing to GBP55m until December 2024. The Group had
no drawings at the reporting date and the facility is subject to
four covenants: Net Worth, Interest Cover, Net Debt to EBITDA and
Cash Flow all of which were met at the reporting date.
Deferred consideration is in respect of the acquisition of
Express & Star.
Payment of the first instalment of GBP18.9m was made on 28
February 2020 and second instalment of GBP16.0m was made on 28
February 2021. Of the remaining amount of GBP24.1m, GBP17.1m is
classified as current liabilities (payable on 28 February 2022) and
GBP7.0m is classified as non-current liabilities (payable on 28
February 2023). There are no conditions attached to the payment of
the deferred consideration and the transaction was structured such
that no interest accrues on these payments. However, under the sale
and purchase agreement the Group has the right to offset agreed
claims arising from a breach of warranties and indemnities and can
also offset any shortfalls on the contracted advertising from the
Health Lottery. The deferred consideration has not been discounted
as we do not believe that the impact of such discounting is
material.
16. Provisions
Share-based Historical
payments Property Restructuring legal Other Total
GBPm GBPm GBPm issues GBPm GBPm
GBPm
----------------------------- ------------ ----------- ---------------- ----------- -------- --------
At 27 December 2020
(audited) (1.6) (5.1) (19.8) (23.0) (7.2) (56.7)
Charged to income
statement (0.8) (11.5) (1.4) (13.0) (0.4) (27.1)
Utilisation of provision 0.3 1.8 10.3 3.6 1.3 17.3
At 27 June 2021 (unaudited) (2.1) (14.8) (10.9) (32.4) (6.3) (66.5)
----------------------------- ------------ ----------- ---------------- ----------- -------- --------
The provisions have been analysed between current and
non-current as follows:
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
------------- ------------------ ------------------ ------------
Current (24.8) (34.6) (31.5)
Non-current (41.7) (17.5) (25.2)
------------- ------------------ ------------------ ------------
(66.5) (52.1) (56.7)
------------- ------------------ ------------------ ------------
The share-based payments provision relates to National Insurance
obligations attached to the future crystallisation of awards. This
provision will be utilised over the next three years.
The property provision relates to property related onerous
contracts and onerous committed costs related to occupied, let and
vacant properties. The provision will be utilised over the
remaining term of the leases or expected period of vacancy. The
charge has increased by GBP11.5m in the period which is primarily
due to GBP10.9m of onerous property costs relating to the Home and
Hub project, which has meant that a number of offices or floors
will no longer be used.
The restructuring provision relates to restructuring charges
incurred in the delivery of cost reduction measures. The balance at
the period end comprises severance costs of GBP0.8m and closure
costs relating to the closure of two print plants of GBP9.5m. The
severance costs provision is expected to be utilised within the
next year. The closure costs provision includes GBP2.5m expected to
be utilised within the next year and GBP7.0m expected to be
utilised over the remaining term of the long term lease relating to
one of the print plants that were closed.
The historical legal issues provision relates to the cost
associated with dealing with and resolving civil claims in relation
to historical phone hacking and unlawful information gathering.
There are three parts to the provision: known claims, potential
onerous claims and common court costs with estimates based on
historical trends and experience of claims and costs. Certain cases
and other matters relating to the issue can be subject to court
proceedings, the outcome of which can impact on how much is
required to settle the remaining claims and on the number of
claims. The Group has recorded an increase in the provision every
year since 2014 which highlights the challenges in making a best
estimate and the time taken to resolve this historical matter. Due
to uncertainty relating to potential future claims, a contingent
liability note has been highlighted in note 18. As a result of
additional claims being received the provision has been increased
by GBP13.0m in the period. At the period end, a provision of
GBP32.4m remains outstanding and this represents the current best
estimate of the amount required to resolve this historical matter.
The provision is expected to be utilised over the next few
years.
The other provision balance of GBP6.3m at the period end relates
to libel and other matters and is expected to be utilised over the
next two years.
17. Share capital and reserves
The share capital comprises 322,085,269 allotted, called-up and
fully paid ordinary shares of 10p each. On 28 September 2020, the
Board recommended a bonus issue to shareholders, in lieu of and
with a value equivalent to an interim dividend of 2.63 pence per
share, which was subsequently approved by shareholders. On 23
October 2020, 12,798,952 ordinary shares were issued in respect of
the bonus issue of shares with the issue being made out of the
share premium account in accordance with the Companies Act
2006.
The share premium reflects the premium on issued ordinary
shares. The merger reserve comprises the premium on the shares
allotted in relation to the acquisition of Express & Star. The
capital redemption reserve represents the nominal value of the
shares purchased and subsequently cancelled under share buy-back
programmes.
The Company holds 9,342,239 shares (28 June 2020 and 27 December
2020: 10,017,620 shares) as Treasury shares. During the period
675,381 shares were transferred to the Reach Employees Benefit
Trust. Cumulative goodwill written off to retained earnings and
other reserves in respect of continuing businesses acquired prior
to 1998 is GBP25.9m (2019: GBP25.9m). On transition to IFRS, the
revalued amounts of freehold properties were deemed to be the cost
of the asset and the revaluation reserve has been transferred to
retained earnings and other reserves.
Shares purchased by the Reach Employee Benefit Trust are
included in retained earnings and other reserves at GBP1.5m (2019:
28 June 2020: GBP2.8m and 27 December 2020: GBP2.7m). During the
period, 960,974 were released relating to grants made in prior
years (28 June 2020: 629,178 and 27 December 2020: 778,658). During
the period 675,381 shares were transferred to the Reach Employees
Benefit Trust from the Treasury shares.
During the period, awards relating to 608,136 shares were
granted to executive directors on a discretionary basis under the
Long Term Incentive Plan (28 June 2020: 1,218,530 and 27 December
2020: 1,218,530). The exercise price of each award is GBP1. The
awards vest after three years, subject to the continued employment
of the participant and satisfaction of certain performance
conditions, and are required to be held for a further two
years.
During the period, awards relating to 935,431 shares were
granted to senior managers on a discretionary basis under the Long
Term Incentive Plan (28 June 2020: 2,593,910 and 27 December 2020:
2,358,715 both under the Senior Management Incentive Plan). The
exercise price of each award is GBP1. The awards vest after three
years, subject to the continued employment of the participant and
satisfaction of certain performance conditions.
During the period, no awards relating to shares were granted to
executive directors under the Restricted Share Plan (28 June 2020:
50,618 and 27 December 2020: 50,618). The awards vest after three
years.
18. Contingent liabilities
There is the potential for further liabilities to arise from the
outcome or resolution of the ongoing historical legal issues (note
16).
19. Reconciliation of statutory to adjusted results
26 weeks ended 27 June 2021 (unaudited)
Operating Pension
adjusted finance
Statutory items charge Tax Adjusted
results (a) (b) (c) results
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------------- ----------- ---------- ------- ------------
Revenue 302.3 - - - 302.3
Operating profit 28.6 40.3 - - 68.9
Profit before tax 25.7 40.3 1.8 - 67.8
(Loss)/profit after tax (34.8) 34.6 1.5 53.9 55.2
Basic (loss)/earnings per
share (p) (11.2) 11.1 0.5 17.4 17.8
--------------------------- ------------- ----------- ---------- ------- ------------
26 weeks ended 28 June 2020 (unaudited)
Operating Pension
adjusted finance
Statutory items charge Tax Adjusted
results (a) (b) (c) results
GBPm GBPm GBPm GBPm GBPm
--------------------------- -------------- ------------ ----------- ------- -------------
Revenue 290.8 - - - 290.8
Operating profit 28.9 26.0 - - 54.9
Profit before tax 25.2 26.0 2.3 - 53.5
(Loss)/profit after tax (2.4) 24.7 1.9 19.0 43.2
Basic (loss)/earnings per
share (p) restated (d) (0.8) 8.1 0.6 6.1 14.0
--------------------------- -------------- ------------ ----------- ------- -------------
52 weeks ended 27 December 2020 (audited)
Operating Pension
adjusted finance
Statutory items charge Tax Adjusted
results (a) (b) (c) results
GBPm GBPm GBPm GBPm GBPm
--------------------------- -------------- ------------ ----------- ------- -------------
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 (p) (8.6) 35.7 1.2 6.1 34.4
--------------------------- -------------- ------------ ----------- ------- -------------
(a) Operating adjusted items relate to the items charged or
credited to operating profit as set out in note 5.
(b) Pension finance charge relating to the defined benefit
pension schemes as set out in note 14.
(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 as set out in note 8.
(d) Basic earnings per share for 26 weeks ended 28 June 2020 has
been restated as set out in note 10.
Set out in note 2 is the rationale for the alternative
performance measures adopted by the Group. The reconciliations in
this note highlight the impact on the respective components of the
income statement. Items are adjusted for where they relate to
material items in the year (impairment, restructuring, disposals)
or relate to historic liabilities (historical legal and contractual
issues, defined benefit pension schemes which are all closed to
future accrual).
Restructuring charges and closure costs incurred to deliver cost
reduction measures relate to the transformation of the business
from print to digital, together with costs to deliver synergies.
These costs are principally severance related, but may also include
system integration costs and print plant closure costs. They are
included in adjusted items on the basis that they are material and
can vary considerably each year, distorting the underlying
performance of the business.
Provision for historical legal issues relates to the cost
associated with dealing with and resolving civil claims for
historical phone hacking and unlawful information gathering. This
is included in adjusted items as the amounts are material, it
relates to historical matters and movements in the provision can
vary year to year.
Impairments to non-current assets arise following impairment
reviews or where a decision is made to close or retire printing
assets. These non-cash items are included in adjusted items on the
basis that they are material and vary considerably each year,
distorting the underlying performance of the business.
The Group's defined benefit pension schemes are all closed to
new members and to future accrual and are therefore not related to
the current business. The pension administration expenses, the past
service costs for GMP equalisation and the pension finance charge
are included in adjusted items as the amounts are significant and
they relate to the historical pension commitment.
The opening deferred tax position is recalculated in the period
in which a change in the standard rate of corporation tax has been
enacted or substantively enacted by parliament or when a decision
is reversed. The impact of the change in rates are included in
adjusted items, on the basis that when they occur they are
material, distorting the underlying performance of the
business.
Other items may be included in adjusted items if they are
material, such as transaction costs incurred on significant
acquisitions or the profit or loss on the sale of subsidiaries,
associates or freehold buildings or liabilities arising from
historical contractual issues. They are included in adjusted items
on the basis that they are material and can vary considerably each
year, distorting the underlying performance of the business.
20. Adjusted cash flow
27 June 28 June 27 December
2020
2021 (unaudited) 2020 (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------- ------------------ ------------------ ------------
Adjusted operating profit 68.9 54.9 133.8
Depreciation 9.9 13.5 27.4
------------------------------------------- ------------------ ------------------ ------------
Adjusted EBITDA 78.8 68.4 161.2
Net interest paid on bank borrowings (0.4) (0.6) (1.1)
Income tax paid (9.2) (8.3) (14.2)
Restructuring payments (10.3) (3.9) (18.0)
Net capital expenditure (2.8) (1.5) (1.6)
Interest paid on leases (0.7) (0.8) (1.5)
Repayment of obligation under leases (3.6) (4.4) (7.7)
Working capital and other 30.8 14.6 4.7
------------------------------------------- ------------------ ------------------ ------------
Adjusted operating cash flow 82.6 63.5 121.8
Historical legal issues payments (3.6) (0.9) (10.6)
Historical contract issues payments - - (15.5)
Dividends paid (13.2) - -
Pension funding payments (37.1) (22.0) (53.9)
Adjusted net cash flow 28.7 40.6 41.8
Bank facility drawdown - 25.0 25.0
Bank facility repayment - - (25.0)
Acquisition related cash flow (16.0) (19.1) (20.2)
Net increase in cash and cash equivalents 12.7 46.5 21.6
------------------------------------------- ------------------ ------------------ ------------
21. Reconciliation of statutory to adjusted cash flow
26 weeks ended 27 June 2021 2021
2021
Stat (a) (b) Adjusted
GBPm GBPm GBPm GBPm
---------------------------------- ------- ------- ------ ---------
Cash flows from operating
activities
Adjusted operating
Cash generated from operations 95.7 (16.7) 3.6 82.6 cash flow
Pension deficit funding
payments (37.1) - - (37.1) Pension funding payments
Historical legal issues
- - (3.6) (3.6) payments
Income tax paid (9.2) 9.2 - -
---------------------------------- -------
Net cash inflow from operating
activities 49.4
---------------------------------- -------
Investing activities
Purchases of property,
plant and equipment (2.8) 2.8 - -
Deferred consideration Acquisition related
payment (16.0) - - (16.0) cash flow
Net cash used in investing
activities (18.8)
Financing activities
Dividends paid (13.2) - - (13.2) Dividends paid
Interest paid on bank borrowings (0.4) 0.4 - -
Interest paid on leases (0.7) 0.7 - -
Repayments of obligations
under leases (3.6) 3.6 - -
Net cash used in financing
activities (17.9)
---------------------------------- ------- ------- ------ ---------
Net increase in cash and
cash equivalents 12.7 - - 12.7
---------------------------------- ------- ------- ------ ---------
26 weeks ended 28 June 2020 2020
2020
Stat (a) (b) Adjusted
GBPm GBPm GBPm GBPm
---------------------------------- ------- ------- ------ ---------
Cash flows from operating
activities
Adjusted operating
Cash generated from operations 78.2 (15.6) 0.9 63.5 cash flow
Pension deficit funding
payments (22.0) - - (22.0) Pension funding payments
Historical legal issues
- - (0.9) (0.9) payments
Income tax paid (8.3) 8.3 - -
---------------------------------- -------
Net cash inflow from operating
activities 47.9
---------------------------------- -------
Proceeds on disposal of
property, plant and equipment 0.3 (0.3) - -
Purchases of property,
plant and equipment (1.8) 1.8 - -
Deferred consideration Acquisition related
payment (18.9) - - (18.9) cash flow
Acquisition of associate Acquisition related
undertaking (0.2) - - (0.2) cash flow
Net cash used in investing
activities (20.6)
Financing activities
Dividends paid - - - -
Interest paid on bank borrowings (0.6) 0.6 - -
Drawdown of borrowings 25.0 - - 25.0 Bank facility drawdown
Interest paid on leases (0.8) 0.8 - -
Repayments of obligations
under leases (4.4) 4.4 - -
Net cash received from
financing activities 19.2
---------------------------------- ------- ------- ------ ---------
Net increase in cash and
cash equivalents 46.5 - - 46.5
---------------------------------- ------- ------- ------ ---------
52 weeks ended 27 December 2020 2020
2020
Stat (a) (b) Adjusted
GBPm GBPm GBPm GBPm
---------------------------------- ------- ------- ------- ---------
Cash flows from operating Adjusted operating
activities 121.3 (25.6) 26.1 121.8 cash flow
Cash generated from operations (53.9) - - (53.9) Pension funding payments
Pension deficit funding Historical contract
payments - - (15.5) (15.5) issues payments
Historical legal issues
- - (10.6) (10.6) payments
Income tax paid (14.2) 14.2 - -
---------------------------------- -------
Net cash inflow from operating
activities 53.2
---------------------------------- -------
Investing activities
Interest received 0.1 (0.1) - -
Dividends received from
associated undertakings 0.5 (0.5) - -
Proceeds on disposal of
property, plant and equipment 0.3 (0.3) - -
Purchases of property,
plant and equipment (1.9) 1.9 - -
Deferred consideration Acquisition related
payment (18.9) - - (18.9) cash flow
Acquisition of associate Acquisition related
undertaking (0.2) - - (0.2) cash flow
Acquisition of subsidiary Acquisition related
undertaking (3.4) - - (3.4) cash flow
Cash acquired on acquisition Acquisition related
of subsidiary undertaking 2.3 - - 2.3 cash flow
Net cash used in investing
activities (21.2)
Financing activities
Interest paid on bank borrowings (1.2) 1.2 - -
Drawdown of borrowings 25.0 - - 25.0 Bank facility drawdown
Repayment of borrowings (25.0) - - (25.0) Bank facility repayment
Interest paid on leases (1.5) 1.5 - -
Repayment of obligations
under leases (7.7) 7.7 - -
Net cash used in financing
activities (10.4)
---------------------------------- ------- ------- ------- ---------
Net increase in cash and
cash equivalents 21.6 - - 21.6
---------------------------------- ------- ------- ------- ---------
(a) Items included in the statutory cash flow on separate lines
which for the adjusted cash flow are included in adjusted operating
cash flow.
(b) Payments in respect of historical legal issues and
historical contract issues are shown separately in the adjusted
cash flow.
22. Reconciliation of statutory to like-for-like revenue
26 weeks 26 weeks 26 weeks 26 weeks
ended ended ended ended
27 June 27 June 28 June 28 June
2021 2021 2020 2020
(unaudited) (a) (like-for-like) (unaudited) (b) (like-for-like)
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------- ------- ------------------ -------------- ------- ------------------
Print 232.4 (5.4) 227.0 241.0 (1.5) 239.5
--------------- -------------- ------- ------------------ -------------- ------- ------------------
Circulation 160.0 (4.5) 155.5 163.9 - 163.9
Advertising 50.3 (0.9) 49.4 53.1 (1.5) 51.6
Printing 9.6 - 9.6 11.8 - 11.8
Other 12.5 - 12.5 12.2 - 12.2
--------------- -------------- ------- ------------------ -------------- ------- ------------------
Digital 68.8 - 68.8 48.2 - 48.2
Other 1.1 - 1.1 1.6 - 1.6
Total revenue 302.3 (5.4) 296.9 290.8 (1.5) 289.3
--------------- -------------- ------- ------------------ -------------- ------- ------------------
(a) Exclusion of Irish Star (purchased on 24 November 2020).
(b) Exclusion of Manchester Metro following ending of franchise
agreement in June 2020 and other portfolio changes in 2020.
Report on the Condensed interim consolidated financial
statements
Our conclusion
We have reviewed Reach plc's Condensed interim consolidated
financial statements (the "interim financial statements") in the
Half-Yearly Financial Report of Reach plc for the 26 week period
ended 27 June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Consolidated balance sheet as at 27 June 2021;
-- the Consolidated income statement and Consolidated statement
of comprehensive income for the period then ended;
-- the Consolidated cash flow statement for the period then ended;
-- the Consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half-Yearly
Financial Report of Reach plc have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual consolidated financial statements of
the Group is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half-Yearly Financial Report, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Half-Yearly Financial Report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Half-Yearly Financial Report based on
our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half-Yearly
Financial Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 July 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR VQLFLFDLXBBE
(END) Dow Jones Newswires
July 27, 2021 02:00 ET (06:00 GMT)
Reach (LSE:RCH)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Reach (LSE:RCH)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024