Reach Plc · LSE:RCH
Reach — Trinity Mirror — FY2008 Earnings Presentation
51 slides from Reach's earnings presentation, Feb 26, 2009
Slide 1: Preliminary Results 2008
26 February 2009 Preliminary Results 2008
Slide 2: Vijay Vaghela, Finance Director
Vijay Vaghela, Finance Director
Slide 3: Presentation structure
Presentation structure 52 weeks to 28th December 2008 • Overview • Group performance • Net debt and covenants • Pensions • Cost management • Non-recurring items • Capital expenditure • Divisional performance • Current trading and outlook for 2009 2
Slide 4: Group overview
Group overview 52 weeks to 28th December 2008 • Rapid slowdown in UK economy during 2008 • Further efficiencies and cost savings to protect profitability • Cost savings – annualised savings of £30 million, ahead of £20 million target – increased ’09 target by £5 million to £25 million • Investment –
Slide 5: Group performance
Group performance 52 weeks to 28th December 2008 • Group revenues(1) (2) fell 6.5% or £60.6m to £871.7m (2007: £932.3m) • Advertising revenues(1) (2) fell 12.3% to £426.5m (2007: £486.1m) • Circulation revenues(1) (2) fell 3.4% to £345.3m (2007: £357.6m) • Operating profit(1) (2) fell 22.0% or £40.9
Slide 6: Net debt
Net debt 52 weeks to 28th December 2008 2008 2007 Movement £m £m £m US private placement loan notes (388.3) (341.3) (47.0) Cross currency interest rate swaps 41.7 (103.7) 145.4 £178.5 million bank facility (committed to June 2013) (10.0) - (10.0) Finance leases and other (12.7) (15.1) 2.4 Gross debt
Slide 7: Financial covenants
Financial covenants 52 weeks to 28th December 2008 Minimum Maximum Interest Debt to Cover EBITDA US private placement Throughout term of notes 2.0x 4.0x £178.5 million bank facility Up to December 2010 2.50x 3.75x January 2011 to December 2011 2.75x 3.50x January 2012 to June 2012 3.00x 3.25x Therea
Slide 8: Defined benefit pension schemes
Defined benefit pension schemes 52 weeks to 28th December 2008 Annual Forecast 2008 2007 Change 2009 IAS 19 pension charge £m £m £m £m Current service cost 24.1 27.0 (2.9) 16.5 Past service cost 2.3 0.8 1.5 - Finance (income)/charge (11.4) (12.3) 0.9 10.5 Total income statement charge before 15.0 15
Slide 9: Defined benefit pension schemes
Defined benefit pension schemes 52 weeks to 28th December 2008 2008 2007 Change £m £m £m Assets 1,233.6 1,458.9 (225.3) Liabilities (1,378.8) (1,538.5) 159.7 Asset ceiling (61.7) (45.2) (16.5) Deficit (206.9) (124.8) (82.1) Fall in assets – underlying fall in asset values – partially offset by defic
Slide 10: Defined benefit pension schemes
Defined benefit pension schemes 52 weeks to 28th December 2008 • The Group has 10 defined benefit pension schemes • Over 95% of assets are concentrated in 5 schemes – the Trinity scheme (last actuarial valuation completed Sept 2007) – the MIN scheme (last actuarial valuation completed June 2008) – 3
Slide 11: Cost management
Cost management 52 weeks to 28th December 2008 Newsprint Impact of recharges decreased Underlying Inflation Digital to disposed pension cost 2008* 2007* Change Change impact investment Acq’s businesses charge reduction £m £m £m % £m £m £m £m £m £m Labour 293.5 306.7 13.2 4.3% (10.0) (2.2) (2.7) - 2.
Slide 12: Investment
Investment 52 weeks to 28th December 2008 • £50m net capital expenditure during the year including – £24.5m on presses – £14.1m on new IT systems – £12.2m on buildings – partially offset by £4.0m disposal proceeds • Capital expenditure forecasts – expect net capital expenditure of around £25m in 200
Slide 13: Non-recurring items
Non-recurring items 52 weeks to 28th December 2008 2008 2007 £m £m Continuing operations: Impairment of intangible assets 190.0 150.0 Impairment of fixed assets 14.3 - Restructuring costs 25.1 10.4 Other (3.1) (0.1) Total non-recurring items 226.3 160.3 Non-recurring restructuring costs of around £1
Slide 14: Regionals division
Regionals division 52 weeks to 28th December 2008 • Revenues* fell 11.0% or £48.7m to £396.0m (2007: £444.7m) – Advertising revenues* fell by 13.6% – decline of 6.0% in H1 and 21.7% in H2 – Circulation revenues* fell by 4.2% – Total Digital revenues* increased by 25.0% or £7.6m to £38.0m (2007: £30.
Slide 15: Nationals division
Nationals division 52 weeks to 28th December 2008 • Revenues fell 2.4% or £11.9m to £475.7m (2007: £487.6m) – Advertising revenues fell by 9.5% – Decline of 6.5% in H1 and 12.7% in H2 – Circulation revenues fell by 3.2% – Other revenues increased by 23.9% (£12.2m) – Total digital revenues increased
Slide 16: Current trading and outlook for 2009
Current trading and outlook for 2009 52 weeks to 28th December 2008 2009 will be a 53 week year - benefit 09 profits by some £3m to £4m Entered 2009 with an uncertain and difficult outlook for UK economy Current trading for January and February • Advertising revenues expected to fall by around 30% –
Slide 17: Sly Bailey, Chief Executive
Sly Bailey, Chief Executive
Slide 18: 2008 performance
2008 performance • Trinity Mirror has performed creditably in difficult conditions • Operating profits of £145.2m ahead of market forecasts • Annualised cost savings of £30m – 50% ahead of target • Continued to generate strong cash flows 17
Slide 19: Economic climate
Economic climate • The entire media industry has been adversely impacted by the economic downturn • Key driver of ad budgets is corporate profitability – when profits are under pressure budgets are cut • Regional newspapers are quick to feel effects of reduction in ad spend across jobs, property and
Slide 20: Survival of the fittest
Survival of the fittest • Media industry in transition but Trinity Mirror is a pioneer of the changes • We’re well positioned to manage our way through these challenging times • Sold or closed more than 30 unprofitable titles • Strengthened our balance sheet • Continue to appropriately fund our pens
Slide 21: Re-engineering the business
Re-engineering the business • Pressing ahead with technology-led operating model • Focusing on replacing obsolete processes with more efficient ways of working • Resulting in lower costs across the business • Re-thinking the publishing process using digital technology • Modernising how we publish wi
Slide 22: Editorial restructuring
Editorial restructuring • Regionals business undergone substantial restructure of editorial departments • Scottish Nationals titles announced fully integrated editorial operation • ‘ContentWatch’ web-based content management system • System already successfully operating in our Birmingham business •
Slide 23: Developing our regionals business
Developing our regionals business • Regional press facing most challenging time in its history • Focus on maintaining robust position in print while developing strong positions in digital • Requires strong and decisive portfolio management – right mix of products across print and digital to serve th
Slide 24: Cost savings
Cost savings • Real barometer of change • Group target of at least £25m savings in 09 • Announced Group-wide pay freeze for 09 • Introducing a new all-employee bonus scheme for 2009 • Focus on increasing efficiencies across Group has resulted in a reduction in headcount • Announced 1,200 headcount r
Slide 25: Importance of print titles
Importance of print titles • Print titles continue to play crucial role in our multi-platform strategy • Latest Audit Bureau of Circulation figures show national newspapers circulate around 11 million copies every day • Each week our titles reach up to 40% of UK adult population and in the majority
Slide 26: Resilience of print
Resilience of print • Continue to provide mass audience reach in a fragmenting media world • Delivering advertisers with fast, efficient coverage of their target market • Print audiences provide the platform for strong and sustainable digital growth • Circulation revenues more resilient than ad reve
Slide 27: Non-ad revenues
Non-ad revenues • £250 million investment in our print plants is driving new revenues across the business • Completion of investment programme positions us well to win long term contracts • Contract print revenues provide further resilience against advertising revenues • Non-ad revenues account for
Slide 28: Digital progress
Digital progress • Group digital revenues grew by 27% in 2008 • Average monthly unique user numbers rose by over 40% to 11.3m per month in ’08… • …and reached 14.2m for the Group in Jan ’09, and we expect this to accelerate in 2009 • Right skills to drive growth - recruited an additional 120 digital
Slide 29: Nationals websites UK reach
Nationals websites UK reach • Mirror Group websites have highest proportion of UK unique users – 55% against a market average of 35% - and UK audience up 70% in Dec ‘08 28
Slide 30: Driving profitable digital growth
Driving profitable digital growth • Digital represented 17.4% of regionals profit in 2008 • Launched 56 newspaper companion sites in 2008 • Launched around 100 hyperlocal and town-specific websites • New Daily Mirror and Daily Record ‘Cashback’ sites • Strong digital recruitment portfolio with an es
Slide 31: Media industry regulation
Media industry regulation • Regulatory reform could create important new opportunities for our business • We have made our views clear on the Government’s Digital Britain report • Continue to believe that consolidation in the regional press is crucial to the future of local media • Urging Lord Carte
Slide 32: Conclusions
Conclusions • Managing business tightly but not to the detriment of driving revenues • Reduced fixed cost base to provide further flexibility in challenging economy • Made good progress towards digital goals of increased revenue and unique user numbers • Robust balance sheet and no expected changes
Slide 33: Appendices
Appendices
Slide 34: Financial Summary
Financial Summary 2008 2007 Income Statement Statutory Statutory continuing continuing 2008 2007 52 weeks to 28th December 2008 operations operations Adjusted(1) Adjusted(1) £m £m £m £m Group revenue 871.7 971.3 871.7 1,009.8 Retained businesses 871.7 971.3 871.7 932.3 Disposed businesses - - - 77.5
Slide 35: Financial Summary: Analysis of revenue by type
Financial Summary Analysis of revenue by type 52 weeks to 28th December 2008 2008 2007 Change Adjusted(1) £m £m % Circulation 345.3 357.6 (3.4)% Advertising 426.5 486.1 (12.3)% Other revenues 99.9 88.6 12.8% Total revenue 871.7 932.3 (6.5)% (1) Adjusted basis, retained businesses only 34
Slide 36: Financial Summary: Revenue by segment and type
Financial Summary Analysis of revenue by segment and type 52 weeks to 28th December 2008 Adjusted(1) Group Regionals % Nationals % Total % £m of total £m of total £m of total Circulation 77.1 19.5% 268.2 56.4% 345.3 39.6% Advertising 282.3 71.3% 144.2 30.3% 426.5 48.9% Other 36.6 9.2% 63.3 13.3% 99.
Slide 37: Financial Summary: Revenue trends
Financial Summary Revenue trends – year on year change 52 weeks to 28th December 2008 Adjusted(1) H1 H2 FY Advertising (6.1)% (18.7)% (12.3)% Circulation (1.6)% (5.3)% (3.4)% Other 29.5% 0.0% 12.8% Group revenue (1.5)% (11.6)% (6.5)% Regionals advertising (6.0)% (21.7)% (13.6)% Nationals advertising
Slide 38: Financial Summary: Operating costs
Financial Summary Operating costs(1) 52 weeks to 28th December 2008 2008 2007 Change Adjusted(2) £m £m % Labour 293.5 306.7 4.3% Newsprint 115.4 133.6 13.6% Depreciation 38.0 36.0 (5.6)% Other 279.4 270.2 (3.4)% Total operating costs 726.3 746.5 2.7% (1) Excluding non-recurring items and amortisatio
Slide 39: Financial Summary: Balance Sheet
Financial Summary Balance Sheet 52 weeks to 28th December 2008 28th December 30th December 2008 2007 Movement £m £m £m Non-current assets 1,512.6 1,651.8 (139.2) Current assets 149.8 361.0 (211.2) Total assets 1,662.4 2,012.8 (350.4) Non-current liabilities Borrowings (388.3) (294.3) (94.0) Obligati
Slide 40: Analysis of revenue, operating profit and margin by segment
Analysis of revenue, operating profit(1) and margin(1) by segment 52 weeks to 28th December 2008 2008 2007 Change Adjusted(2) £m £m % Regionals division 396.0 444.7 (11.0)% Nationals division 475.7 487.6 (2.4)% Total revenue 871.7 932.3 (6.5)% Regionals division 68.2 109.0 (37.4)% Nationals division
Slide 41: Regionals division performance
Regionals division performance 52 weeks to 28th December 2008 2008 Change Statutory(2) & 2007 2007 Change adjusted adjusted(3) Statutory(2) Adjusted(3) statutory(2) (3) £m £m £m % % Advertising 282.3 361.3 326.7 (21.9)% (13.6)% Circulation 77.1 82.5 80.5 (6.5)% (4.2)% Other 36.6 39.9 37.5 (8.3)% (2.
Slide 42: Regionals division: Analysis of advertising revenue
Regionals division Analysis of advertising revenue 52 weeks to 28th December 2008 Adjusted(1) 2008 2007 Change Advertising by category £m £m % Display 96.0 103.6 (7.4)% Recruitment 76.1 90.7 (16.2)% Property 39.2 53.7 (27.2)% Motors 18.2 23.5 (22.7)% Other classified 52.8 55.2 (4.7)% Total net adver
Slide 43: Nationals division performance
Nationals division performance 52 weeks to 28th December 2008 2008 2007 Change Nationals division £m £m % Circulation 268.2 277.1 (3.2)% Advertising 144.2 159.4 (9.5)% Other 63.3 51.1 23.9% Total revenue 475.7 487.6 (2.4)% Operating profit(1) 88.9 94.3 (5.7)% Margin(1) 18.7% 19.3% (0.6)% (1)Excludin
Slide 44: UK Nationals Newspaper advertising market share
UK Nationals Newspaper advertising market share (volumes) 52 weeks to 28th December 2008 2008 2008 1 6 1 5 5 2 2 4 3 3 4 Dailies Sundays 2008 2007 2008 2007 1 Mirror 17.3% 17.5% 1 Sunday Mirror 13.9% 12.9% 2 Sun 21.0% 20.0% 2 People 7.5% 6.9% 3 Star 16.2% 16.6% 3 News of the World 14.7% 15.5% 4 Mail
Slide 45: Digital revenues
Digital revenues 52 weeks to 28th December 2008 2008 2007 Change Adjusted(1) £m £m % Regionals Advertising 35.3 30.2 16.9% Other 2.7 0.2 1,250.0% Total 38.0 30.4 25.0% Nationals Advertising 2.8 2.5 12.0% Other 2.8 1.4 100.0% Total 5.6 3.9 43.6% Group Advertising 38.1 32.7 16.5% Other 5.5 1.6 243.8%
Slide 46: Disposed businesses
Disposed businesses 52 weeks to 30th December 2007 Full Year 2007 Sports TMS Total Adjusted(1) £m £m £m Advertising 10.8 34.6 45.4 Circulation 24.7 2.0 26.7 Other 3.0 2.4 5.4 Total revenue 38.5 39.0 77.5 Operating profit 12.9 9.9 22.8 (1)Adjusted basis 45
Slide 47: Net debt - statutory
Net debt - statutory 52 weeks to 28th December 2008 Loans Other 30th Dec Cash Income repaid/ non-cash 28th Dec 2007 Flow statement (drawn) changes 2008 £m £m £m £m £m £m Non-current liabilities Loan notes (294.3) - (93.9) - (0.1) (388.3) Derivative financial instruments (88.5) - 88.5 - - - Finance l
Slide 48: Net debt
Net debt(1) 52 weeks to 28th December 2008 2008 2007 Movement £m £m £m US private placement loan notes and related swaps (382.1) (442.6) 60.5 Other loan notes - (0.9) 0.9 £178.5m bank facility (10.0) - (10.0) Finance leases (10.6) (13.6) 3.0 Other (2.1) (0.6) (1.5) Gross debt (404.8) (457.7) 52.9 Ne
Slide 49: Defined benefit pension schemes assets and liabilities
Defined benefit pension schemes assets and liabilities 52 weeks to 28th December 2008 28th December 30th December 2008 2007 Net scheme liabilities £m £m Present value of scheme liabilities (1,378.8) (1,538.5) Fair value of scheme assets 1,233.6 1,458.9 Effect of asset ceiling (61.7) (45.2) Scheme de
Slide 50: Reconciliation of statutory result to adjusted result 2008
Reconciliation of statutory result to adjusted result 52 weeks to 28th December 2008 Continuing operations Non- Tax statutory Sports recurring Finance legislation Adjusted result division items Amortisation costs changes result (a) (b) (c) (d) (e) (f) 2008 £m £m £m £m £m £m £m Revenue 871.7 - - - -
Slide 51: Reconciliation of statutory result to adjusted result 2007
Reconciliation of statutory result to adjusted result 52 weeks to 30th December 2007 Continuing operations Non- Tax statutory Sports recurring Finance legislation Adjusted result division items Amortisation costs changes result (a) (b) (c) (d) (e) (f) 2007 £m £m £m £m £m £m £m Revenue - retained 932