Reach Plc · LSE:RCH

Reach — Trinity Mirror — FY2016 Earnings Presentation

50 slides from Reach's earnings presentation, Feb 27, 2017

  1. Slide 1: Trinity Mirror plc 2016 Annual Results

    Trinity Mirror plc 2016 ANNUAL RESULTS 27 February 2017

  2. Slide 2: Today's agenda

    Today’s agenda 2016 Operational update Simon Fox Financial highlights Vijay Vaghela Strategic update Simon Fox Trinity Mirror plc 1

  3. Slide 3: Highlights

    Highlights Group Operating Earnings per Dividends per EBITDA Net debt revenue profit share share £713.0m £137.5m £159.7m £30.5m 38.1p 5.45p +20.3% +25.5% +21.0% -£62.4m +12.4% +5.8%  Strong performance and cash generation – Adjusted EBITDA of £159.7m and net cash inflows resulted in net debt fallin

  4. Slide 4: Strong operational progress

    Strong operational progress Print Digital  Award winning journalism  LFL audience growth of 15.4%(1) and digital  Volume declines partially mitigated by cover display and other transactional revenue price increases growth of 24.7%  Ongoing portfolio review of regional titles – Increased audience

  5. Slide 5: Vijay Vaghela, Group Finance Director

    Vijay Vaghela GROUP FINANCE DIRECTOR Trinity Mirror plc

  6. Slide 6: Prior year comparison

    Prior year comparison  2016 is a 53‐week financial year  Results are presented on an adjusted basis(1)  Revenue trends are shown on a LFL basis: – Assumes Local World was owned from the beginning of 2015 – Compares 52 weeks to 25 December 2016 with 52 weeks to 27 December 2015 – Excludes revenue

  7. Slide 7: Group performance

    Group performance Group summary 2016 2015 Var Var £m £m £m % Revenue 713.0 592.7 120.3 20.3% Costs (576.6) (489.1) (87.5) (17.9%) Associates 1.1 6.0 (4.9) (81.7%) Operating profit 137.5 109.6 27.9 25.5% Operating margin pre associates 19.1% 17.5% 1.6% n/a EBITDA 159.7 132.0 27.7 21.0% EPS 38.1p 33.9

  8. Slide 8: Publishing

    Publishing Publishing revenue (£m) Publishing operating profit (£m) & margin (%) £528.8m £660.0m +24.8% (LFL: ‐8.4%) 22.5% 79.0 Digital 160.0 21.5% 140.0 42.9 +84.1% 120.0 (LFL: +12.8%) 100.0 581.0 80.0 485.9 Print 60.0 40.0 +19.6% (LFL: -10.7%) 20.0 113.7 148.4 0.0 2015 2016 2015 2016 Operating pro

  9. Slide 9: Publishing print

    Publishing print 2016 Publishing print revenue mix (£m)  On a LFL basis, circulation +5.0% representing 53% of print revenue (LFL: ‐1.5%) fell by 5.2% – Volume declines partially 33.8 mitigated by cover price increases Circulation  On a LFL basis, advertising revenue Advertising representing 41% o

  10. Slide 10: Publishing digital

    Publishing digital Publishing digital revenue mix (£m) Publishing digital display and transactional revenue (£m) +145.0% +64.8% (LFL: +99.4%) Total revenue: (LFL: ‐11.3%) +84.1% +92.1% 5.3 (LFL: +12.8%) (LFL: +24.7%) 20.6 Video 58.4 Other display and 30.4 53.1 transactional +88.1% Classified (LFL: +

  11. Slide 11: Other divisional performance

    Other divisional performance Other divisions 2016 2015 Specialist Specialist £m Printing Digital Central Printing Digital Central Revenue 36.2 12.9 3.9 44.9 15.4 3.6 Cost (36.2) (10.5) (18.3) (44.9) (12.8) (16.3) Operating profit pre associates ‐ 2.4 (14.4) ‐ 2.6 (12.7) Associates ‐ ‐ 1.1 ‐ ‐ 6.0 Op

  12. Slide 12: Non-recurring items and restructuring charges

    Non‐recurring items and restructuring charges Non‐recurring items 2016 2015 £m £m Impairment of goodwill (2.0) ‐ Provision for historical legal issues (11.5) (29.0) Closure of print sites and press line (10.7) (3.4) Profit on disposal of land and buildings 0.2 ‐ Local World related items (2.0) 28.0

  13. Slide 13: Cash flow

    Cash flow  Strong cash generation of £84.3m pre distribution to shareholders  Term loan repaid from cash balances and free cash flow of £62.4m Cash flow 2016 2015 Var £m £m £m EBITDA 159.7 132.0 27.7 Proceeds from sale of land and buildings 10.6 ‐ 10.6 Capital expenditure (4.3) (3.6) (0.7) Net int

  14. Slide 14: Pensions

    Pensions  Key driver of increase in deficit is fall in interest rates and increase in future inflation  Negative real discount rates of 0.55% – inflation is higher than the discount rate – Liabilities increased by £294.0m even after benefit payments of £98.0m  A 0.5% increase in the discount rate

  15. Slide 15: Pensions

    Pensions Discounted uninsured benefit cashflows (£m)  Pension payments go out to 2090  Average life of c.20 years  No liquidity issues as schemes have significant assets to meet obligations due in the medium term Current assets can pay future pensions until 2045 if returns of only 2.65% achieved

  16. Slide 16: Financial flexibility

    Financial flexibility  Term loan repaid fully during 2016 through cash flow  The US private placement loan notes are repayable in June 2017  Cash balance of £37.8m at year end  New £110m amortising RCF committed to December 2021 – £10m reduction in December 2017 – £8.3m reduction every 6 months

  17. Slide 17: Financial flexibility

    Financial flexibility Dividends Share buyback  Aligned to the free cash generation of the  To be considered if surplus cash is generated business and there is an opportunity to enhance EPS – Free cash flow before distributions to and therefore shareholder value shareholders of £84.3m in 2016  Any

  18. Slide 18: Current trading and outlook

    Current trading and outlook  Revenue in the first two months is expected to decline by 9% on a LFL basis. The actual revenue decline is impacted by: – One less week in 2017 – Independent print and distribution contract which ceased in April 2016 – Disposal of Rippleffect which was sold in August 20

  19. Slide 19: Simon Fox, Chief Executive

    Simon Fox CHIEF CHIEFEXECUTIVE EXECUTIVE Trinity Mirror plc

  20. Slide 20: Our vision

    Our vision OUR VISION To be an essential part of people’s daily lives by delivering quality content and services that inform, enlighten and enrich Engaging, differentiated content is at the heart of our business. It is this OUR BELIEF content that makes us central to our audience’s daily lives and o

  21. Slide 21: Our strategy

    Our strategy Grow, build, protect and consolidate our strong position in the communities that we serve Grow digital audience and revenue through deepening relationships with GROW readers and optimising response for advertisers BUILD Build a diversified product portfolio and sustainable mix of new re

  22. Slide 22: Grow: digital metrics

    STRATEGY OUR GROW All metrics of our digital business are healthy Careful yield management through direct SEO growth drove overall sales and increasing use of data led increases – up 39% YoY(4) programmatic trading techniques Display and Ad Unique users Page views Video views transactional impressio

  23. Slide 23: Growing digital audience

    STRATEGY OUR GROW Growing digital audience Average weekly local audience reach (%) Monthly unique browsers (m) for Dec 2016 for Dec 2016 50% 40% 30% 20% 10% 0% Source: ComScore UK multi‐platform (Dec 2016) Source: Omniture (Dec 2016) We are growing from an already established position Trinity Mirror

  24. Slide 24: National and regional reach is a unique proposition

    STRATEGY OUR GROW Our national and regional reach is a unique proposition National Local Advertisers Advertisers Local National consumers consumers Trinity Mirror plc 23

  25. Slide 25: Grow: 2017 objectives

    STRATEGY 2017 Objectives OUR GROW Continue digital audience and revenue growth  Migration of ex Local World sites to Chameleon 2017 targets platform  Monthly page views – Continued investment in training and upskilling in increase of at least the newsroom 10%  Continued investment in video  Vide

  26. Slide 26: Build: 2017 objectives

    STRATEGY 2017 Objectives OUR BUILD Build a diversified and sustainable mix of new revenue OUR CORE ASSETS Audience Reach & Quality Content Trusted Brands Data Print Digital National Local Events E‐commerce Validate concepts with the potential for scale-up in 2018 Trinity Mirror plc 25

  27. Slide 27: Protect: 2017 objectives

    STRATEGY 2017 Objectives OUR PROTECT Efficiently deliver quality print products  Continual process improvements to maximise financial 2017 targets performance  Circulation revenue – single digit  Restructuring of regional newsrooms to regional print declines production hubs  Print advertising 

  28. Slide 28: Consolidate: 2017 objectives

    STRATEGY 2017 Objectives OUR CONSOLIDATE Seek out strategic opportunities that drive value  We will continue to exercise rigorous discipline in considering any acquisitions, ensuring required financial returns are met and measured against any opportunity costs  We will identify smaller diversifica

  29. Slide 29: Group KPIs

    Group KPIs Financial measure 2017 target KPIs Publishing digital revenue growth At least 15% p.a. Circulation revenue Single digit declines At least in line with national market Print advertising revenue trends Grow operating margin to support Operating margin profits Dividend growth At least 5% p.a

  30. Slide 30: In summary…

    InIn summary… summary… Trinity Mirror plc

  31. Slide 31: Summary

    Summary 2016 has been a strong year Operating Earnings per EBITDA Net debt profit share +25.5% +21.0% +12.4% -£62.4m All metrics of our digital business in robust health Display and Ad Unique users Page views Video views transactional impressions revenue +14.4% +15.4% +100.0% +17.6% +24.7% Refreshed

  32. Slide 32: Thank you, Questions

    THANK YOU Questions Trinity Mirror plc

  33. Slide 33: Appendices

    Appendices Trinity Mirror plc

  34. Slide 34: Income statement

    Income statement 2016 2015 2016 2015 Statutory Statutory Adjusted* Adjusted* £m £m £m £m Group revenue 713.0 592.7 713.0 592.7 Operating profit 93.5 82.2 137.5 109.6 Adjusted operating profit 137.5 109.6 137.5 109.6 Non‐recurring items (26.1) (5.7) ‐ ‐ Restructuring charges in respect of cost reduct

  35. Slide 35: Revenue, operating profit and margin by division

    Revenue, operating profit and margin by division 2016 2015 Change Change £m £m £m % Publishing 660.0 528.8 131.2 24.8% Printing 36.2 44.9 (8.7) (19.4%) Specialist Digital 12.9 15.4 (2.5) (16.2%) Central 3.9 3.6 0.3 8.3% Revenue 713.0 592.7 120.3 20.3% Publishing 148.4 113.7 34.7 30.5% Printing ‐ ‐ ‐

  36. Slide 36: Publishing and Printing

    Publishing 2016 2015 Change Change £m £m £m % Print 581.0 485.9 95.1 19.6% Digital 79.0 42.9 36.1 84.1% Revenue 660.0 528.8 131.2 24.8% Costs (511.6) (415.1) (96.5) (23.2%) Adjusted operating profit 148.4 113.7 34.7 30.5% Adjusted operating margin 22.5% 21.5% 1.0% 4.7% Printing 2016 2015 Change Chan

  37. Slide 37: Balance sheet

    Balance sheet Dec‐16 Dec‐15 £m £m Intangible assets 901.5 904.3 Property, plant and equipment 262.1 300.1 Investment in associates 21.8 19.2 Retirement benefit assets ‐ 29.4 Deferred tax assets 81.5 55.2 Derivative financial instruments ‐ 3.5 Non‐current assets 1,266.9 1,311.7 Cash and cash equivale

  38. Slide 38: Group revenue trends 2016

    Group revenue trends 2016 2016 Q1 Q2 H1 Q3 Q4 H2 FY Publishing 38.5% 32.8% 35.7% 25.7% 5.3% 14.7% 24.8% Print 32.2% 27.0% 29.7% 19.8% 1.6% 10.0% 19.6% Digital 120.6% 101.0% 110.1% 93.1% 41.3% 63.4% 84.1% Printing (15.4%) (23.6%) (19.4%) (20.7%) (18.0%) (19.4%) (19.4%) Specialist Digital ‐ (2.6%) (1.

  39. Slide 39: Group revenue trends 2015

    Group revenue trends 2015 2015 Q1 Q2 H1 Q3 Q4 H2 FY Publishing (8.1%) (11.1%) (9.6%) (7.0%) 8.3% 0.7% (4.5%) Print (10.0%) (13.2%) (11.6%) (9.0%) 5.3% (1.8%) (6.8%) Digital 29.5% 23.7% 26.8% 23.6% 49.9% 37.4% 32.4% Printing (27.1%) (29.7%) (28.4%) (32.3%) (32.8%) (32.6%) (30.4%) Specialist Digital 9

  40. Slide 40: Publishing revenue trends 2016

    Publishing revenue trends 2016 2016 Q1 Q2 H1 Q3 Q4 H2 FY Publishing Print 32.2% 27.0% 29.7% 19.8% 1.6% 10.0% 19.6% Circulation 25.3% 15.5% 20.4% 14.1% 2.9% 8.3% 14.3% Advertising 43.2% 47.0% 45.0% 32.5% 3.1% 16.0% 30.0% Other 26.5% 18.6% 23.4% 1.2% (14.8%) (8.1%) 5.0% Publishing Digital 120.6% 101.0

  41. Slide 41: Publishing revenue trends 2015

    Publishing revenue trends 2015 2015 Q1 Q2 H1 Q3 Q4 H2 FY Publishing Print (10.0%) (13.2%) (11.6%) (9.0%) 5.3% (1.8%) (6.8%) Circulation (6.1%) (5.4%) (5.8%) (4.9%) 5.4% 0.1% (2.9%) Advertising (14.8%) (23.2%) (19.0%) (17.2%) 3.6% (6.7%) (13.0%) Other (13.1%) (14.1%) (13.8%) 8.0% 14.0% 11.4% (1.2%) P

  42. Slide 42: Publishing – print advertising and digital revenue

    Publishing – print advertising and digital revenue 2016 2015 Var LFL* £m £m £m Var % Var % Publishing ‐ print advertising 236.6 182.0 54.6 30.0% (17.9%) Display and other 118.5 122.1 (3.6) (2.9%) (15.1%) Classified 118.1 59.9 58.2 96.8% (20.5%) Recruitment 14.6 9.9 4.7 47.1% (34.9%) Property 24.9 13

  43. Slide 43: Reconciliation of statutory results to adjusted results

    Reconciliation of statutory results to adjusted results Non‐ recurring Pension Restructuring Finance Tax Statutory items Amortisation charges charges costs items Adjusted results (a) (b) (c) (d) (e) (f) results £m £m £m £m £m £m £m £m 2016 Revenue 713.0 ‐ ‐ ‐ ‐ ‐ ‐ 713.0 Operating profit 93.5 26.1 0

  44. Slide 44: Cash flow

    Cash flow 2016 2015 £m £m Statutory operating profit 93.5 82.2 Depreciation 22.2 22.4 Pension deficit funding (net of pension administrative expenses) (38.5) (17.9) Share of associates results (0.7) (2.2) Impairment of goodwill 2.0 ‐ Gain on deemed disposal of Local World associate interest ‐ (33.6)

  45. Slide 45: Reconciliation of net debt, covenants and financing

    Reconciliation of net debt 2016 2015 £m £m Statutory net debt (28.6) (88.7) Loan notes at period end exchange rate 81.2 67.6 Loan notes at swapped exchange rate (68.3) (68.3) Cross‐currency interest rate swap (14.8) (3.5) Contracted net debt (30.5) (92.9) Financial covenants Minimum Maximum Net Debt

  46. Slide 46: Pension scheme assets

    Pension scheme assets 2016 % 2015 % £m of total £m of total UK equities 208.2 12.5% 181.7 11.9% US equities 217.2 13.1% 192.8 12.6% Other overseas equities 235.7 14.2% 210.7 13.8% Total equities 661.1 39.8% 585.2 38.3% Property 26.9 1.6% 20.4 1.3% Corporate bonds 220.0 13.2% 308.7 20.2% Fixed intere

  47. Slide 47: Net scheme deficit

    Reduced discount and higher inflation rates driving increased pension deficit 4.90% 800 5% 4.50% 4.40% 700 Net scheme deficit (£m) 3.70% 3.65% 4% 600 3.20% 500 3.35% 3% 3.05% 3.05% 3.05% 400 2.80% 2.65% 300 2% 200 1% 100 230.1 297.7 252.2 301.2 305.2 466.0 ‐ 0% 2011 2012 2013 2014 2015 2016 Net sche

  48. Slide 48: Provisions and Associates

    Provisions Share‐based payments Property Restructuring Other Total £m £m £m £m £m At 27 December 2015 (0.3) (9.6) (3.7) (37.1) (50.7) Charged to income statement ‐ (2.5) (15.1) (13.4) (31.0) Utilisation of provision ‐ 4.0 15.4 30.8 50.2 At 1 January 2017 (0.3) (8.1) (3.4) (19.7) (31.5) Associates PA

  49. Slide 49: National newspaper advertising market share (volumes)

    National newspaper advertising market share (volumes) UK Dailies 2016 2016 2015 1. Daily Mirror 17.4% 18.3% 2. Sun 19.0% 19.5% 3. Daily Star 15.0% 14.5% 4. Daily Mail 23.6% 22.5% 5. Daily Express 25.0% 25.2% 100.0% 100.0% Sundays 2016 2015 2016 1. Sunday Mirror 16.2% 17.5% 2. Sunday People 10.9% 11.

  50. Slide 50: Trinity Mirror plc

    Trinity Mirror plc

Trinity Mirror — FY2016 Earnings Presentation on 6ix