Reach Plc · LSE:RCH
Reach — FY2022 Earnings Presentation
46 slides from Reach's earnings presentation, Mar 7, 2023
Slide 1: Prelim Results 2022
PRELIM RESULTS 2022 Prelim Results Presentation 7 March 2023 Reach plc - Prelim Results 2022 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Reach plc (the Forward-looking statements speak only as of the date of such “Company”) and its subsidiaries or associated companies or its statements reflecting the knowledge and information available or their affiliates (the “Group”) in connection w
Slide 3: Contents
CONTENTS 01 Strategic Update Jim Mullen, CEO 02 Financial Update Darren Fisher, CFO 03 Editorial Perspective Lloyd Embley, Group Editor-in-Chief 04 Summary Jim Mullen, CEO 05 Q&A Reach plc - Prelim Results 2022 3
Slide 4: Strategic Update
PRELIMS 22 STRATEGIC UPDATE JIM MULLEN CEO Reach plc - Prelim Results 2022 4
Slide 5: Continuing to rise to the challenge
Strategic Update | Financial Update | Editorial | Summary Continuing to rise to the challenge Customer Value Strategy delivering to plan in spite of macro headwinds • Inflation and weaker ad demand impacted 2022; action plan in place for 2023 • Strategy driving engagement and more sustainable revenu
Slide 6: Customer Value Strategy
Strategic Update | Financial Update | Editorial | Summary Customer Value Strategy Creating a more data-led digital business Our business model PRINT OUR BRANDS DIGITAL OUR FOUNDATIONS AND PRODUCTS OUR FUTURE Market dynamic National Market dynamic • Strategy focused on We sell circa 1 million copies
Slide 7: Consistent growth in customer engagement
Strategic Update | Financial Update | Editorial | Summary Consistent growth in customer engagement Registered customers increasingly active Registered & Active Users 5.6m 4.3m Total Registered UK audience +4% Page views +4% 3.6m or 7.1m 12.7m 5.6m 2.5m 64% active weekly Jan 2021 Jan 2022 Jan 2023 20
Slide 8: Audience driven by more interactive content
Strategic Update | Financial Update | Editorial | Summary Audience driven by more interactive content Strategic delivery Strategic delivery Strategic Strategic delivery Financial Strategic Financial update delivery Financial delivery Financial update update updateFinancial Editorial Editorial Editor
Slide 9: A strong and growing base of registered active users
Strategic Update | Financial Update | Editorial | Summary A strong and growing base of registered active users More activity, greater retention, more data Breakdown of active users Registered page views 5.6m 0.8m 101m Reactivated Users 94m New Users 0.5m 92m Retained Users 4.3m 2.5m 56m 0.3m 0.2m 2.
Slide 10: Large and growing pool of data
Strategic Update | Financial Update | Editorial | Summary Large and growing pool of data Building insight on most of our audience c.75% of total UK audience generating data • Around three quarters of total UK Gathering high quality audience consent to data collection behavioural & contextual data on
Slide 11: Customer value strategy driving higher quality revenue mix
Strategic Update | Financial Update | Editorial | Summary Customer value strategy driving higher quality revenue mix Diversified platform for sustainable and profitable growth PLUS +64% +78% +120% +44% Proven value of data; consistently ECOMM AFFILIATES & MANTIS & EDITORIAL SOLUTIONS Evolving beyond
Slide 12: Industry curated development gathering pace
Strategic Update | Financial Update | Editorial | Summary Industry curated development gathering pace Curated marketplaces will enable data-led advertising at scale Curated programmatic Open market programmatic Curated Deal Publisher Audience Advertiser Publisher Open Auction Advertiser Context Inve
Slide 13: Mantis curated marketplace
Strategic Update | Financial Update | Editorial | Summary Mantis curated marketplace Leading the way with global data opportunity Multiple Cost of living Publishers • Opportunity as curator Buyer 1 as well as publisher Publisher A Sustainability • Mantis categorising Publisher B mantis Family Automo
Slide 14: Expansion in the US
Strategic Update | Financial Update | Editorial | Summary Expansion in the US REACH IN THE Exciting opportunity leveraging CVS playbook Large addressable market - significant growth potential Visitor split v other UK publishers • Already our largest non UK market 62% 48% 47% 41% 33% UK • Audience pe
Slide 15: A clear opportunity for our national brands
Strategic Update | Financial Update | Editorial | Summary A clear opportunity for our national brands REACH IN THE Adapting & creating content for US audiences SOCCER Our biggest US Already has New for the Dedicated to US • Strength in content with US brand 12m audience audience of 10m US market Pre
Slide 16: Introducing Curiously
Strategic Update | Financial Update | Editorial | Summary Introducing Curiously New culturally relevant brand aimed at 16-34yr olds • Building engagement with younger audience • Social first, video led approach • Bringing new talent to the business • New content creation and reworking ‘best of Reach
Slide 17: Print - scale business with significant cashflows
Strategic Update | Financial Update | Editorial | Summary Print - scale business with significant cashflows Enables investment in digital One in five UK adults read a Reach title • Scale business, loyal customers last month and significant cashflows • Active management of volume decline C.1m copies
Slide 18: Financial Update
PRELIMS 22 FINANCIAL UPDATE DARREN FISHER CFO Reach plc - Prelim Results 2022 18
Slide 19: 2022 Summary
Strategic Update | Financial Update | Editorial | Summary 2022 Summary Clear impact from macro headwinds Adjusted Results 2022 £m 2021 £m Var £m Var % Revenue 601.4 615.8 (14.4) (2.3%) • Lower revenue reflects Costs (498.1) (472.9) (25.2) (5.3%) slowdown in H2 advertising Associates 2.8 3.2 (0.4) (1
Slide 20: Revenue lower year on year
Strategic Update | Financial Update | Editorial | Summary Revenue lower year on year Robust circulation performance; H2 slowdown in advertising -1.7% -15.9% -£15m +1.0% +25.0% OR +8.4% -2.3% +13.2% H1: (5.1%) H1: (9.9%) H1: +5.4% H2: +1.9% H2: (21.5%) H2: (2.7%) £616m £601m Total print down 3.5% or
Slide 21: Input cost inflation had significant impact on profit
Strategic Update | Financial Update | Editorial | Summary Input cost inflation had significant impact on profit Efficiencies support investment -£14m -£38m -£40m OR +£5m +£25m -27% -£18m £146m £106m 2021 Revenue Inflation Investment Efficiencies 2021 one -offs 2022 mix & other Reach plc - Prelim Res
Slide 22: Customer Value Strategy driving quality of digital revenue
Strategic Update | Financial Update | Editorial | Summary Customer Value Strategy driving quality of digital revenue Open market yield impacts revenue overall Reach Open Market Yield (indexed) Growing quality of digital revenue 180 H1 YOY H2 YOY (28%) (40%) 160 140 120 102 100 Data driven 117 80 +58
Slide 23: Print circulation
Strategic Update | Financial Update | Editorial | Summary Print circulation Revenue supported by cover price, consistent historic volume trend (4.5%) (11.6%) (2.1%) (1.7%) 5% 0% • H2 revenue growth -5% driven by price increases -10% • Volume response in -15% line with expectations Volume trend -20%
Slide 24: Operating costs
Strategic Update | Financial Update | Editorial | Summary Operating costs Increase reflects record increase in cost of newsprint; supply hedged for H1 Adjusted Operating European newsprint price* Costs (£m) 240 £473m £498m 220 200 • Total operating costs up c.5% 168 180 • Newsprint costs up c.60% on
Slide 25: Adjusted cash flow
Strategic Update | Financial Update | Editorial | Summary Adjusted cash flow Lower operating cashflow reflects profit position Cash balance at start of year £65m Movement in the year (£25m) £5m Retained cash at the year end £40m £14m £13m £6m £3m £126m £55m £ million £20m £9m £65m £1m £23m £1m £(23m
Slide 26: Capital allocation
Strategic Update | Financial Update | Editorial | Summary Capital allocation Cash & balance sheet support creation of more sustainable business • Strategic investment supports more sustainable future business Continued • Balance sheet optionality to investment Growing Pension accelerate via M&A in d
Slide 27: Trading & outlook for 2023
Strategic Update | Financial Update | Editorial | Summary Trading & outlook for 2023 Digital still impacted by macro, expect overall reduction in cost base • Trading YTD in line with our expectations Print Digital Costs • Group revenue (5.8%), Circulation trends Macro uncertainty remains digital (11
Slide 28: Editorial Update
PRELIMS 22 EDITORIAL UPDATE LLOYD EMBLEY GROUP EDITOR-IN-CHIEF Reach plc - Prelim Results 2022 28
Slide 29: Journalism is our core purpose
s our core purpose Journalism is our core purpose Strategic d el mpower & entertain To enlighten, empower Journ&aentertain lipsu e Strategic Update | Financial Update | Editorial | Summary e m r pi o s s o u r c r c o r o r e p Strategic d oTu u r elivery n a Journalism r l i s m is i ours o core e
Slide 30: Raising awareness & representing communities
o m m u n i t i e s r e s e n t i n g c r e n e s s & r e p w a Strategic Update | Financial Update | Editorial | Summary isi n g a Raising awareness Journalism is our core purpose Strategic delivery Financial update Editorial Summary & n t i n g c o m m u n i t i e s Raising awareness & representin
Slide 31: Summary
PRELIMS 22 SUMMARY JIM MULLEN CEO Reach plc - Prelim Results 2022 31
Slide 32: A responsible and sustainable business
Strategic Update | Financial Update | Editorial | Summary A responsible and sustainable business New framewok formalises approach Our responsible business framework • Formalised framework after stakeholder consultation • Aligns purpose and strategy Creating Trusted, Operating with Developing Protect
Slide 33: Looking forward
Strategic Update | Financial Update | Editorial | Summary Looking forward Customer Value Strategy supporting long term growth • Challenging trading environment set to continue in short term • Strategy focused on data-led, long term structural growth • Growing proportion of digital revenue in our con
Slide 34: Q&A
Q&A Reach plc - Prelim Results 2022 34
Slide 35: Appendices
pj 0 | i jel. SUL Appendices Reach
Slide 36: Guidance items
Guidance items • Depreciation – expect similar charge to 2022 (2022: £20.2m) • P&L finance charge – expect small increase year on year (2022: £2.8m) • P&L tax rate – expect full year rate of 23.5% - 19% UK rate for Q1 & 25% thereafter • Working capital – broadly flat • Capex – mid teens (2022: £13.3
Slide 37: Group income statement
Group income statement Revenue Operating profit Adjusted operating profit Operating adjusted items Profit before taxation Operating profit Interest income Finance costs Pension finance charge Earnings per share Statutory Statutory 2021 £m 615.8 79.3 146.1 (66.8) 73.3 79.3 ol (2.7) (3.4) Adjusted 202
Slide 38: Group balance sheet
Group balance sheet Goodwill and intangible assets 868.8 860.2 Property, plant and equipment 1401 1573 Right-of-use assets 10.9 127 Finance lease receivable 10.4 - Investment in associates 46 7.4 Retirement benefit assets 812 107.9 Non-current assets 1,096.0 1155.5 Cash and cash equivalents 40.4 657
Slide 39: Reconciliation of statutory to adjusted results
Reconciliation of statutory to adjusted results 5
Slide 40: Operating adjusted items
Operating adjusted items 2022 £m Provision for historical legal issues (1.0) Restructuring charges in respect of cost reduction measures (15.5) Sublet of closed print site 16.6 Home and Hub project - Pension administrative expenses and past service costs (14.8) Other items (8.7) Operating adjusted i
Slide 41: Adjusted cash flow
Adjusted cash flow Adjusted operating profit 106.1 146.1 (40.0) Depreciation and amortisation 20.2 193 0.9 Adjusted EBITDA 126.3 165.4 (39.1) Net interest and charges paid on bank borrowings (18) (13) (0.5) Income tax paid (5.0) (14.6) 9.6 Restructuring payments (13.8) (15.1) 13 Net capital expendit
Slide 42: Financing & deferred consideration
Financing & deferred consideration 8
Slide 43: Pensions
Pensions Pensions 2022 2021 Change £m £m £m Fair value of scheme assets 1710.3 2636.3 (926.0) Present value of scheme liabilities (1860.0) (2,788.4) 928.4 Impact of IFRIC 14 (12) (is) 06 Net scheme deficit (150.9) (153.9) 30 Net scheme deficit after deferred tax (113.9) 117.2) 33 Pension scheme asse
Slide 44: IAS19 accounting pension deficit
IAS19 accounting pension deficit 10
Slide 45: Provisions & associates
Provisions & associates Provisions Share-based Historical legal payments Property Restructuring issues £m At 26 December 2021 (4.0) (12.3) (10.3) (41.0) (48) (72.4) Charged to income statement (0.3) - (15.7) (1.0) (1.0) (28.0) Released to income statement 27 0.4 56 - u 98 Utilisation of provision 07
Slide 46: Group revenue trends 2022 & 2021
Group revenue trends 2022 & 2021 12