Reach Plc · LSE:RCH
Reach — Trinity Mirror — FY2017 Earnings Presentation
51 slides from Reach's earnings presentation, Mar 5, 2018
Slide 1: Trinity Mirror plc 2017 Annual Results
www.trinitymirror.com Trinity Mirror plc 2017 Annual Results 5 March 2018
Slide 2: Today's agenda
Today’s agenda Highlights Simon Fox Financial update Vijay Vaghela Strategic and operational update Simon Fox Trinity Mirror plc 1
Slide 3: Financial highlights
Financial highlights Digital display and Operating Operating profit Operating profit Group revenue transactional margin (statutory) (adjusted)(1) revenue (adjusted)(1) £623.2m £68.7m £97.9m £124.7 20.0% -12.6% +17.6% +4.7% -9.3% +0.7 p.p. (LFL: -8.8%) (2) (LFL: +18.2%) (2) EBITDA IAS 19 pension Divi
Slide 4: Strategic highlights
Strategic highlights Largest commercial digital news provider in the UK – 33m monthly unique users(1) GROW Strong publishing digital display and transactional growth – revenue growth (18%)(2) outstripping growth in average monthly page views (15%)(3) New products validated and ready for scale
Slide 5: Vijay Vaghela, Group Finance Director
Vijay Vaghela GROUP FINANCE DIRECTOR Trinity Mirror plc
Slide 6: Prior year comparison
Prior year comparison 2017 is a 52‐week trading period 2016 is a 53‐week trading period Results are presented on an adjusted basis(1) Revenue trends are shown on a LFL basis which excludes: – The extra week of trading in 2016 – The Independent print and distribution contract which ceased in
Slide 7: Group performance
Group performance Group summary 2017 2016 Var Var £m £m £m % Revenue 623.2 713.0 (89.8) (12.6%) Costs (499.3) (576.6) 77.3 13.4% Associates 0.8 1.1 (0.3) (27.3%) Operating profit 124.7 137.5 (12.8) (9.3%) Operating margin 20.0% 19.3% 0.7% n/a EBITDA 145.1 159.7 (14.6) (9.1%) EPS 36.1p 38.1p (2.0p) (
Slide 8: Publishing
Publishing Publishing revenue and costs (£m) Publishing operating profit (£m) & margin (%) £660.0m 23.0% £578.5m Revenue 22.5% 160.0 -12.3% 140.0 (LFL: -9.0%) 120.0 100.0 80.0 511.6 445.3 Costs 60.0 -13.0% 40.0 20.0 148.4 133.2 0.0 2016 2017 2016 2017 Operating profit Operating margin LFL revenue
Slide 9: Publishing print
Publishing print 2017 Publishing print revenue mix (£m) On a LFL basis, circulation representing 58% of print revenue fell by 6.5% ‐4.4% (LFL: ‐1.8%) – Cover price increases reducing the impact of volume declines 32.3 On a LFL basis, advertising revenue Circulation representing 36% of print reve
Slide 10: Publishing digital
Publishing digital Publishing digital revenue mix (£m) Publishing digital display and transactional revenue (£m) ‐26.2% Total revenue (LFL: ‐25.1%) £83.9m +17.6% 15.2 (2016: £79.0m) (LFL: +18.2%) +6.2% (LFL: +7.0%) 68.7 Display and transactional 58.4 68.7 Classified +17.6% (LFL: +18.2%) 2016 2017
Slide 11: Other divisional performance
Other divisional performance Other divisions 2017 2016 Specialist Specialist £m Printing Digital Central Printing Digital Central Revenue 31.6 9.6 3.5 36.2 12.9 3.9 Cost (31.6) (6.9) (15.5) (36.2) (10.5) (18.3) Operating profit pre associates ‐ 2.7 (12.0) ‐ 2.4 (14.4) Associates ‐ ‐ 0.8 ‐ ‐ 1.1 Oper
Slide 12: Group costs
Group costs £576.6m £499.3m £77.3m Operating costs fell £77.3m (13.4%) – Structural cost savings of £20m achieved against initial full year target of £15m 247.6 – Portfolio changes – Mitigating actions 204.8 Other £15m of structural cost savings targeted 22.2 for 2018 Depreciation 67.4 20.4 56.5
Slide 13: Operating adjusted items
Operating adjusted items Operating adjusted items 2017 2016 £m £m Restructuring charges in respect of cost reduction measures (12.6) (15.1) Provision for historical legal issues (10.5) (11.5) Pension administrative expenses (1.0) (2.2) Amortisation of intangible assets (0.3) (0.3) Profit on sale of
Slide 14: Cash flow
Cash flow Cash generation of £47.0m pre distribution to shareholders Working capital in 2016 benefitted from additional week Cash flow 2017 2016 Var £m £m £m EBITDA 145.1 159.7 (14.6) Proceeds from sale of land and buildings 1.2 10.6 (9.4) Capital expenditure (8.9) (4.3) (4.6) Net interest (2.0)
Slide 15: Pensions
Pensions Pensions Insurance Excluding contract insurance Dec‐17 Dec‐16 Var buyout contracts £m £m £m £m £m Fair value of scheme assets 1,551.6 1,661.6 (110.0) 173.3 63.3 Present value of scheme liabilities (1,929.2) (2,127.6) 198.4 (173.3) 25.1 Net scheme deficit (377.6) (466.0) 88.4 ‐ 88.4 Net sche
Slide 16: Financial flexibility
Financial flexibility Net debt of only £9.0m at year end The US private placement loan notes fully repaid in June 2017 utilising existing cash balances and drawdown on the £100m RCF £100m amortising RCF committed to December 2021 – £8.3m reduction every 6 months during 2018 to 2020 – £50m outs
Slide 17: Acquisition of Northern & Shell's publishing assets
Acquisition of Northern & Shell’s publishing assets Purchase price £m 2018 2019 2020 2021 2022 2023 Total Cash consideration 47.7 (1) ‐ 18.9 16.0 17.1 7.0 106.7 New TM equity issued 20.0 ‐ ‐ ‐ ‐ ‐ 20.0 Total 67.7 ‐ 18.9 16.0 17.1 7.0 126.7 Total consideration of £126.7m with £106.7m in cash and 20
Slide 18: Current trading and outlook
Current trading and outlook Revenue in the first two months fell by 9% on a LFL basis – LFL trends exclude from the 2017 comparative the two Metros handed back in December 2017 and other portfolio changes in 2017 Acquisition of Northern & Shell’s publishing assets expected to be earnings enhanci
Slide 19: Simon Fox, Chief Executive
Simon Fox CHIEF CHIEFEXECUTIVE EXECUTIVE Trinity Mirror plc
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
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
Slide 22: Strategy: Grow – 2017 performance and 2018 objectives
STRATEGY 2017 performance and 2018 objectives OUR GROW Continue digital audience and revenue growth 2017 performance 2018 targets Monthly PVs (1) +15.4% >10% Digital display & transactional revenue(2) +18.2% >20% Note: (1) Based on annual average YoY and excludes apps, galleries, Streamo and Live Ev
Slide 23: Strategy: Build – Live brands and new newsroom model
STRATEGY 2017 performance and 2018 objectives OUR BUILD Roll‐out of Live brands and new newsroom model Launch of Live brand in areas with no existing print presence Existing digital sites rebranded to Live Existing Live sites to move to new newsroom model in 2018 New Live sites to be launched in are
Slide 24: Build a diversified and sustainable mix of new revenue
STRATEGY Build a diversified and sustainable mix of new revenue OUR BUILD Strong pipeline of new products Content verticals Conversion products Local Events Ticketing Have successfully validated some concepts for roll‐out in 2018 Trinity Mirror plc 23
Slide 25: Strategy: Protect – 2017 performance and 2018 objectives
STRATEGY 2017 performance and 2018 objectives OUR PROTECT Efficiently deliver quality print products 2017 performance 2018 targets Circulation -6.5% (1) Single digit revenue declines Print (1) At least in line with advertising -19.3% trends market trends Structural cost savings £20m £15m Note: (1) R
Slide 26: Strategy: Protect – 2017 and 2018 initiatives
STRATEGY 2017 Performance and 2018 objectives OUR PROTECT Efficiently deliver quality print products 2017 initiatives 2018 initiatives Ongoing portfolio reviews resulting in Won a 5‐year contract to print and further closure and rationalisation of distribute the Guardian and Observer titles titl
Slide 27: Strategy: Consolidate – Northern & Shell acquisition
STRATEGY The acquisition of Northern & Shell’s publishing assets is financially OUR CONSOLIDATE compelling and will deliver attractive returns for shareholders The business is of a scale to make a material Monthly Monthly Circ UBs(2) PVs(2) difference to Trinity Mirror’s future cash flows and fina
Slide 28: Proposal to change the name of the Group
Proposal to change the name of the Group Trinity Mirror was formed in September Represents what we do and our ambitions 1999 following the merger of Trinity plc This is a corporate name change and Mirror Group plc – All of our individual news brands and The Group has evolved significantly si
Slide 29: Trinity Mirror plc
People Places Platforms Passions Cities Towns Villages Communities Families Out Forward Grimsby, Plymouth & Stoke Trinity Mirror plc 28
Slide 30: In summary…
InIn summary… summary… Trinity Mirror plc
Slide 31: Summary
Summary We have delivered a resilient financial performance in a difficult trading environment Improved our adjusted operating margin by 0.7 percentage points to 20.0% Reduced net debt by £25.1m to £9.0m Grew digital display and transactional revenue by 18.2% on a LFL basis to £68.7m Incre
Slide 32: Thank you – Questions
THANK YOU Questions Trinity Mirror plc
Slide 33: Appendices
Appendices Trinity Mirror plc
Slide 34: Income statement
Income statement 2017 2016 2017 2016 Statutory Statutory Adjusted* Adjusted* £m £m £m £m Group revenue 623.2 713.0 623.2 713.0 Operating profit 97.9 93.5 124.7 137.5 Adjusted operating profit 124.7 137.5 124.7 137.5 Operating adjusted items (26.8) (44.0) ‐ ‐ Profit before taxation 81.9 76.5 122.5 13
Slide 35: Revenue, operating profit and margin by division
Revenue, operating profit and margin by division 2017 2016 Change Change £m £m £m % Publishing 578.5 660.0 (81.5) (12.3%) Printing 31.6 36.2 (4.6) (12.7%) Specialist Digital 9.6 12.9 (3.3) (25.6%) Central 3.5 3.9 (0.4) (10.3%) Revenue 623.2 713.0 (89.8) (12.6%) Publishing 133.2 148.4 (15.2) (10.2%)
Slide 36: Publishing and Printing
Publishing 2017 2016 Change Change £m £m £m % Print 494.6 581.0 (86.4) (14.9%) Digital 83.9 79.0 4.9 6.2% Revenue 578.5 660.0 (81.5) (12.3%) Costs (445.3) (511.6) 66.3 13.0% Adjusted operating profit 133.2 148.4 (15.2) (10.2%) Adjusted operating margin 23.0% 22.5% 0.5% 2.2% Printing 2017 2016 Change
Slide 37: Balance sheet
Balance sheet Dec‐17 Dec‐16 £m £m Intangible assets 901.2 901.5 Property, plant and equipment 247.7 262.1 Investment in associates 16.8 21.8 Deferred tax assets 66.4 81.5 Non‐current assets 1,232.1 1,266.9 Cash and cash equivalents 16.0 37.8 Short‐term debt (25.0) (81.2) Retirement benefit obligatio
Slide 38: Reconciliation of statutory to like for like revenue
Reconciliation of statutory to like for like revenue 52 weeks ended 52 weeks ended 31 December 53 weeks 52 weeks ended 31 December 2017 ended 1 1 January 2017 2017 (a) (like for like) January 2017 (a) (b) (c) (like for like) £m £m £m £m £m £m £m £m Publishing print 494.6 (0.7) 493.9 581.0 (15.4) (8.
Slide 39: Group revenue trends 2017
Group revenue trends 2017 2017 Q1 Q2 H1 Q3 Q4 H2 FY Publishing (16.3%) (12.0%) (14.2%) (10.4%) (10.2%) (10.3%) (12.3%) Print (18.9%) (14.1%) (16.6%) (12.5%) (13.4%) (13.0%) (14.9%) Digital 4.5% 3.7% 4.3% 4.3% 12.4% 8.3% 6.2% Printing (19.2%) (6.4%) (13.3%) (11.0%) (13.5%) (12.2%) (12.7%) Specialist
Slide 40: 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.
Slide 41: Publishing revenue trends 2017
Publishing revenue trends 2017 2017 Q1 Q2 H1 Q3 Q4 H2 FY Publishing Print (18.9%) (14.1%) (16.6%) (12.5%) (13.4%) (13.0%) (14.9%) Circulation (13.1%) (6.4%) (9.9%) (6.7%) (6.7%) (6.7%) (8.3%) Advertising (27.3%) (26.2%) (26.8%) (21.6%) (23.9%) (22.8%) (24.9%) Other (10.7%) 2.3% (4.1%) (6.1%) (3.8%)
Slide 42: 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
Slide 43: Publishing – print advertising and digital revenue
Publishing – print advertising and digital revenue 2017 2016 Var LFL* £m £m £m Var % Var % Publishing ‐ print advertising 177.6 236.6 (59.0) (24.9%) (19.3%) Display and other 90.5 118.5 (28.0) (23.6%) (14.8%) Classified 87.1 118.1 (31.0) (26.2%) (23.5%) Recruitment 8.6 14.6 (6.0) (41.1%) (38.4%) Pro
Slide 44: Reconciliation of statutory to adjusted results
Reconciliation of statutory to adjusted results Operating Pension adjusted Finance finance Tax Statutory items costs charges items Adjusted results (a) (b) (c) (d) results £m £m £m £m £m £m 2017 Revenue 623.2 ‐ ‐ ‐ ‐ 623.2 Operating profit 97.9 26.8 ‐ ‐ ‐ 124.7 Profit before tax 81.9 26.8 1.9 11.9 ‐
Slide 45: Cash flow
Cash flow 2017 2016 £m £m Statutory operating profit 97.9 93.5 Depreciation 20.4 22.2 Pension deficit funding (net of pension administrative expenses) (37.7) (38.5) Share of associates results (0.4) (0.7) Impairment of goodwill ‐ 2.0 Other (including movements in working capital) (12.1) 13.0 Cash fl
Slide 46: Reconciliation of net debt, covenants and financing
Reconciliation of net debt 2017 2016 £m £m Statutory net debt (9.0) (28.6) Loan notes at period end exchange rate ‐ 81.2 Loan notes at swapped exchange rate ‐ (68.3) Cross‐currency interest rate swap ‐ (14.8) Contracted net debt (9.0) (30.5) * Following repayment of the private placement loan notes
Slide 47: Pension scheme assets
Pension scheme assets 2017 % 2016 % £m of total £m of total UK equities 66.1 4.3% 208.2 12.5% US equities 218.3 14.1% 217.2 13.1% Other overseas equities 279.1 18.0% 235.7 14.2% Total equities 563.5 36.4% 661.1 39.8% Property 24.6 1.6% 26.9 1.6% Corporate bonds 240.5 15.5% 220.0 13.2% Fixed interest
Slide 48: Net scheme deficit
Reduced discount and higher inflation rates have been key driver of deficit increase since 2011 4.90% 800 5% 4.50% 4.40% 700 Net scheme deficit (£m) 3.70% 3.65% 4% 600 3.20% 3.15% 500 3.35% 3% 3.05% 3.05% 3.05% 2.50% 400 2.80% 2.65% 300 2% 200 1% 100 230.1 297.7 252.2 301.2 305.2 466.0 377.6 ‐ 0% 20
Slide 49: Provisions and Associates
Provisions Share‐based payments Property Restructuring Other Total £m £m £m £m £m At 1 January 2017 (0.3) (8.1) (3.4) (19.7) (31.5) Charged to income statement ‐ (1.0) (12.6) (11.6) (25.2) Utilisation of provision 0.1 2.9 13.6 19.8 36.4 At 31 December 2017 (0.2) (6.2) (2.4) (11.5) (20.3) Associates
Slide 50: National newspaper advertising market share (volumes)
National newspaper advertising market share (volumes) UK Dailies 2017 UK Dailies 2017 2016 1. Daily Mirror 16.2% 17.4% 2. Sun 18.4% 19.0% 3. Daily Star 16.7% 15.0% 4. Daily Mail 24.8% 23.6% 5. Daily Express 23.9% 25.0% 100.0% Sundays 2017 2016 1. Sunday Mirror 14.8% 16.2% 2. Sunday People 10.0% 10.9
Slide 51: Trinity Mirror plc
Trinity Mirror plc