Reach Plc · LSE:RCH
Reach — FY2020 Earnings Presentation
53 slides from Reach's earnings presentation, Mar 1, 2021
Slide 1: Annual Results 2020
Annual Results 2020 1 March 2021 Reach plc - FY20 Prelim Results 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: Jim Mullen, CEO
Jim Mullen CEO Reach plc - FY20 Prelim Results 33
Slide 4: Agenda
1 2020 Highlights Jim Mullen, CEO 2 2020 Financial Update Simon Fuller, CFO 3 Strategic Delivery Jim Mullen, CEO 4 Editorial - Embracing Strategy Lloyd Embley, Group Editor-in-Chief 5 Summary Jim Mullen, CEO 6 Q&A Reach plc - FY20 Prelim Results 4
Slide 5: Editorial: Key 2020 highlights
Highlights Financial Strategic Editorial Summary Update Delivery Key 2020 highlights Momentum in digital strategy 5.0m registrations c.2m SUBSCRIBED Growing customer ReachID ReachID over 10% of audience engagement launched in Launchedinsuite of launched December new commercial December 5.0 PVs per u
Slide 6: 2020: An unparalleled year of change
Highlights Financial Strategic Editorial Summary Update Delivery 2020: An unparalleled year of change Creating platform for long-term sustainable growth Our People Transformation Strategic Focus • Adaptable, determined & • More efficient & sustainable • Leverage scale as largest commercial resourcef
Slide 7: 2020 Financial Update
2020 Financial Update Simon Fuller CFO Reach plc - FY20 Prelim Results 7
Slide 8: Robust performance for year
Highlights Financial Strategic Driving Summary Update Delivery Customer Robust performance for year Group adjusted results 2019 £m 2020 £m Var £m Var % • Improving revenue trajectory post Q2 COVID impact Revenue 702.5 600.2 (102.3) (14.6%) Costs (550.9) (469.0) 81.9 14.9% • Strategy driving digital
Slide 9: Operating profit
Highlights Financial Strategic Driving Summary Update Delivery Customer Operating profit Reconciliation of adjusted to reported Adjusted Operating Profit 133.8 Restructuring charges (36.4) Transforming • Majority of charges related Print closure impairment Reach (48.4) to business transformation Inc
Slide 10: Group revenue
Highlights Financial Strategic Driving Summary Update Delivery Customer Group revenue Improving trajectory after worst of COVID impact -7.4% -8.5% Group Revenue (£m) -14.8% 27 40 • Acceleration in revenue -27.5% 30 decline driven by 21 COVID-19 impact from mid-March 134 122 • Steady recovery in both
Slide 11: Print revenue
Highlights Financial Strategic Driving Summary Update Delivery Customer Print revenue Impacted by COVID; mix points to moderating decline over time Print Revenue (£m) 6% 5% 6% 6% 7% 5% Print 8% 6% 6% 6% 6% 5% £591m Revenue mix 39 2015 - 2020 23% LFL -18.9% 38 £479m 36% 40% 35% 30% 26% 26 152 25 108
Slide 12: Print revenue by quarter
Highlights Financial Strategic Driving Summary Update Delivery Customer Print revenue by quarter Recovery in both circulation & advertising post Q2 -10.7% Advertising -29.5% Circulation -19.7% -15.8% £591m -4.7% -12.6% -10.9% -18.2% £479m -17.6% -18.9% -34.8% -45.7% FY19 Print Revenue FY20 Print Rev
Slide 13: Mix of revenue
Highlights Financial Strategic Driving Summary Update Delivery Customer Mix of revenue Strategy supports progression of digital mix 5% 8% 11% 13% 15% 20% £593m £600m 2015 2016 2017 2018 2019 2020 Digital revenue 4x greater than 5 years ago within business of similar size Reach plc - FY20 Prelim Resu
Slide 14: Strong digital performance metrics
Highlights Financial Strategic Driving Summary Update Delivery Customer Strong digital performance metrics Digital revenue (£m) Worldwide page views per month (m) UK monthly unique visitors Dec (m) +10.6% +32.2% +4.5% 118 40 42 1,680 1,271 107 FY19 FY20 2019 2020 Dec 19 Dec 20 • Page views growing s
Slide 15: Digital revenue accelerating
Highlights Financial Strategic Driving Summary Update Delivery Customer Digital revenue accelerating Yield in open market place (OMP) Digital growth & mix 160 Dec 40% > Jan rate 24.7% 142 20.5% 140 16.6% 16.5% Numbers rebased to 100 120 100 26.0% 80 13.7% 13.4% 107 60 51 40 Q1 Q3 Q4 -14.8% 20 Digita
Slide 16: Operating margin
Highlights Financial Strategic Driving Summary Update Delivery Customer Operating margin Significant reduction in cost base drives margin progression 22.3% 21.8% Adjusted operating £551m Adjusted operating profit margin (%) costs (£m) 39 20.1% £469m 20.0% 38 19.3% 216 26 14.9% 152 25 reduction 179 i
Slide 17: Transformation of our business model
Highlights Financial Strategic Driving Summary Update Delivery Customer Transformation of our business model • Proactive response to unprecedented business challenge Annualised • Best in class operating model savings of • No compromise in quality of content Printing £46m • Severance and cash closure
Slide 18: Strong adjusted operating cash flow
Highlights Financial Strategic Driving Summary Update Delivery Customer Strong adjusted operating cash flow Increase in net cash position Operating cash flow 161 (14) £122m (18) (2) (9) 4 122 (26) (54) £ million 42 (20) 20 42 22 es nd ed r su l a as ng CF DA g lu h he ts en on g re F h ts in itu l y
Slide 19: Consistently strong in cash conversion
Highlights Financial Strategic Driving Summary Update Delivery Customer Consistently strong in cash conversion Adjusted operating cash flow(£m) Dividend 151 Pension • Business remains net 133 133 payments cash positive Other 122 • Cash supports; 101 49 Net cash flow - Increased strategic investment
Slide 20: Our capital allocation framework
Highlights Financial Strategic Driving Summary Update Delivery Customer Our capital allocation framework Positive net cash & strong balance sheet provides optionality Guidance: up to 1x leverage (currently 0x) • Prioritising greater organic investment to accelerate digital growth Increasing investme
Slide 21: Current trading & outlook
Highlights Financial Strategic Driving Summary Update Delivery Customer Current trading & outlook Performing in-line with management expectations for the year • Trading broadly consistent with Q4 • Revenue year to date down 10.7%; digital +20.4% • Expect full year operating margin % to increase • In
Slide 22: We will double digital revenue over the medium term
Highlights Financial Strategic Editorial Summary Update Delivery We will DOUBLE digital revenue over the medium term Reach plc - FY20 Prelim Results 22
Slide 23: Our Customer Value Strategy - Pillars
Highlights Financial Strategic Editorial Summary Update Delivery Our Customer Value Strategy - 4 Pillars A Single View Of Harnessing Talent The Customer & Teams A unified view of the A customer-centric culture Increased Customer Revenue Diversification underpinned by data customer across Reach Engag
Slide 24: Agenda
Highlights Financial Strategic Editorial Summary Update Delivery Agenda 1 Driving Registration & Engagement 2 Diversifying Revenue 3 Transforming to Deliver 4 Editorial Embracing Strategy Reach plc - FY20 Prelim Results 24
Slide 25: Growing direct traffic to our digital content
Highlights Financial Strategic Editorial Summary Update Delivery 1 Growing direct traffic to our digital content UK page views up over 40% to c.15bn InYourArea registered users Newsletters driving engagement now over 2m Newsletter page views (m) • 92m page views referred • Now sending c.35m to Reach
Slide 26: And increasing engagement
Highlights Financial Strategic Editorial Summary Update Delivery 1 And increasing engagement Engagement Index Page Views for our Top 10 Titles Page view multiple – registered v non-registered Indexed page views per user Loyal* customers using The most comment functionality Growing the engaged view 7
Slide 27: Reach ID: Customer insight key to future growth
Highlights Financial Strategic Editorial Summary Update Delivery 2 Reach ID Customer insight key to future growth How we will grow revenue per customer Analyse • Customer understanding data forming single view Customer informs campaigns segmentation • Higher frequency, lower Data fed into churn and
Slide 28: ReachID key to new products
Highlights Financial Strategic Editorial Summary Update Delivery 2 How we will grow revenue per customer ReachID key to new products Reach ID Audience+ Customer+ Geo+ Partnerships Niche Sites Enriched Cross-matching First party geo Direct New sites based on audience product user info to targeted dat
Slide 29: Audience+: Deepening audience segmentation
Highlights Financial Strategic Editorial Summary Update Delivery 2 Audience+ Deepening audience segmentation Supports engagement & growing yield Campaign 1 REGISTER Unique data points Identify more specific • Recent trial with high Visited womens’ Fashion enhance performance Working from street fash
Slide 30: Customer+: Customer matched data
Highlights Financial Strategic Editorial Summary Update Delivery 2 Customer+ Customer matched data Campaign 2 • Recent trial with leading Reach User match Grocery loyalty UK grocer declared users scheme • Their loyalty data overlaid with our registered users • Targeting loyal customers • Highest mat
Slide 31: Geo+: Hyper local postcode targeting
Highlights Financial Strategic Editorial Summary Update Delivery 2 Geo+ Hyper local postcode targeting Campaign 3 • Mix of hyperlocal, regional and national assets creates solution unique to Reach • Working with multiple local/regional advertising campaigns 2m registered • Tested traditional IP addr
Slide 32: Niche Sites Partnerships
Highlights Financial Strategic Editorial Summary Update Delivery 2 Niche Sites Partnerships Developing new sites Direct commercial targeting niche interests partnerships • Focus on specialist areas of ‘passions’ • Using niche customer data to direct as basis • Optimised for affiliate revenue, brand
Slide 33: Transforming to deliver
Highlights Financial Strategic Editorial Summary Update Delivery 3 Transforming to deliver Unified model supports acceleration of strategy • Radical reorganisation of business model • Removes historic operational silos • Maximises true potential of business model Highly efficient e.g Reach Wire & ag
Slide 34: Editorial Embracing Strategy
Editorial Embracing Strategy Lloyd Embley Group Editor-in-Chief Reach plc - FY20 Prelim Results 34
Slide 35: The Reach Wire
Highlights Financial Strategic Editorial Summary Update Delivery 4 The Reach Wire Content sharing across platforms to maximise assets NATIONAL NE WSPAPER OF WALES PAPUR CENE DLAETHOL CY MRU ‘kEEP THE Monday, No vember 30 , 2020 www.wales online.co.u k £1.10 DAILY NEW FAITH’ SPAPER OF THE YEAR Sunday
Slide 36: Award winning journalism
4 Award winning journalism Scoop of the year Regional campaign of the year Campaign of the year Regional website of the year Reach plc - FY20 Prelim Results 36
Slide 37: And something a little lighter too
4 And something a little lighter too Reach plc - FY20 Prelim Results 37
Slide 38: Investing in our Content
Highlights Financial Strategic Editorial Summary Update Delivery 4 Investing in our Content County Northumberland SunderlandLive Durham Live Significant expansion of regional live sites Live March & August 2020. 6 journalists Jan 21: 6m pvs Just Launched Newport MyBolton edinburgh YorkshireLive Onli
Slide 39: Priorities for 2021
Highlights Financial Strategic Embracing Summary Update Delivery Strategy Priorities for 2021 Continued progress towards registered user target of 10m by end 2022 Leverage ReachID to drive engagement and grow ARPU Progress commercial partnerships as part of revenue diversification Leverage Reach Wir
Slide 40: Summary
Highlights Financial Strategic Editorial Summary Update Delivery Summary Investment in people & capabilities will accelerate digital growth agenda Business transformation supports agility & strength of profit margin Return to cash dividend demonstrates confidence in sustainable cashflow We will doub
Slide 41: Appendices
Appendices 1
Slide 42: Group income statement
Group income statement 2020 2019 2020 2019 (1) Statutory Statutory Adjusted Adjusted(1) £m £m £m £m Revenue 600.2 702.5 600.2 702.5 Operating profit 7.6 131.7 133.8 153.4 Adjusted operating profit 133.8 153.4 133.8 153.4 Operating adjusted items (126.2) (21.7) - - Profit before taxation 0.4 120.9 13
Slide 43: Group balance sheet
Group balance sheet 2020 2019 £m £m Intangible assets 854.6 852.0 Property, plant and equipment 168.4 224.9 Right-of-use assets 25.3 - Investment in associates 18.1 21.9 Retirement benefit assets 50.4 31.2 Deferred tax assets 60.5 55.9 Non-current assets 1,177.3 1,185.9 Cash and cash equivalents 42.
Slide 44: Group revenue trends 2020
Group revenue trends 2020 2020 Q1 Q2 H1 Q3 Q4 H2 FY Print (10.7%) (29.5%) (20.1%) (19.7%) (15.8%) (17.7%) (18.9%) Circulation (4.7%) (18.2%) (11.5%) (12.6%) (10.9%) (11.8%) (11.6%) Advertising (18.9%) (45.7%) (31.9%) (34.8%) (17.6%) (25.9%) (28.9%) Printing (26.3%) (53.4%) (40.1%) (30.4%) (27.5%) (2
Slide 45: Group revenue trends 2019
Group revenue trends 2019 2019 Q1 Q2 H1 Q3 Q4 H2 FY Print 7.7% (9.3%) (1.5%) (8.7%) (8.5%) (8.6%) (5.1%) Circulation 18.9% (5.3%) 5.4% (5.6%) (5.0%) (5.3%) (0.1%) Advertising (14.1%) (22.3%) (18.2%) (20.2%) (20.4%) (20.3%) (19.3%) Printing 16.0% 9.3% 12.6% 9.5% (0.9%) 4.1% 8.1% Other 19.0% (2.1%) 6.
Slide 46: Reconciliation of statutory to adjusted results
Reconciliation of statutory to adjusted results Operating Pension adjusted finance Statutory items charge Tax Adjusted results (a) (b) (c) results £m £m £m £m £m 2020 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)
Slide 47: Operating adjusted items
Operating adjusted items 2020 2019 £m £m Restructuring charges in respect of cost reduction measures (36.4) (10.7) Impairment of property, plant and equipment (34.7) (2.7) Impairment of right-of-use assets (13.7) - Impairment of goodwill (6.1) - Pension administrative expenses and past serice costs
Slide 48: Adjusted cash flow
Adjusted cash flow 2020 2019 Var £m £m £m Adjusted operating profit 133.8 153.4 (19.6) Depreciation 27.4 21.5 5.9 Adjusted EBITDA 161.2 174.9 (13.7) Net interest paid on bank borrowings (1.1) (3.2) 2.1 Income tax paid (14.2) (11.7) (2.5) Restructuring payments (18.0) (13.6) (4.4) Net capital expendi
Slide 49: IFRS16 impact on balance sheet
IFRS16 impact on balance sheet 2019 (audited) IFRS 16 adjustment 2019 (unaudited) £m £m £m Intangible assets 852.0 - 852.0 Property, plant and equipment 224.9 - 224.9 Right-of-use assets - 45.6 45.6 Investment in associates 21.9 - 21.9 Retirement benefit assets 31.2 - 31.2 Deferred tax assets 55.9 -
Slide 50: Financing
Financing 2020 2019 Change £m £m £m Cash balances 42.0 20.4 21.6 Net cash 42.0 20.4 21.6 Financial covenants Minimum Maximum Minimum Interest Cover Net Debt to EBITDA Cash Flow* Bank facilities Throughout term of facilities 5.0x 1.75x £25m * Cash flow before interest, debt repayment, acquisitions an
Slide 51: Pensions
Pensions 2020 2019 Change £m £m £m Fair value of scheme assets 2,597.3 2,400.8 196.5 Present value of scheme liabilities (2,864.1) (2,663.9) (200.2) Impact of IFRIC 14 (47.6) (32.8) (14.8) Net scheme deficit (314.4) (295.9) (18.5) Net scheme deficit after deferred tax (255.5) (242.9) (12.6) Pension
Slide 52: Reduced discount rate has been a key driver of deficit increase since 2011
Reduced discount rate has been a key driver of deficit increase since 2011 4.90% 800 5% 4.50% 4.40% 700 3.70% 4% 3.65% 600 3.20% 3.20% 3.15% 2.96% 3.35% 2.76% 3% 500 2.65% 2.50% 3.05% 3.05% 3.05% 2.80% 2.86% 1.94% 400 2% 1.49% 300 1% 200 0% 100 230.1 297.7 252.2 301.2 305.2 466.0 377.6 348.6 242.9 3
Slide 53: Provisions and Associates
Provisions Share-based Historical legal payments Property Restructuring issues Other Total £m £m £m £m £m £m At 29 December 2019 (0.7) (5.7) (1.4) (21.1) (7.1) (36.0) IFRS16 Adjustment - 0.4 - - - 0.4 Restated at 30 December 2019 (0.7) (5.3) (1.4) (21.1) (7.1) (35.6) Acquisition of subsidiary undert