Reach Plc · LSE:RCH
Reach — Trinity Mirror — FY2015 Earnings Presentation
60 slides from Reach's earnings presentation, Feb 29, 2016
Slide 1: 2015 Annual Results
Trinity Mirror plc 2015 ANNUAL RESULTS 29 February 2016
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: Highlights
Highlights Group financial performance(a) – Group revenue down 6.9% – Adjusted operating profit up 3.9% – Adjusted earnings per share of 33.9 pence, up 3.4% – Strong cash generation – Proposed final dividend of 3.15 pence per share (full year dividend: 5.15 pence) Continued growth in digital(b) – Av
Slide 4: Vijay Vaghela, Group Finance Director
Vijay Vaghela GROUP FINANCE DIRECTOR Trinity Mirror plc 3
Slide 5: Adjusted and underlying performance
Adjusted and underlying performance Focus on adjusted results which provide a more meaningful comparison of performance No difference between adjusted and statutory revenues References to underlying revenue performance excludes the following: Revenue 2015 2014 £m £m Acquisition of Local World 20.6 -
Slide 6: Group performance
Group performance Group revenue Operating profit Profit before tax Earnings per share £592.7m £109.6m £107.5m 33.9p -6.9% +3.9% +5.1% +3.4% Underlying revenue fell 7.8% with an 8.7% decline in H1 and 6.9% decline in H2 Excluding Local World operating profit post acquisition, operating profit up 1.3%
Slide 7: The acquisition of Local World
The acquisition of Local World Implied Enterprise Value of £220.0 million Actual equity value of £192.6 million Total consideration £m 80.02% equity acquired 154.1 Debt and debt-like items 23.3 Transaction costs 5.6 Total 183.0 Funded by £m Cash payable in the future 5.2 Term loan 80.0 Equity placin
Slide 8: Local World's financial performance
Local World’s financial performance Post acquisition contribution to Trinity Mirror Group (£m) Full year (£m)(a) Revenue 3.4 20.6 10.7 0.6 (0.6) 201.9 6.5 41.4(b) Print - Print - Print - Digital Contract Local World circulation advertising other printing contribution Revenue Operating profit supplie
Slide 9: Publishing
Publishing Revenue Operating profit (£m) and margin (%) 2015 2014 Underlying £113.7m 0.2% £m £m % Var % Var Print 485.9 521.6 (6.8)% (9.5)% 21.5% 20.5% Digital 42.9 32.4 32.4 % 21.9 % Total 528.8 554.0 (4.5)% (7.6)% Operating costs 113.7 113.5 2015 2014 Var Var 2015 2014 £m £m £m % Operating profit
Slide 10: Publishing – print
Publishing – print Publishing - print revenue 2015 2014 Underlying £m £m % Var H1 % Var H2 % Var FY % Var Circulation 271.7 279.8 (2.9)% (5.6)% (4.4)% (5.0)% Advertising 182.0 209.2 (13.0)% (17.5)% (15.8)% (16.6)% Display 99.7 119.6 (16.6)% (20.1)% (16.5)% (18.3)% Classified 68.5 72.6 (5.7)% (12.2)%
Slide 11: Publishing – digital
Publishing – digital Publishing - digital revenue 2015 2014 Underlying £m £m % Var H1 % Var H2 % Var FY % Var Advertising 37.3 28.5 30.9 % 25.8 % 15.1 % 19.6 % Display 25.0 18.6 34.6 % 44.0 % 24.1 % 32.6 % Classified recruitment 6.0 5.5 7.5 % (1.3)% (8.8)% (4.8)% Classified other 6.3 4.4 45.5 % (3.3
Slide 12: Printing
Printing Revenue (£m) £44.9m 30.4% (Underlying: -14.8%) 2.2 73% 12.8% Contract printing (Underlying: -11.2%) 9.9 22% 59.3% Newsprint supply (Underlying: -25.0%) 32.8 5% 15.4% Other (Underlying: -15.4%) Publishing division charges Printing and newsprint costs of our print titles are down 16.4% year o
Slide 13: Other segments
Other segments Specialist Digital 2015 2014 Var £m £m % Advertising 5.0 4.8 4.2 % Other 10.4 9.7 7.2 % Revenue 15.4 14.5 6.2 % Costs (12.8) (12.5) (2.4)% Operating profit 2.6 2.0 30.0 % Central 2015 2014 Var £m £m % Other 3.6 3.3 9.1 % Revenue 3.6 3.3 9.1 % Costs (16.3) (19.4) 16.0 % Associates 6.0
Slide 14: Cost savings
Cost savings £489.1m £536.9m 8.9% Operating costs fell £47.8 million Underlying costs fell by over £50 million 218.8 – Structural cost savings of £20 207.1 million Other – Fall in newsprint prices 24.5 Depreciation 22.4 – Mitigating actions 97.5 Newsprint 63.8 £15 million of structural cost Labour s
Slide 15: Non-recurring items and restructuring charges
Non-recurring items and restructuring charges Non-recurring items 2015 2014 £m £m Provision for historical legal issues (29.0) (12.0) Closure of print sites (3.4) - Local World acquisition transaction costs (5.6) - Gain on deemed disposal of Local World associate interest 33.6 - Non-recurring items
Slide 16: Pensions
Pensions Pensions 2015 2014 Var £m £m £m Fair value of scheme assets 1,528.4 1,562.0 (33.6) Present value of scheme liabilities (1,833.6) (1,863.2) 29.6 Net scheme deficit (305.2) (301.2) (4.0) Net scheme deficit after deferred tax (250.2) (241.0) (9.2) Movement in assets and liabilities is substant
Slide 17: Cash flow
Cash flow 22.4 109.6 (20.0) (3.6) 16.3 (1.1) (16.1) 63.8 (12.9) (9.7) (12.5) (8.6) (137.4) (73.6) Minimal capex spend in 2015 with anticipated spend of £16 million in 2016 Cash balances as at 27 December 2015 were £55.4 million Trinity Mirror plc 16
Slide 18: Financing
Financing Financing 2015 2014 Var £m £m £m Loan notes 68.3 68.3 - Term loan 80.0 - (80.0) Cash balances (55.4) (49.0) 6.4 Contracted net debt 92.9 19.3 (73.6) Leverage below one times The US private placement loan notes are repayable in June 2017 The £80.0 million term loan is committed for five yea
Slide 19: Current trading and outlook
Current trading and outlook Strategy remains on track and the Group is making good progress with the integration of Local World Revenue environment remains volatile – Assuming Local World owned for the whole of 2015, on a like for like basis, revenue for the first two months of the year fell by 9% T
Slide 20: Simon Fox, Chief Executive
Simon Fox CHIEF EXECUTIVE Trinity Mirror plc 19
Slide 21: We are better together
The acquisition of Local World We are better together UK’s largest regional news publisher – Daily reach into 14 of the top 20 cities – Average weekly circulation of over 10 million Combined digital audience of over 120 million unique users* (33% increase) Cost synergies in 2017 of £12 million Earni
Slide 22: Integrating Local World
The acquisition of Local World Integrating Local World Combined regional businesses under a single Managing Director, Rachel Addison Structured the teams to extract the best of Trinity Mirror and Local World Making good progress with integration Managing Director Rachel Addison Chief Operating Offic
Slide 23: Cross-sharing of best practice, content and resources
The acquisition of Local World Cross-sharing of best practice, content and resources Digital-first approach to publishing Central commercial direction driving recruitment and classified sales strategies Trinity Mirror plc 22
Slide 24: Areas of strategic focus
Areas of strategic focus Strategic focus KPI Protecting and revitalising our Outperform print trends core brands in print Growing our existing brands onto Digital growth digital delivery channels Continuing our relentless focus on Targeted cost savings efficiency and cost management Launching, devel
Slide 25: Protecting and revitalising our core brands in print
Protecting and revitalising our core brands in print Trinity Mirror plc 24
Slide 26: Birmingham Mail re-launched
Protecting and revitalising our core brands in print Birmingham Mail re-launched Launched in October 2015 Circulation trends improved by 2-3% since relaunch Positive feedback from readers Trinity Mirror plc 25
Slide 27: Positive disruption
Protecting and revitalising our core brands in print Positive disruption You, Me & the Apocalypse Fully disruptive and immersive campaign with Mediacom: masthead takeover, cartoon strip adaptation and website meteorite. Drove 1.6 million viewers for the premiere Trinity Mirror plc 26
Slide 28: Growing our existing brands onto digital delivery channels
Growing our existing brands onto digital delivery channels Trinity Mirror plc 27
Slide 29: Our scale in digital
Growing our existing brands onto digital delivery channels Our scale in digital Newsbrands digital audience in the UK December 2015 (m) 27.7 27.4 25.3 22.7 21.2 Mail Online Trinity Mirror Trinity Mirror Guardian Telegraph (incl. Local (excl. Local World) World) Source: Comscore multi-platform – UK o
Slide 30: Continue to grow our Group audience and page views
Growing our existing brands onto digital delivery channels Continue to grow our Group audience and page views Group monthly unique users (m) Group monthly page views (m) 140.0 101.3m +21% 122.7m 900.0 680.8m +25% 851.5m 800.0 146.9 120.0 22.8 700.0 100.0 110.1 19.6 600.0 80.0 500.0 60.0 400.0 704.6
Slide 31: Trinity Mirror digital revenues
Growing our existing brands onto digital delivery channels Trinity Mirror digital revenues Publishing digital revenues 2014 and 2015 (£m) Publishing digital revenues 2015 (£m) +39% 39.5 +22% 5.4 32.4 9.5 -4% 24.6 +33% 2014 2015 Display Classified Other Note: The above excludes Local World Trinity Mi
Slide 32: Dynamic news feed launched across four platforms
Growing our existing brands onto digital delivery channels Dynamic news feed launched across four platforms Apple News Google Play Newsstand Instant Articles Accelerated Mobile Pages Trinity Mirror plc 31
Slide 33: Email newsletters and single sign-in
Growing our existing brands onto digital delivery channels Email newsletters and single sign-in Trinity Mirror plc 32
Slide 34: Refreshed video offering
Growing our existing brands onto digital delivery channels Refreshed video offering Monthly video views up 100% YoY 2015 video revenues up 200% YoY Source: Brightcove Trinity Mirror plc 33
Slide 35: Continuing our relentless focus on efficiency and cost management
Continuing our relentless focus on efficiency and cost management Trinity Mirror plc 34
Slide 36: Continuing our relentless focus on efficiency and cost management
Continuing our relentless focus on efficiency and cost management Cost management remains a key area of focus We delivered £20 million of structural cost savings in 2015 Actions undertaken include – Restructuring of editorial and advertising functions – Continued rationalisation of our manufacturing
Slide 37: Launching, developing, investing in or acquiring new businesses
Launching, developing, investing in or acquiring new businesses built around distinctive content or audience Trinity Mirror plc 36
Slide 38: Launching, developing, investing in or acquiring new businesses
Launching, developing, investing in or acquiring new businesses built around distinctive content or audience New product development Acquisition Strong balance sheet – Acquisition of 80.02% not previously owned of Local World Trinity Mirror plc 37
Slide 39: First new standalone national daily newspaper in 30 years
Launching, developing, investing in or acquiring new businesses built around distinctive content or audience First new standalone national daily newspaper in 30 years Gap in the market – Consumer led product – Modern print product reimagined for the 21st century Innovation at the heart of production
Slide 40: The New Day
The New Day Trinity Mirror plc 39
Slide 41: In summary…
In summary… Trinity Mirror plc 40
Slide 42: Summary
Summary Robust financial performance despite challenging print environment Rapid cost actions to mitigate profit impact of revenue declining Digital growth continues and strategy remains on track Strong balance sheet with financial flexibility Board has confidence in the performance for 2016 Trinity
Slide 43: Thank you – Questions
THANK YOU Questions Trinity Mirror plc
Slide 44: Appendices
Appendices Trinity Mirror plc 43
Slide 45: Income statement
Income statement 2015 2014 2015 2014 Statutory Statutory Adjusted* Adjusted* £m £m £m £m Group revenue 592.7 636.3 592.7 636.3 Operating profit 82.2 98.6 109.6 105.5 Adjusted operating profit 109.6 105.5 109.6 105.5 Non-recurring items (5.7) 15.2 - - Restructuring charges (15.3) (14.0) - - Amortisat
Slide 46: Revenue and operating profit by division
Revenue and operating profit by division 2015 2014 Change Change £m £m £m % Publishing 528.8 554.0 (25.2) (4.5%) Printing 44.9 64.5 (19.6) (30.4%) Specialist Digital 15.4 14.5 0.9 6.2% Central 3.6 3.3 0.3 9.1% Revenue 592.7 636.3 (43.6) (6.9%) Publishing 113.7 113.5 0.2 0.2% Printing - - - - Special
Slide 47: Publishing and Printing
Publishing 2015 2014 Change Change £m £m £m % Print 485.9 521.6 (35.7) (6.8%) Digital 42.9 32.4 10.5 32.4% Revenue 528.8 554.0 (25.2) (4.5%) Costs (415.1) (440.5) 25.4 5.8% Adjusted operating profit 113.7 113.5 0.2 0.2% Adjusted operating margin 21.5% 20.5% 1.0% 4.9% Printing 2015 2014 Change Change
Slide 48: Balance sheet
Balance sheet Dec Dec 2015 2014 £m £m Intangible assets 904.3 680.9 Property, plant and equipment 300.1 317.7 Investment in associates 19.2 41.4 Retirement benefit assets 29.4 17.8 Deferred tax assets 55.2 62.1 Derivative financial instruments 3.5 3.2 Non-current assets 1,311.7 1,123.1 Cash and cash
Slide 49: Group revenue trends
Group revenue trends 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 9.7% 7
Slide 50: Publishing revenue trends
Publishing revenue trends 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%) Publis
Slide 51: 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 2015 Revenue 592.7 - - - - - - 592.7 Operating profit 82.2 5.7 4.
Slide 52: Cash flow
Cash flow 2015 2014 £m £m Statutory operating profit 82.2 98.6 Depreciation 22.4 24.5 Pension deficit funding (net of pension administrative expenses) (17.9) (15.0) Share of associates results (2.2) (30.6) Gain on deemed disposal of Local World associate interest (33.6) - Other (including movements
Slide 53: Reconciliation of net debt and financial covenants
Reconciliation of net debt Dec Dec 2015 2014 £m £m Statutory net debt (88.7) (13.1) Loan notes at period end exchange rate 67.6 65.3 Loan notes at swapped exchange rate (68.3) (68.3) Cross-currency interest rate swap (3.5) (3.2) Contracted net debt (92.9) (19.3) Financial covenants Minimum Maximum I
Slide 54: Financing and repayment schedule
Financing 2015 2014 Change £m £m £m Loan notes 68.3 68.3 - Term loan 80.0 - (80.0) Cash balances (55.4) (49.0) 6.4 Contracted net debt 92.9 19.3 (73.6) Repayment schedule Term Loan Loan Notes Total £m £m £m 2016 15.0 - 15.0 2017 12.0 68.3 80.3 2018 17.7 - 17.7 2019 17.7 - 17.7 2020 17.6 - 17.6 Total
Slide 55: Pension scheme assets
Pension scheme assets 2015 % 2014 % £m of total £m of total UK equities 181.7 11.9% 219.6 14.1% US equities 192.8 12.6% 189.3 12.1% Other overseas equities 210.7 13.8% 251.2 16.1% Total equities 585.2 38.3% 660.1 42.3% Property 20.4 1.3% 26.8 1.7% Corporate bonds 308.7 20.2% 248.7 15.9% Fixed intere
Slide 56: Provisions and Associates
Provisions Share-based payments Property Restructuring Other Total £m £m £m £m £m At 28 December 2014 (1.4) (9.0) (3.6) (16.2) (30.2) Charged to income statement (0.2) (0.1) (15.3) (30.1) (45.7) Utilisation of provision 1.3 2.4 16.1 9.2 29.0 Acquisition of subsidiary undertakings - (2.9) (0.9) - (3.
Slide 57: Group revenue
Group revenue 2015 2014 Specialist Specialist Group Publishing Printing Digital Central Group Publishing Printing Digital Central £m £m £m £m £m £m £m £m £m £m Circulation 271.7 271.7 - - - 279.8 279.8 - - - Advertising 224.3 219.3 - 5.0 - 242.5 237.7 - 4.8 - Print 182.0 182.0 - - - 209.2 209.2 - -
Slide 58: Group underlying revenue
Group underlying revenue 2015 2014 Specialist Specialist Group Publishing Printing Digital Central Group Publishing Printing Digital Central £m £m £m £m £m £m £m £m £m £m Circulation 265.2 265.2 - - - 279.3 279.3 - - - Advertising 210.4 205.4 - 5.0 - 238.8 234.0 - 4.8 - Print 171.3 171.3 - - - 205.5
Slide 59: National newspaper advertising market share (volumes)
National newspaper advertising market share (volumes) UK Dailies 2015 2015 2014 1. Daily Mirror 18.3% 18.5% 1 2. Sun 19.5% 19.9% 5 3. Daily Star 14.5% 16.3% 2 4 3 4. Daily Mail 22.5% 21.1% 5. Daily Express 25.2% 24.2% 100.0% 100.0% Sundays 2015 2014 1. Sunday Mirror 17.5% 17.6% 2015 2. Sunday People
Slide 60: Trinity Mirror plc
Trinity Mirror plc