Reach Plc · LSE:RCH
Reach — H1 2022 Earnings Presentation
48 slides from Reach's earnings presentation, Jul 26, 2022
Slide 1: Interims Results Presentation
Interims Results Presentation 26 July 2022 Reach plc - Interim 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 Delivery Jim Mullen, CEO 02 Financial Update Simon Fuller, CFO 03 Editorial Perspective Lloyd Embley, Group Editor-in-Chief 04 Summary Jim Mullen, CEO 05 Q&A Reach plc - Interim Results 2022 3
Slide 4: Strategic Update
INTERIMS 22 STRATEGIC UPDATE JIM MULLEN CEO Reach plc - Interim Results 2022 4
Slide 5: Strategy delivering in line with plans
Strategic Delivery | Financial Update | Editorial | Summary Strategy delivering in line with plans Digitally enabled, data-led, operationally robust • Higher yielding mix demonstrates growing quality of digital business • Resilience of print supports actions to address macro headwinds • Financially
Slide 6: Strategy shaping the future of Reach
Strategic Delivery | Financial Update | Editorial | Summary Strategy shaping the future of Reach Growing quality of revenue; business more digitally driven 1/3 PLUS+ 25% PLUS revenue in H1 over UK Audience 5m +8% Registered users Page Views Almost a third of 80% of full year 21 digital revenue Regis
Slide 7: Print - scale business enables digital investment
Strategic Delivery | Financial Update | Editorial | Summary Print - scale business enables digital investment Resilience & efficiency underpins cash generation • Scale business, loyal customers, resilient cash flows • Actively managing volume decline through: •Printing 10s of - Step-change cost bill
Slide 8: Print - addressing newsprint inflation
Strategic Delivery | Financial Update | Editorial | Summary Print - addressing newsprint inflation Further actions driving H2 efficiencies & stronger circulation Reduction in supply; limited impact on availability Example pagination reductions Pre During Post 6% Ave. no. pages Covid Covid Covid Redu
Slide 9: Building depth of customer data
Strategic Delivery | Financial Update | Editorial | Summary Building depth of customer data Consistent growth in number of in-month actives Building data across >75% Registered & Active Users of total audience 5m 9m 4m Total Registered 40m 6m 11m 5m Total UK Audience 3m 31m 2m Jan 2021 Jun 2022 Cons
Slide 10: Improving quality of digital revenue
Strategic Delivery | Financial Update | Editorial | Summary Improving quality of digital revenue Reducing % driven by open market programmatic • PLUS still growing strongly PLUS+ revenue H122 Digital revenue split £m • Yield c.10x greater than open • Supports growth in data driven, strategic revenue
Slide 11: Engagement driving more data
Strategic Delivery | Financial Update | Editorial | Summary Engagement driving more data Widgets & surveys drive registrations & depth of customer data Good Luck messages for Over 2k Londoners complete Jubilee survey - Liverpool in UCL final generated 30k postcode understanding supports more targete
Slide 12: Audience engagement
Strategic Delivery | Financial Update | Editorial | Summary Audience engagement Engagement growing; converting anonymous loyal users Registered Page Views Growing 8% 2% 489m + + 371m 241m total page views page views per user 17% 112% H1 21 H2 21 H1 22 + + • Page views growing faster than other publi
Slide 13: Neptune - advertising & data platform
Strategic Delivery | Financial Update | Editorial | Summary Neptune - advertising & data platform The foundation for data-led growth Advertising Data The Neptune platform Data capture and enrichment Data management Ad Campaigns and analysis Growing Plus+ Yield Registered Customer Direct Data Declare
Slide 14: Ad tech development & Reach owned IP
Strategic Delivery | Financial Update | Editorial | Summary Ad tech development & Reach owned IP Mantis - innovating beyond brand safety Intelligent Contextual Editorial New Recommender Mantis brand safety Targeting Insights tool Classify content using multiple More advanced Powers data driven Not r
Slide 15: Driving traffic & customer engagement
Strategic Delivery | Financial Update | Editorial | Summary Driving traffic & customer engagement New recommender driving significant increase in traffic • 50m page views per month • Equal to 40% of total growth Reach plc - Interim Results 2022 15
Slide 16: Enhancing the customer experience
Strategic Delivery | Financial Update | Editorial | Summary Enhancing the customer experience Platform development to improve content delivery Site latency project; delivering significant Immediate improvement in user ‘time to interact’ Improvements Enhancing customer experience & delivering value n
Slide 17: Developing our use of social video
Strategic Delivery | Financial Update | Editorial | Summary Developing our use of social video Building engagement with younger demographic Reach monetised social media views (m) 165 180 • Investing in content, Launch of social formats & platforms for video project digital natives 95 • Social video
Slide 18: Financial Update
INTERIMS 22 FINANCIAL UPDATE SIMON FULLER CFO Reach plc - Interim Results 2022 18
Slide 19: H1 Summary
Strategic Delivery | Financial Update | Editorial | Summary H1 Summary Adjusted Results H1 22 £m H1 21 £m Var £m Var % • Revenue slightly lower; Revenue 297.4 302.3 (4.9) (1.6%) reflecting slowdown in Q2 Costs (251.6) (234.9) (16.7) (7.1%) digital growth Associates 1.4 1.5 (0.1) (6.7%) Operating pro
Slide 20: Statutory operating profit
Strategic Delivery | Financial Update | Editorial | Summary Statutory operating profit Continuing to reduce impact of adjusting items -£6m • Statutory profit -£3m £34m (H121: £29m) -£5m +£1m • Significant reduction in adjusting items - H122 £13m (H121: £40m) Historical commitments • Currently expect
Slide 21: Revenue slightly lower year on year
Strategic Delivery | Financial Update | Editorial | Summary Revenue slightly lower year on year Driven by Q2 slowdown in digital -5.1% -£5m OR -1.6% +5.4% +36.4% -9.9% +18.4% +19.8% £302m Q1: +10.4% Q2: +0.3% £297m Total down -3.9% H121 Circulation Print Advertising Printing Print Other Digital Othe
Slide 22: Inflation impacting operating profit
Strategic Delivery | Financial Update | Editorial | Summary Inflation impacting operating profit Preserving investment to support longer term growth -£18m +£3m -£14m +£9m -£21.7m -£5m OR +£3m -31.5% £69m £47m H121 2021 one-offs Input cost Efficiencies Investment Revenue/mix Other H122 inflation Reac
Slide 23: Operating costs
Strategic Delivery | Financial Update | Editorial | Summary Operating costs Increase reflects investment in digital & newsprint inflation Adjusted Operating Costs (£m) Newsprint Cost Drivers (£m) £252m £17m £235m £3m 84 85 10 10 £39m 39 25 £25m Other 119 115 H121 Volume Rate / Other H122 Depreciatio
Slide 24: The newsprint market - global demand & pricing
Strategic Delivery | Financial Update | Editorial | Summary The newsprint market - global demand & pricing All-time high for cost of newsprint Global newsprint demand growth Europe Paper Price (indexed) 10% 160 Latest price more 5% than double H1’21 140 0% -5% 120 Peaks from ‘normal’ Post COVID -10%
Slide 25: Strong traffic & audience; improving quality of digital revenue
Strategic Delivery | Financial Update | Editorial | Summary Strong traffic & audience; improving quality of digital revenue Non data-driven revenue impacted by yield Revenue (£m) Ave. page views p.m UK audience* (m) Rev per page view YOY Q1: +10% Q1: +8% YOY +5% YOY +8% YOY +3% +29% Q2: 0% Q2: +7% 6
Slide 26: Digital revenue impacted by yield
Strategic Delivery | Financial Update | Editorial | Summary Digital revenue impacted by yield Open market yield in Q2 lowest level since start of COVID Reach Open Market Yield (indexed) % Brand Unsafe 175 150 • Conflict 150 in Ukraine means > 2x level of brand unsafe War unsafe 120 content Standard
Slide 27: Print circulation
Strategic Delivery | Financial Update | Editorial | Summary Print circulation Circulation revenue robust, supported by cover price Volume Revenue Price / Mix 15% • Volume trends back to pre pandemic trends 10% • Accelerated cover price 5% increases 0% • Expect stronger H2 -5% circulation revenue wit
Slide 28: Adjusted cashflow
Strategic Delivery | Financial Update | Editorial | Summary Adjusted cashflow Net cashflow broadly flat; penultimate payment for Express and Star £57m £4m £66m £4m £7m £3m £44m £39m £6m £23m £ million £14m £1m £(5m) £17m £(22m) se ha al ed & or sh ing CF DA ts en on g s F es leg ar re sh g rc ts itu
Slide 29: Capital allocation
Strategic Delivery | Financial Update | Editorial | Summary Capital allocation Cash & balance sheet support creation of more sustainable business • Strategic investment supports more sustainable future business • Balance sheet optionality to accelerate through M&A Continued Growing Pension • Continu
Slide 30: Profit drivers in H2 & current trading
Strategic Delivery | Financial Update | Editorial | Summary Profit drivers in H2 & current trading Expect stronger H2 profit performance business Ukraine & softer 3rd party printing Newsprint inflation Decline due • Print revenue stronger post to input cost price increases H1 market impacts Q2 yield
Slide 31: Editorial Update
INTERIMS 22 EDITORIAL UPDATE LLOYD EMBLEY GROUP EDITOR-IN-CHIEF Reach plc - Interim Results 2022 31
Slide 32: Adapting & strengthening editorial
Strategic Delivery | Financial Update | Editorial | Summary Adapting & strengthening editorial Award-winning & flexible newsrooms Best Newsroom Transformation award Strategic delivery New cost of Living editors Financial update Editorial Summary recognising use of data xxxxxxxxxxxxxxxxxxx xxxxxxxxxx
Slide 33: Journalism is our core purpose
Strategic Delivery | Financial Update | Editorial | Summary Journalism is our core purpose Championing causes, embracing obsessions, standing up for communities bAiRSTOwAHfTiTeSR DX1ST e RON THAT PLAN Monday, July 4, 2022 J U ST b e TON 56 Daily Express kOHLi Jibe cDonnell By David M two-and-a-ha lf
Slide 34: Building a culture fit for the future
Strategic Delivery | Financial Update | Editorial | Summary Building a culture fit for the future Further progress on D&I & family support • Diversity & Inclusion further recognised by McKenzie-Delis review • Introduced new range of family friendly policies • Launching Sustainability strategy in ear
Slide 35: Looking forward
Strategic Delivery | Financial Update | Editorial | Summary Looking forward Strategy continuing to drive higher yielding digital revenue • Expect challenging macro backdrop • Market trend towards data-driven advertising will continue • Investment delivering higher yielding revenue & improving mix •
Slide 36: Q&A
Slide 37: Appendices
INTERINE Appendices 26 July 2022 mecch
Slide 38: Group income statement
Group income statement H1 22 H1 21 H1 22 H1 21 Statutory Statutory Adjusted(1) Adjusted(1) £m £m £m £m Revenue 297.4 302.3 297.4 302.3 Operating profit 34.5 28.6 47.2 68.9 Adjusted operating profit 47.2 68.9 47.2 68.9 Operating adjusted items (12.7) (40.3) - - Profit before taxation 32.0 25.7 45.9 6
Slide 39: Group balance sheet
Group balance sheet H1 22 FY 21 £m £m Intangible assets 863.5 860.2 Property, plant and equipment 153.1 157.3 Right-of-use assets 11.1 12.7 Investment in associates 18.1 17.4 Retirement benefit assets 94.4 107.9 Non-current assets 1,140.2 1,155.5 Cash and cash equivalents 43.8 65.7 Deferred consider
Slide 40: Group revenue trends 2022
Group revenue trends 2022 H1 22 Q1 Q2 HY 22 Print (3.9%) (3.9%) (3.9%) Circulation (6.2%) (4.0%) (5.1%) Advertising (8.5%) (11.4%) (9.9%) Printing 23.6% 17.1% 19.8% Other 28.1% 9.4% 18.4% Digital 10.4% 0.3% 5.4% Other 63.5% 26.2% 36.4% Revenue (0.5%) (2.8%) (1.6%) 4
Slide 41: Group revenue trends 2021
Group revenue trends 2021 H1 21 Q1 Q2 HY 21 Print (14.1%) 9.6% (3.6%) Circulation (8.7%) 4.8% (2.4%) Advertising (22.6%) 22.2% (5.3%) Printing (38.5%) 11.9% (18.6%) Other (16.6%) 27.3% 2.5% Digital 25.2% 65.0% 42.7% Other (49.9%) (3.9%) (31.3%) Revenue (7.8%) 18.8% 4.0% H1 21 Like for like (1) Q1 Q2
Slide 42: 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 H1 22 Revenue 297.4 - - - 297.4 Operating profit 34.5 12.7 - - 47.2 Profit before tax 32.0 12.7 1.2 - 45.9 Profit after tax 25.2 11.2 1.0
Slide 43: Operating adjusted items
Operating adjusted items H1 22 H1 21 £m £m Provision for historical legal issues (5.9) (13.0) Restructuring charges in respect of cost reduction measures (5.4) (1.4) Pension administrative expenses (2.2) (1.5) Other items 1.5 - Impairment of property, plant and equipment - (2.3) Impairment of right-
Slide 44: Adjusted cash flow
Adjusted cash flow H1 22 H1 21 Var £m £m £m Adjusted operating profit 47.2 68.9 (21.7) Depreciation and amortisation 9.9 9.9 - Adjusted EBITDA 57.1 78.8 (21.7) Net interest and charges paid on bank borrowings (0.9) (0.4) (0.5) Income tax paid (4.0) (9.2) 5.2 Restructuring payments (4.0) (10.3) 6.3 N
Slide 45: Financing & deferred consideration
Financing & deferred consideration Financing H1 22 FY 21 Change £m £m £m Cash balances 43.8 65.7 (21.9) Net cash 43.8 65.7 (21.9) Financial covenants Minimum Maximum Interest Cover Net Debt to EBITDA Bank facilities Throughout term of facilities 5.0x 1.75x Deferred consideration 2020 2021 2022 2023
Slide 46: Pensions
Pensions Pensions H1 22 FY 21 Change £m £m £m Fair value of scheme assets 2,059.0 2,636.3 (577.3) Present value of scheme liabilities (2,148.9) (2,788.4) 639.5 Impact of IFRIC 14 (1.5) (1.8) 0.3 Net scheme deficit (91.4) (153.9) 62.5 Net scheme deficit after deferred tax (69.1) (117.2) 48.1 Pension
Slide 47: Discount rate a key driver of pension deficit
Discount rate a key driver of pension deficit 800 5% 4.40% 700 3.72% 4% 3.70% 3.65% 600 3.20% 3.20% 3.15% 500 2.96% 3.46% 3.40% 3.35% 3% 3.05% 2.65% 2.76% 3.05% 2.50% 400 2.86% 1.94% 1.83% 2% 300 1.49% 200 1% 100 252.2 301.2 305.2 466.0 377.6 348.6 295.9 314.4 153.9 91.4 - 0% 2013 2014 2015 2016 201
Slide 48: Provisions & associates
Provisions & associates Provisions Share-based payments Property Restructuring Historical legal issues Other Total £m £m £m £m £m £m At 27 December 2021 (4.0) (12.3) (10.3) (41.0) (4.8) (72.4) Charged to income statement (0.2) - (5.6) (5.9) (0.6) (12.3) Released to income statement 1.9 - - - 0.8 2.7