Reach Plc · LSE:RCH
Reach — Trinity Mirror — H1 2015 Earnings Presentation
56 slides from Reach's earnings presentation, Aug 3, 2015
Slide 1: Telling the Story: 2015 Interim Results
Telling the Story Yesterday. Today. Tomorrow. . 2015 INTERIM RESULTS 3 August 2015 Trinity Mirror plc
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 Continued strong growth in digital audience and revenue whilst print advertising revenues remained challenging – Average monthly unique users and page views up 55% and 59% respectively – Publishing digital display advertising revenues grew by 44.0% Group performance – Profit before tax of
Slide 4: Vijay Vaghela, Group Finance Director
Vijay Vaghela GROUP FINANCE DIRECTOR Trinity Mirror plc 3
Slide 5: Group performance
Group performance 2015 2014 Change Change £m £m £m % Revenue 288.5 324.2 (35.7) (11.0%) Costs (244.1) (277.0) 32.9 11.9% Associates 3.5 3.1 0.4 12.9% Operating profit 47.9 50.3 (2.4) (4.8%) Net interest (0.9) (2.1) 1.2 57.1% Profit before tax 47.0 48.2 (1.2) (2.5%) Profit after tax 38.0 38.4 (0.4) (
Slide 6: Publishing
Publishing 2015 2014 Change Change £m £m £m % Print 235.7 266.7 (31.0) (11.6%) Digital 18.9 14.9 4.0 26.8% Revenue 254.6 281.6 (27.0) (9.6%) Costs (205.1) (227.9) 22.8 10.0% Operating profit 49.5 53.7 (4.2) (7.8%) Operating margin 19.4% 19.1% 0.3% 1.6% Underlying Publishing revenue fell by 8.8%, wit
Slide 7: Publishing print revenue
Publishing print revenue 2015 2014 Change Change £m £m £m % Circulation 134.3 142.5 (8.2) (5.8%) Advertising 87.7 108.3 (20.6) (19.0%) Display 48.1 61.0 (12.9) (21.1%) Classified 32.7 38.4 (5.7) (14.8%) Other 6.9 8.9 (2.0) (22.2%) Other 13.7 15.9 (2.2) (13.8%) Revenue 235.7 266.7 (31.0) (11.6%) Circ
Slide 8: Publishing digital revenue
Publishing digital revenue 2015 2014 Change Change £m £m £m % Advertising 16.6 13.2 3.4 25.8% Display 11.5 8.0 3.5 44.0% Classified recruitment 2.9 2.9 - - Classified other 2.2 2.3 (0.1) (3.3%) Other 2.3 1.7 0.6 35.3% Revenue 18.9 14.9 4.0 26.8% Digital revenues up 26.8% Advertising revenues up 25.8
Slide 9: Printing
Printing 2015 2014 Change Change £m £m £m % Contract printing 17.5 19.5 (2.0) (10.3%) Newsprint supply 5.6 13.0 (7.4) (56.9%) Other revenue 1.1 1.3 (0.2) (15.4%) Revenue 24.2 33.8 (9.6) (28.4%) External costs (79.2) (98.8) 19.6 19.8% Publishing division recharge 55.0 65.0 (10.0) (15.4%) Operating re
Slide 10: Other segments
Other segments Specialist Digital Central 2015 2014 Change 2015 2014 Change £m £m % £m £m % Advertising 2.5 2.3 8.7% - - - Other 5.3 4.9 8.2% 1.9 1.6 18.8% Revenue 7.8 7.2 8.3% 1.9 1.6 18.8% Costs (6.5) (6.4) (1.6%) (8.3) (8.9) 6.7% Associates - - - 3.5 3.1 12.9% Operating profit/(loss) 1.3 0.8 62.5
Slide 11: Cost savings
Cost savings 2015 2014 Change Change £m £m £m % Labour 96.6 101.1 4.5 4.5% Newsprint 33.2 51.9 18.7 36.0% Depreciation 11.7 12.2 0.5 4.1% Other 102.6 111.8 9.2 8.2% Costs 244.1 277.0 32.9 11.9% Continued tight cost management Excluding the change in newsprint supply arrangements, operating costs fel
Slide 12: Non-recurring items and restructuring charges
Non-recurring items and restructuring charges Non-recurring items 2015 2014 £m £m Provision for historical legal issues (16.0) (4.0) Closure of print site (1.4) - Non-recurring items excluding associates (17.4) (4.0) Non-recurring items included in share of results of associates (0.1) 27.6 Total non
Slide 13: Pensions
Pensions Jun Dec 2015 2014 Change £m £m £m Fair value of scheme assets 1,568.0 1,562.0 6.0 Present value of scheme liabilities (1,858.8) (1,863.2) 4.4 Net scheme deficit (290.8) (301.2) 10.4 Net scheme deficit after deferred tax (232.6) (241.0) 8.4 Assets increased by £6.0 million – Positive asset r
Slide 14: Cash flow and financing
Cash flow and financing 2015 2014 Change £m £m £m Operating profit 47.9 50.3 (2.4) Depreciation 11.7 12.2 (0.5) Pension funding (9.9) - (9.9) Net capital expenditure (2.1) (4.9) 2.8 Net interest (0.9) (2.3) 1.4 Restructuring charges in respect of cost reduction measures (7.3) (9.3) 2.0 Taxation (4.6
Slide 15: Current trading and outlook
Current trading and outlook Revenue environment has remained challenging in H1 Profit supported by – Increased structural cost saving target for 2015 by £10 million to £20 million – Ongoing cost mitigation actions – Digital investment to drive revenue Capital expenditure of £10 million, a reduction
Slide 16: Simon Fox, Chief Executive
Simon Fox CHIEF EXECUTIVE Trinity Mirror plc 15
Slide 17: Areas of strategic focus
Areas of strategic focus Strategic focus KPI Protecting and revitalising our core Outperform print trends 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 18: Protecting and revitalising our core brands in print
Protecting and revitalising our core brands in print Trinity Mirror plc 17
Slide 19: What's happened to print?
Protecting and revitalising our core brands in print What’s happened to print? Marked slow-down in print advertising – Accelerated in Q2 2015 as a result of further contraction of retail advertising spend The tabloid market, particularly the red-tops, have been more affected than the qualities – Nar
Slide 20: Is the pendulum about to swing back?
Protecting and revitalising our core brands in print Is the pendulum about to swing back? Enders estimate the UK newspaper print advertising market to be worth £1.7 billion in 2017 “…there’s some really strong evidence that engagement with traditional print is greater than that engagement with so-ca
Slide 21: We are well-placed to adapt to the changing print environment
Protecting and revitalising our core brands in print We are well-placed to adapt to the changing print environment Our print reach is significant and our market position is unique – National, Regional and digital at scale – In print: National: 7 million weekly reach Regional: 4 million weekly reach
Slide 22: We are well-placed to adapt to the changing print environment
Protecting and revitalising our core brands in print We are well-placed to adapt to the changing print environment Continuously outperforming the print market – Average six-month circulation of the Daily Mirror was 2.0% better than the red- top market in H1 2015 Evolving our organisation to capitali
Slide 23: The new regional daily
The new regional daily Make people feel good about where they live #TellAli Trinity Mirror plc 22
Slide 24: Launch of a repositioned Liverpool Echo
Protecting and revitalising our core brands in print Launch of a repositioned Liverpool Echo Emphasis on What’s On Helping people make the most of their city Modern and stylish Digestible Trinity Mirror plc 23
Slide 25: Growth in media content marketing
Protecting and revitalising our core brands in print Growth in media content marketing Content/native ad revenue in Paid Media estimates 2014 (£m) 600 £1.2 billion 500 400 £m 300 509 200 270 100 205 101 99 - Online TV Newspapers Magazines Radio Source: Enders’ Analysis: Content marketing: publishers
Slide 26: New Invention deals: Star Wars Day
Protecting and revitalising our core brands in print New Invention deals Star Wars Day Fully immersive May 4th takeover of Mirror newsbrand: masthead, bespoke brand partner ads, interactive content and social conversation Trinity Mirror plc 25
Slide 27: New Invention deals: Kellogg's
Protecting and revitalising our core brands in print New Invention deals Kellogg’s 3rd campaign for Kellogg’s in 18 months. Utilised our events team to create a ‘city farm’ for a day in Manchester, Kellogg’s HQ Trinity Mirror plc 26
Slide 28: New Invention deals: NHS Blood & Transplant
Protecting and revitalising our core brands in print New Invention deals NHS Blood & Transplant “Missing Type” campaign Raise awareness of the severe lack of blood type A&O and encouraging more people to become regular blood donors Trinity Mirror plc 27
Slide 29: Brands we worked with in Invention
Protecting and revitalising our core brands in print Brands we worked with in Invention Trinity Mirror plc 28
Slide 30: Growing our existing brands onto digital delivery channels
Growing our existing brands onto digital delivery channels Trinity Mirror plc 29
Slide 31: Our scale in digital
Growing our existing brands onto digital delivery channels Our scale in digital Newsbrands digital audience in the UK June 2015 (m) Mail Online Trinity Mirror Guardian Telegraph Source: Comscore multi-platform – UK only, June 2015 Trinity Mirror plc 30
Slide 32: 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 browsers (m) Group monthly page views (m) 120.0 800.0 700.0 +72% 100.0 +46% 600.0 80.0 500.0 60.0 400.0 m m 759.8 96.1 300.0 40.0 65.7 200.0 442.4 20.0 100.0 - - June 14
Slide 33: Our digital revenues
Growing our existing brands onto digital delivery channels Our digital revenues Publishing digital revenues H1 2014 and H1 2015 (m) Publishing digital revenues H1 2015 (m) +35% +27% 20.0 18.9 2.3 18.0 16.0 14.9 14.0 -2% 5.1 12.0 10.0 11.5 +44% m 8.0 6.0 4.0 2.0 - Display Classified Other H1 2014 H1
Slide 34: New mobile apps to build daily audience loyalty and grow revenue
Growing our existing brands onto digital delivery channels New mobile apps to build daily audience loyalty and grow revenue Designed and built in-house More opportunities for advertisers Completely customisable (new ad formats, more placements e.g. enabling geo-locating and push New interface and gr
Slide 35: Improved user experience on mobile web
Growing our existing brands onto digital delivery channels Improved user experience on mobile web Increased engagement as articles are adjoined – Users stream seamlessly through the content – Mirror engagement up 22% from 1.33 article page views per visit to 1.62 article page views per visit Each mo
Slide 36: Video growth continues
Growing our existing brands onto digital delivery channels Video growth continues Monthly video views across Trinity Mirror (m) 20.0 18.0 16.0 14.0 June 15 views: 12.0 +249% yoy 10.0 m 8.0 6.0 4.0 2.0 - Feb-14 Mar-14 Apr-14 Sep-14 Feb-15 Mar-15 Apr-15 Jan-14 May-14 Aug-14 Dec-14 May-15 Jun-14 Jul-14
Slide 37: Continuing our relentless focus on efficiency and cost management
Continuing our relentless focus on efficiency and cost management Trinity Mirror plc 36
Slide 38: 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 given revenue trends We delivered £7 million of structural cost savings in H1 Increased structural cost savings target of £20 million for 2015 Actions undertaken include – Restructuring of e
Slide 39: 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 38
Slide 40: Launching, developing, investing in or acquiring new businesses
Launching, developing, investing in or acquiring new businesses built around distinctive content or audience Sport Media – Official Match Day Programme and Pre-Tournament Magazine Licensee for Rugby World Cup 2015 in England Pinpoint – continue to make progress on Pinpoint which was launched in Q4 2
Slide 41: In summary…
In summary… Trinity Mirror plc 40
Slide 42: Summary
Summary Solid financial performance despite challenging print environment Rapid cost actions to mitigate profit impact Digital growth continues and strategy remains on track Strong balance sheet with financial flexibility Board continues to expect profits for 2015 to be in line with expectations Tri
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 288.5 324.2 288.5 324.2 Operating profit 19.6 60.0 47.9 50.3 Adjusted operating profit 47.9 50.3 47.9 50.3 Non-recurring items (17.5) 23.6 - - Amortisation of intangibles (2.5) (2.5) - - Pension ad
Slide 46: Balance sheet
Balance sheet Jun Dec 2015 2014 £m £m Intangible assets 679.8 680.9 Property, plant and equipment 307.1 317.7 Investment in associates 23.9 41.4 Retirement benefit assets 17.6 17.8 Deferred tax assets 59.3 62.1 Derivative financial instruments 1.2 3.2 Non-current assets 1,088.9 1,123.1 Cash and cash
Slide 47: Group revenue trends
Group revenue trends 2015 Q1 Q2 Jan/Feb Mar/Apr May/Jun Jun YTD Publishing (8.1%) (11.1%) (8.5%) (8.7%) (11.5%) (9.6%) Print (10.0%) (13.2%) (10.5%) (10.7%) (13.5%) (11.6%) Digital 29.5% 23.7% 30.4% 28.6% 21.4% 26.8% Printing (27.1%) (29.7%) (26.1%) (27.3%) (31.4%) (28.4%) Specialist Digital 9.7% 7.
Slide 48: Publishing revenue trends
Publishing revenue trends 2015 Q1 Q2 Jan/Feb Mar/Apr May/Jun Jun YTD Publishing Print (10.0%) (13.2%) (10.5%) (10.7%) (13.5%) (11.6%) Circulation (6.1%) (5.4%) (6.7%) (5.5%) (5.2%) (5.8%) Advertising (14.8%) (23.2%) (16.1%) (16.1%) (24.3%) (19.0%) Other (13.1%) (14.1%) (7.3%) (19.3%) (12.3%) (13.8%)
Slide 49: Reconciliation of statutory results to adjusted results
Reconciliation of statutory results to adjusted results Non- recurring Pension Restructuring Finance Statutory items Amortisation charges charges costs Adjusted results (a) (b) (c) (d) (e) results £m £m £m £m £m £m £m 2015 Revenue 288.5 - - - - - 288.5 Operating profit 19.6 17.5 2.5 1.0 7.3 - 47.9 P
Slide 50: Cash flow
Cash flow 2015 2014 £m £m Statutory operating profit 19.6 60.0 Depreciation 11.7 12.2 Pension funding (9.9) - Share of associates results (2.0) (29.3) Other (including movements in working capital) 22.6 15.9 Cash flows from operating activities 42.0 58.8 Income tax paid (4.6) (9.3) Dividends receive
Slide 51: Reconciliation of net cash/(debt) and financial covenants
Reconciliation of net cash/(debt) Jun Dec 2015 2014 £m £m Statutory net cash/(debt) 29.0 (13.1) Loan notes at period end exchange rate 64.4 65.3 Loan notes at swapped exchange rate (68.3) (68.3) Cross-currency interest rate swaps (1.2) (3.2) Contracted net cash/(debt) 23.9 (19.3) Financial covenants
Slide 52: Pension scheme assets
Pension scheme assets Jun Dec 2015 % 2014 % £m of total £m of total UK equities 196.8 12.6% 219.6 14.1% US equities 192.0 12.2% 189.3 12.1% Other overseas equities 224.2 14.3% 251.2 16.1% Total equities 613.0 39.1% 660.1 42.3% Property 19.8 1.3% 26.8 1.7% Corporate bonds 303.8 19.4% 248.7 15.9% Fixe
Slide 53: 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 134.3 134.3 - - - 142.5 142.5 - - - Advertising 106.8 104.3 - 2.5 - 123.8 121.5 - 2.3 - Print 87.7 87.7 - - - 108.3 108.3 - - -
Slide 54: 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 - - (7.3) (16.4) (23.7) Utilisation of provision 0.3 1.6 5.7 5.7 13.3 At 28 June 2015 (1.1) (7.4) (5.2) (26.9) (40.6) Associates PA Group
Slide 55: National newspaper advertising market share (volumes)
National newspaper advertising market share (volumes) UK Dailies 2015 2015 2014 1. Daily Mirror 18.1% 18.6% 2. Sun 18.9% 20.0% 3. Daily Star 14.5% 16.4% 4. Daily Mail 23.0% 21.1% 5. Daily Express 25.5% 23.9% 100.0% 100.0% Sundays 2015 2015 2014 1. Sunday Mirror 17.7% 17.5% 2. Sunday People 12.6% 11.
Slide 56: Trinity Mirror plc
Trinity Mirror plc