REG - Reach PLC - Annual Results for 53 weeks ended 31 December 2023
05/03/2024 07:00
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RNS Number : 5460F Reach PLC 05 March 2024
Reach plc ("The Company") Full Year Results - 53 weeks to 31 December 2023
5 March
2024
FY23 Progress on our digital strategy, long-term uncertainties resolved
Jim Mullen Chief Executive
"This year we have successfully gained clarity on two significant long-term
uncertainties in pension funding and Historical Legal Issues. With the end of
these issues in sight, we have significantly reduced our obligations and have
a clear path forward for the business.
"The success of our strategy also came to the fore this year. Despite the
macroeconomic pressures, we have continued to build a stronger digital
business with an increasing portion of much higher yielding revenues, reducing
our reliance on the open market. At the same time, we have expertly managed
our print business, maintaining circulation revenues as well as delivering
necessary cost and efficiency plans across the Group.
"Together, all of these actions have put our business in a stronger position,
so that we can continue to deliver great content to our audiences as well as
returns for our shareholders."
Capital allocation priorities unchanged with commitments unwinding
· After a number of years, the 2019 and 2022 Pension Triennial valuations
are concluded. There is an agreed pathway to fully funding the schemes and
from 2028 pension commitments are expected to reduce by c.£40m((1))
· December's High Court judgment provides a resolution on time limitation
for Historical Legal Issues. This means that a significant number of
outstanding claims can be resolved, and this should largely bring an end to
future claims. The expected cost of settling has reduced by £20.2m
· Continued strategic investment with a focus on digital capabilities,
digital infrastructure and the US operations, including the launch of Mirror
and Express '.com' websites
· Final £7.0m deferred consideration in respect of the Express &
Star acquisition has been paid
· Full year dividend maintained at 7.34p reflecting the Board's
confidence in the business model and understanding of the importance of
dividends to shareholders
Results overview
Data-led outperformance improves digital revenue resilience despite sector
decline in page views
Financial Summary((2))
53 weeks to 31 Dec 2023 Adjusted results((3)) Statutory results
2023 2022 Change 2023 2022 Change
Revenue £m 568.6 601.4 (5.4)% 568.6 601.4 (5.4)%
Operating profit £m 96.5 106.1 (9.0)% 46.1 71.3 (35.3)%
Operating profit margin % 17.0% 17.6% (0.6)% 8.1 % 11.9% (3.8)%
Earnings per share Pence 21.8 27.1 6.8 16.8
Net (debt)/cash ((4)) £m (10.1) 25.4 (10.1) 25.4
Dividend per share((5)) Pence 7.34 7.34 7.34 7.34
· Revenue declined 5.4% to £568.6m, Print revenue of £438.8m (FY22:
£448.6m) down 2% and Digital revenue of £127.4m (FY22: £149.8m) down 15%
· Strong print circulation performance £312.5m (FY22: £307.7m) -
revenue up by 2% and volumes in line with our historical print volumes. Print
advertising declined by 12% to £76.6m (FY22: £86.9m), outperforming volume
trends
· Data-driven digital revenues down 4% (FY23: £55.3m), continue to
outperform the market driven by a material increase in yields and now
represent 43% of total digital revenues (FY22: 38%)
· Other digital revenues which includes open market programmatically
driven advertising declined by 24% due to the sector-wide decline of platform
referred traffic to newsbrands (down 24%) alongside declining open market
yields (down 25%)
· As committed to at the start of 2023, we delivered our cost programme
and improved efficiency reducing operating costs by 5.7% on a like-for-like
basis to £469.5m
· Maintained our strong adjusted operating profit margin of 17.0% (FY
2022: 17.6%)
· Highly cash generative with adjusted operating cash flow of £91.9m (FY
2022: £92.1m)((6)) and closing net debt of £10.1m
FY24 Outlook - On track to deliver market expectations
We remain focused on delivering our Customer Value Strategy and the areas
within our control, building a more resilient growing digital business and
delivering efficiencies. The sector-wide decline in referral traffic will
impact Q1 2024 and we expect growing momentum across our digital business
thereafter. As previously announced, we have made our operations better
aligned to the digital world and are on track to deliver a reduction in
full-year operating costs of 5-6% for 2024. Trading performance across the
first two months of 2024 has been robust, with print advertising and digital
performing well and we are on track with our full year outlook but we continue
to operate in an uncertain macroeconomic environment.
Q4 Trading, factors impacting performance unchanged
2023 Like for like ((2)) Q1 YOY Q2 YOY Q3 YOY Q4 YOY Q4 LFL YOY % FY YOY FY LFL YOY %
% % % % %
Digital Revenue (13.4) (18.7) (13.7) (14.2) (15.0) (15.0) (15.2)
Print Revenue (3.0) (2.5) (5.8) 2.4 (2.8) (2.2) (3.5)
· circulation revenue 2.6 2.2 (3.3) 5.1 (1.1) 1.6 0.0
· advertising revenue (21.1) (15.7) (8.9) (1.5) (5.6) (11.9) (13.0)
Group Revenue (5.6) (6.5) (7.8) (2.0) (6.0) (5.4) (6.5)
The factors affecting Q4 digital revenue include the well-publicised declining
digital referral volumes alongside some the volatility from a higher than
usual high number of Google core updates. As a result over the year,
year-on-year page views declined 24%. Data driven revenue, which is higher
value and more targeted (than open market), continues to outperform and now
makes up a larger part of digital revenues at 43% (FY 2019 - 24%).
In print, circulation revenue is down slightly, remaining a resilient and
predictable revenue stream. The volume decline is actively managed alongside
circulation and cover price increases.
Notes:
((1)) The estimated committed pension payments are based on the current funding
schedule and are subject to future valuations and movements in the underlying
assets and liabilities.
((2)) The results have been prepared for the 53 weeks ending 31 December 2023 and
the comparative period has been prepared for the 52 week period ending 25
December 2022. The revenue and costs have been adjusted to show the numbers on
a like for like basis, the additional week added £6.2m to revenue and £0.8m
to operating profit.
((3)) Set out in note 20 is the reconciliation between the statutory and adjusted
results.
((4)) Net debt balance comprises cash and cash equivalents of £19.9m (inclusive of
£0.9m restricted cash) less bank borrowings of £30m but excludes lease
obligations (note 16).
((5)) Full year dividend of 7.34 pence per share comprised interim dividend of 2.88
pence per share and proposed final dividend of 4.46 pence per share.
((6)) Adjusted cash flow is presented in note 21 which reconciles the adjusted
operating profit to the net change in cash and cash equivalents. Note 22
provides a reconciliation between the statutory and adjusted cash flows.
((7)) Market expectations compiled by the company are an average of analyst
published forecasts - consensus adjusted operating profit for FY24 is £97.4m.
Enquiries
Reach plc
Jim Mullen, Chief Executive Officer communications@reachplc.com
Darren Fisher, Chief Financial Officer +44 (0)7557 557 447
Lija Kresowaty, Head of External Communications
Jo Britten, Investor Relations Director
Teneo reachplc@teneo.com
Giles Kernick, David Allchurch 020 7353 4200
About Reach
We're Reach plc, the UK's and Ireland's largest commercial news publisher.
We're home to more than 120 trusted brands, from national titles like the
Mirror, Express, Daily Record and Daily Star, to local brands like MyLondon,
BelfastLive and the Manchester Evening News, to our recently launched U.S.
titles. Every month, 47 million people come to us, via print and online, for
trusted news, entertainment and sport.
LEI: 213800GNI5XF3XOATR61
Classification: 3.1 Additional regulated information required to be disclosed
under the laws of the United Kingdom
Jim Mullen, Chief Executive Officer and Darren Fisher, Chief Financial Officer
will be hosting a webcast at 9:00am (UK) on 5 March 2024. It will be followed
by a live question and answer session. The presentation slides will be
available on www.reachplc.com
(file:///C:/Users/lauraharris/Downloads/www.reachplc.com) from 7.00am (UK).
You can join the webcast to watch the presentation or listen to the Q&A
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Please try to allow at least 10 minutes prior to the start time to provide
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Forward looking statements
This announcement has been prepared in relation to the financial results for
the 53 weeks ended 31 December 2023. Certain information contained in this
announcement may constitute 'forward-looking statements', which can be
identified by the use of terms such as 'may', 'will', 'would', 'could',
'should', 'expect', 'seek, 'anticipate', 'project', 'estimate', 'intend',
'continue', 'target', 'plan', 'goal', 'aim', 'achieve' or 'believe' (or the
negatives thereof) or words of similar meaning. Forward-looking statements can
be made in writing but also may be made verbally by members of management of
the Company (including, without limitation, during management presentations to
financial analysts) in connection with this announcement. These
forward-looking statements include all matters that are not historical facts
and include statements regarding the Company's intentions, beliefs or current
expectations concerning, among other things, the Company's results of
operations, financial condition, changes in global or regional trade
conditions, changes in tax rates, liquidity, prospects, growth and strategies.
By their nature, forward-looking statements involve risks, assumptions and
uncertainties that could cause actual events or results or actual performance
or other financial condition or performance measures of the Company to differ
materially from those reflected or contemplated in such forward-looking
statements. No representation or warranty is made as to the achievement or
reasonableness of and no reliance should be placed on such forward-looking
statements. The forward-looking statements reflect knowledge and information
available at the date of this announcement and the Company does not undertake
any obligation to update or revise any forward-looking statement, whether as a
result of new information or to reflect any change in circumstances or in the
Company's expectations or otherwise.
Chief Executive's Review
A path to progress
2023 was far from a straightforward year, but it was an important and
necessary one for the business. We can now look to the future having removed
several long-term uncertainties and delivered market expectations, while also
having progressed our Customer Value Strategy (CVS) and more firmly pointed
the business towards our digital audiences.
Much of this progress was several years in the making, for example the
preparation that supported us in 2023's trial around several long-standing
historical legal issues. While confronting the past in this way is not easy,
the resulting judgment on time limitation for future claims around historical
legal issues means that a significant number of outstanding claims can be
resolved, and this should largely bring an end to future claims.
We also took decisive action to resolve the outstanding pension funding
valuations, which has similarly given us a firm end in sight for an obligation
that has hindered this organisation for several decades. Together these two
achievements give the business much-needed financial clarity and allow us to
plan for the future with far greater certainty.
Throughout the year, we made significant progress in becoming a data-driven,
digitally-focused business, supported by a predictable and reliable print
business.
The average revenue (RPM) we generate from our digital page views is now up
over 10% from last year, not something I take for granted against a
challenging backdrop. While we have seen yields decline in our open market
programmatic advertising, we have been able to add increased value by growing
non-advertising revenue streams like ecommerce, affiliates and partnerships,
reinforcing the benefit of our Customer Value Strategy (CVS). Crucially this
has reduced the impact from the industry-wide decline in referral traffic, a
trend that we have long expected - albeit not as quickly and severely as it
came - and which CVS was always intended to mitigate.
We continued our transformation in the year, taking action to ensure that our
cost base reflects the economic environment in which we operate, and to enable
us to become a digital-first organisation. To achieve this, we needed to
reduce the size of some of our teams. This is not a decision I or my
management team take lightly. However, recent trends have only reinforced our
belief that we must be willing to make big changes to exert more control over
our own destiny and protect our brands in the long term.
The strong yield performance and efficient management of our cost base meant
we delivered a sustainable operating margin of 17%, broadly in line with last
year and giving us a strong foundation for 2024.
A fast-changing environment
We operate in a dynamic, competitive and constantly evolving market and 2023
was no exception. The period of economic volatility that began in 2020 has
continued to impact the market, placing pressure on advertising spend and
inflating costs for both businesses and consumers. Throughout the year, our
entire industry saw a fall in referral traffic from tech platforms and we were
not immune from that. Facebook, one of our largest traffic referrers, has
shifted away from news content and we have contended with numerous Google core
algorithm updates, each one requiring us to pivot on how we deliver content to
our audiences.
These changes have impacted our organic search traffic and therefore our
growth in the near term, with page views down 24% versus last year, in line
with the wider news publishing market. Despite the decline in volume, our
commercial teams have expertly traded the value of our content and ad space,
capitalising on our Customer Value Strategy progress to drive our revenue.
Telling the stories that matter
It's clear that audience behaviour and digital trends can shift rapidly, but
what remains constant is our core purpose to enlighten, empower and entertain
our mainstream audiences, wherever they might find us. Great content will
always be at the heart of our business and this year our teams produced an
abundance of it. The editorial highlights that come to mind for me personally
include the Sunday Mail's exclusive scoop on the SNP scandal, the Mirror's
campaign for free school meals which so far has seen Sadiq Khan announce free
hot meals for all primary pupils, and the Express's campaign calling for the
Government to invest more in radiotherapy and increase services for cancer
patients.
Meanwhile, the Manchester Evening News' award-winning Awaab's Law campaign has
made its way through Parliament and will change many people's lives for the
better.
And while it's always an honour to watch everyday heroes at the Mirror's Pride
of Britain Awards, in 2023 it was particularly inspiring to see members of the
Windrush generation be recognised for their outstanding contribution to
British life since the first passengers on that vessel arrived 75 years ago.
These highlights all wield the power and impact they do precisely because of
our wide reach, with our scale and editorial purpose working hand in hand.
Despite the challenges of the business environment, Reach remains the largest
publisher in the UK and Ireland, and continues to command the sixth largest
digital audience of any UK business, reaching 36m adults digitally every month
which is 72% of the online population. Our transformation actions in 2023 will
ensure the continuation of our core purpose into 2024 and beyond.
Enhancing resilience and efficiency
Our print business continues to generate strong returns, despite the falling
demand across the sector. Our experienced circulation teams use decades of
data to expertly inform our approach to price increases and availability, both
of which are critical to underpinning sales volumes. We maintain a track
record of effective cost management and are constantly reviewing and making
changes to our supply chain, optimising distribution and right-sizing our
property footprint.
Across the business, we successfully delivered a 5.7% reduction in operating
costs (on a like-for-like basis), against the 5-6% reduction we targeted at
the start of the year. As announced in November 2023, to set ourselves up for
success in 2024 we have committed to and already started to deliver a further
5-6% reduction in our operating cost base. In the wider industry context, with
many organisations now making similar decisions to those we took in late 2023,
we believe our early action demonstrates responsible foresight and planning.
As labour represents our single largest cost, there is no getting away from
the fact that we have had to reduce the size of our teams to save cost and
re-shape for the future. I do not underestimate the impact of these decisions
on all of our people. With that in mind I committed to working through them
with fairness and integrity, and to communicating openly throughout. During
this period, I led a programme of small group discussions and town hall
meetings with leaders and colleagues, to share updates, provide important
context about the need for change, and facilitate open dialogue. Honest
colleague communication remains something that I'm passionate about and
committed to investing time into, all year round.
Our emphasis on efficiency goes beyond traditional cost-cutting measures as we
must also organise our ways of working to put ourselves in the best position
to achieve our strategic aims and accelerate our journey to being a
digital-first content organisation. As part of this work we created the Reach
Studio team, which pools all of our video and audio talent in one super team
that will provide multimedia content for both editorial audiences and
commercial partners, maximising the value for both.
Progressing our strategic priorities
During volatile times it is all the more important to pursue a strategy that
gives us greater long-term stability and control over our business.
Over the year, our Customer Value Strategy (CVS) continued to progress on key
metrics. Against falling referral traffic, we continued to grow our yield or
RPM (+11% from 2022), an increasingly important metric as we focus on
controlling digital revenue.
We also see that as a result of our CVS progress, the return on data-driven
advertising is currently 10 times more valuable than volume-related
programmatic advertising returns. These figures demonstrate that whatever
market trends may come, we are able to consistently adapt to optimise the
value of our content, data and audience.
Our commercial activity continues to be led by data, while focusing on direct
customer relationships and more diversified revenues that support
higher-quality digital earnings. These efforts are reflected in our mix, which
is now made up of 43% of digital revenues generated by data-driven, higher
value and better performing advertising, a trend which will continue.
Part of the strategy has been to strengthen and expand our audience base with
key demographics and into valuable regions. In 2023 we successfully launched
three '.com' websites from a new US operation, which by the end of the year
were regularly attracting an audience of a million a day.
Additionally, we have worked to secure our audience, which will make us less
vulnerable to changing tech platform algorithms and better able to directly
engage with our millions of customers and drive them to our content. There
have been several initiatives on this front, including an award-winning
project to reach people via WhatsApp Communities and Channels, through which
we reach more than 1.65m people directly as of February 2024.
One early standout in this area is our Arsenal channel which sends multiple
stories a day directly to over 600k people, making it the biggest Arsenal
channel in the world. Through work like this we are able to speak to our
audiences on our own terms and ensure that our great content reaches them.
Our tech and commercial teams have played a key role in supporting our
discoverability challenge, further developing in-house recommender tools
powered by AI that point readers to content we know they'll be interested in.
One of these tools alone has reduced customer bounce rate by over 10% and
generated 2bn page views through the year. Our in-house first-party data
capabilities, in particular our proprietary Mantis tool, will stand us in good
stead as Google continues to phase out third-party cookies, a process we have
now seen beginning in 2024. This will be a major shift in the landscape for
publishers and advertisers, who for years have depended on third-party data to
target their advertising. We will be significantly ahead of the curve on this
front, with 12.3m registered customers, of which approximately 4m are active
over each four-week period, and advanced capability to effectively place
advertising using contextual targeting.
We have further strengthened our position by growing our revenue streams
outside traditional advertising revenue, with important work being done with
affiliates and ecommerce. It's great to see the continued success of the OK!
Beauty Box, which we launched in late 2020 as one of our first Customer Value
Strategy initiatives, and now has c.12k paying subscribers.
Our goal with this work is not to replace our business model but to
continuously evolve, strengthen and broaden it, and to give our audiences more
choice about how they engage with our content.
Resolving long-term uncertainties
For several years now, the leadership team and I have been working to resolve
a number of long-standing hurdles facing this business. Over the past months I
am proud to say we have made real headway in clearing these.
Ahead of 2023 we took the decision to go to trial to achieve greater certainty
around the future impact of long-standing historical legal issues. The
judgment we received in December set out very clear parameters on time
limitation which enables us to draw a line under these issues. Simply, this
means we now have a much clearer view on the estimated cost of resolving these
long-standing issues and, crucially, these costs are expected to be materially
lower than our previous estimates.
Over the last four years we had not been able to come to an agreement with the
MGN Pension Trustees on the 2019 triennial valuation. I cannot overstate the
importance of having successfully concluded both the 2019 and 2022 triennial
pension reviews for the MGN pension scheme. Agreement with our other schemes
is also expected to be completed by the 31 March 2024 due date. This provides
much needed clarity on the scale of our funding obligations, which are
scheduled to materially step down in early 2028.
These developments will both benefit the wider business and enable better
planning for our future. Thank you to all the teams who have been involved in
bringing these matters to a close.
Exploring AI as a tool
At the start of 2023 the conversation around how businesses and media
organisations use AI was only beginning to take shape. Our editorial leaders
created a cross-functional workstream to manage this complex issue, exploring
the many opportunities while also gaining a firmer understanding of the risks.
Their primary focus has been to test tools that help journalists to tell their
stories more quickly and effectively. As a result of this work, the team has
identified several areas with strong potential, such as spotting trends and
analysing large volumes of data.
We have steadily increased our use of AI through the year, while carefully
controlling its roll-out, and by the end of 2023 over a dozen newsrooms were
set up to use an AI tool to support their work. As we continue to test AI's
potential, we ensure that every story is edited and approved by a journalist,
maintaining our commitment to responsible journalism.
Fighting our case
I have also been putting our case to political decision-makers, ensuring that
those in power and in opposition understand the issues facing Reach and the
entire media industry. The stakes are high and I have had many encouraging
discussions this year on the crucial questions that will decide the future of
journalism in this country, such as: how can tech platforms work fairly with
the media to support a free press and functioning democracy?
2023 marked my last year as chair of the NMA (News Media Association), but I
will continue to discuss these vital issues in 2024 with our legislators,
particularly as we watch the Digital Markets Bill progress through Parliament.
Looking after our people and our future
All of this progress is made possible by our talented and passionate
colleagues in all departments. We have made many necessary changes to our
teams this year but I remain committed to retaining and developing the great
people who are shaping the future of this business.
Developing our teams is just one pillar of our formalised responsible business
framework, now one year in. We continue to prioritise becoming a more
inclusive organisation, and in 2023 were once again recognised by Inclusive
Companies with our highest ranking yet and testament to the dedication of many
people here. We're also working to protect all our futures through our
environmental efforts, which continued to progress this year as we implemented
the systems and gathered the data that will inform our path to net zero.
Looking ahead
2023 was a critical moment for this business, allowing us to put several
significant issues in the past and to focus instead on looking forward, and I
am confident that we are now well positioned to take on the future.
As always, there are challenges ahead. The macro environment is unlikely to
provide much relief over the near term and we are working to secure our
audience and build our data-driven digital business. This will be achieved
through small incremental gains and by continuing to build direct
relationships with our audiences.
Our industry has a history of change and the future will undoubtedly see yet
more. That's why it's essential we set ourselves up to win by making our
operations suited to an increasingly fast-paced, competitive and digital
world.
Jim Mullen
Chief Executive Officer
5 March 2024
Financial Review
Building long term resilience
Looking back over the year, we have made demonstrable progress to ensure the
business is more resilient and able to continue its digital transformation.
During a year of macroeconomic uncertainty and some significant shifts across
the media sector, we delivered a resilient financial performance and made
significant progress in resolving the long-standing uncertainties.
We concluded the 2019 triennial valuation, along with the 2022 valuation, for
the MGN pension scheme, and have subsequently reached agreement in principle
with our other schemes and are expected to be concluded satisfactorily by the
31 March 2024 due date. This provides a clear view of our future pension
commitments which will materially step down from the current rate of £60.0m
in 2028.
In December, the High Court's judgment on the Group's historical legal issues
(HLI) provided clarity around time limitation. This has resulted in a material
reduction in the cost of settling outstanding claims and should largely bring
an end to future claims. This has led to a £20.2m year-on-year release in the
HLI provision. We expect the majority, if not all, of the issued claims to be
resolved during 2024 and 2025 which is a much shorter time frame than
previously anticipated. Resolving these two matters has reduced uncertainty
and allows us to plan more effectively for the long term.
The macroeconomic environment in 2023 impacted advertising spend, and there
was a material step down in digital referral traffic from major platforms such
as Facebook, which has deprioritised news content. This has driven a 24%
year-on-year decline in digital page views, which alongside depressed open
market yields (year on year decline 25%), adversely impacted digital revenue,
which declined by £22.4m or 15% to £127.4m in 2023.
Conversely, our data-driven revenues performed robustly, only declining 4%
year-on year, to now represent 43% of digital revenues (2022: 38%). To
compensate for the industry headwinds we took clear actions to continue to
diversify our digital revenues and trade our digital assets harder. We
prioritised areas within our Customer Value Strategy which are higher yielding
and within our control. As a result revenue per thousand pages (RPM) across
our digital estate increased by 11%. These actions have resulted in improved
resilience, with areas of strong growth including curated marketplaces,
ecommerce and affiliates.
We continued to invest in our digital expansion. We launched our three
US-based sites, invested in Curiously, our social-first, video-focused brand,
and invested in new products to develop our curated marketplace capability.
The print business remained robust and delivered £438.8m (2022: £448.6m) of
revenue, representing just over 75% of the Group's revenue with a strong
performance in circulation and print advertising. The teams have access to a
significant amount of data which has built up over many years and this is used
to determine optimal levels of availability and cover price increases. These
dynamics have offset the volume decline with circulation revenue growing 1.6%.
Print advertising declined by £10.3m, or 11.9% year-on-year; this was a solid
performance, outperforming volume trends which were down 17% year-on-year.
Focus on efficiency
Through our cost action plan we continue to focus on efficiency, setting up
our operations to adapt and thrive in
a fast-paced and competitive digital landscape. At the start of the year we
committed to reducing total operating costs by 5-6%, and on a 52 week
like-for-like basis we achieved a 5.7% reduction. Inflation moderated through
the year following the material increase in the cost of newsprint in 2022,
some of which unwound in 2023. Overall newsprint costs reduced by 21%, mainly
driven by the decline in production volumes. We have implemented restructuring
and efficiency programmes and as part of these, headcount has reduced by 14%
over the year. Our largest operating cost, labour, reduced by 5% year-on year.
Together these actions have driven higher levels of efficiency, protecting the
strong operating margin of 17% and mean we are better positioned for the long
term.
Strong balance sheet
The Group has a robust balance sheet with a closing cash balance of £19.9m,
and net debt of £10.1m (inclusive of £0.9m restricted cash). The Group has
£30.0m drawn down on its revolving credit facility. The Group's revolving
credit facility of £120.0m is in place until November 2026.
Cash management remains a priority. Group cash conversion was strong at 95%
supported by efficient working capital management. Pension scheme
contributions during the year were £60.0m, HLI claim settlements totalled
£4.6m and we incurred £18.8m of restructuring payments. Together these
non-operating cash outflows amount to £83.4m.
In December 2023 the Group completed a £605.4m capital reduction, converting
the entirety of the share premium account into distributable reserves, which
will support the payment of dividends into the future. This did not involve
any return of capital or payment to shareholders.
Looking ahead
The strength of our print business underpins the cash generation and
profitability of the Group. We will continue to carefully balance cover price
increases and availability to deliver a robust circulation performance despite
the falling demand for print. Print revenue funds the Group's financial
commitments and enables investment as we continue to build our digital
business.
This year we will continue to invest in product and new markets including the
US and developing the AI-powered Mantis ad tech. We will also increase our use
of AI tools to support increased productivity in the newsrooms, under the
continued guidance of our journalists.
Across our digital business we continue to build a more sustainable
higher-quality digital mix, with 43% of digital revenue now data-driven. The
depressed open market yields, compounded by the decline in page views, have
reinforced the benefits of our data-driven Customer Value Strategy. This
strategy will continue to increase yields and grow data-driven revenues.
As communicated in 2023, we have already actioned a further programme of cost
reduction for 2024, which we are confident will support a 5-6% in-year
reduction in our operating costs and protect our operating margin. Savings
have been generated throughout the business and include further steps in
creating a digitally-led editorial business, for example the creation of a
single video studio.
Summary income statement
Adjusted Adjusted YOY Statutory Statutory YOY
2023 2022 change 2023 2022 change
£m £m % £m £m %
Revenue 568.6 601.4 (5.4) 568.6 601.4 (5.4)
Costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4
Associates 2.9 2.8 3.6 1.4 1.4 0.0
Operating profit 96.5 106.1 (9.0) 46.1 71.3 (35.3)
Finance costs (3.5) (2.8) (25.0) (9.4) (5.1) (84.3)
Profit before tax 93.0 103.3 (10.0) 36.7 66.2 (44.6)
Tax charge (24.6) (18.8) (30.9) (15.2) (13.9) (9.4)
Profit after tax 68.4 84.5 (19.1) 21.5 52.3 (58.9)
Earnings per share - basic (p) 21.8 27.1 (19.6) 6.8 16.8 (59.5)
The results have been prepared for the 53 weeks ending 31 December 2023. The
comparative period has been prepared for the 52 week period ending 25 December
2022. The additional week contributed £6.2m of revenue and £0.8m of
operating profit.
Group revenue fell by £32.8m or 5.4% to £568.6m with print down 2.2% and
digital down 15.0%.
Adjusted costs decreased by £23.1m or 4.6% to £475.0m, partially offsetting
the decline in revenue. This was driven by the reduction in circulation
volumes and a small unwinding of some of last year's newsprint cost inflation,
alongside the ongoing cost reduction programme. Statutory costs were lower by
£7.6m or 1.4%, with the increase in operating adjusted items of £15.5m
(£48.9m in 2023 versus £33.4m in 2022) partially offsetting the reduction in
operating costs.
Adjusted operating profit decreased by £9.6m or 9.0% to £96.5m, driven by
the decline in revenue partially offset by the savings in costs. The adjusted
operating margin of 17.0% in 2023 compares to 17.6% for 2022. Statutory
operating profit decreased by £25.2m or 35.3% primarily due to the increase
in operating adjusted items which include restructuring charges in respect of
cost reduction measures and impairment of the finance lease receivable and
recognition of onerous costs following the sub-lessee of a vacant print site
entering administration, partially offset with the release of the provision
for historical legal issues.
Adjusted earnings per share decreased by 5.3p or 19.6% to 21.8p. Statutory
earnings per share decreased by 10.0p to 6.8p, principally due to the decrease
in operating profit.
Revenue
2023 2022 YOY change %
£m £m
Print 438.8 448.6 (2.2)
Circulation 312.5 307.7 1.6
Advertising 76.6 86.9 (11.9)
Printing 20.2 23.1 (12.7)
Other 29.5 30.9 (4.5)
Digital 127.4 149.8 (15.0)
Other 2.4 3.0 (16.9)
Total revenue 568.6 601.4 (5.4)
Revenue declined overall by £32.8m or 5.4%.
Print revenue decreased by £9.8m or 2.2% (2022: down 3.5%). Circulation
performance was strong with revenue up 1.6% (2022: down 1.7%) driven by
carefully considered cover price increases, which were above recent historical
levels, offsetting the ongoing decline in circulation volumes.
Print advertising revenue declined by £10.3m or 11.9% (2022: down 15.9%); but
outperformed the print volume decline of 17%. During the year the strongest
performing sectors for print advertising include food retail, travel, the
government and entertainment and media, which is very similar to the prior
year.
Print revenue also includes external or third-party printing revenues and
other print-related revenues which decreased by £4.3m, or 8.0% (2022:
increased 10.4%). These revenues are largely contracted on a cost-plus basis,
and reflect the external market demand for print.
Digital revenue decreased by 15.0% to £127.4m (2022: 1.0% increase). Revenue
has been impacted by lower advertising demand during a period of macroeconomic
uncertainty alongside a material reduction in page views. Major platforms
including Facebook have deprioritised news content over the year which in turn
has driven a reduction in referral traffic for publishers across the sector.
These changes have adversely impacted our revenues which were directly
impacted by page view volume. Strategically driven or 'data-led revenues',
which are more resilient and higher yielding, performed robustly. Data-driven
revenues were £55.3m, down 4.0%, and now represent 43% of digital (2022:
38%).
Costs
2023 2022 YOY 2023 2022 YOY
Adjusted Adjusted change Statutory Statutory change
£m £m % £m £m %
Labour (223.0) (234.7) 5.0 (223.0) (234.7) 5.0
Newsprint (59.5) (75.4) 21.1 (59.5) (75.4) 21.1
Depreciation and amortisation (21.6) (20.2) (7.0) (21.6) (20.2) (7.0)
Other (170.9) (167.8) (1.9) (219.8) (201.2) (9.2)
Total costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4
Adjusted costs of £475.0m (2022: £498.1m) decreased by £23.1m or 4.6%. On a
52 week like-for-like basis adjusted costs declined by 5.7%. Labour costs
decreased 5% as we implemented our restructuring and efficiency programme
with headcount falling by 14% over the year. Newsprint costs reduced from
lower volumes, and an unwinding of some of last year's newsprint cost
inflation.
Statutory costs were lower by £7.6m or 1.4%, a less significant reduction due
to higher operating adjusted items which were £15.5m higher (£48.9m in 2023
compared to £33.4m in 2022).
Operating adjusted items included in statutory costs above related to the
following:
Statutory Statutory
2023 2022
£m £m
Provision for historical legal issues 20.2 (11.0)
Restructuring charges in respect of cost reduction measures (26.9) (15.5)
(Impairment of sublease)/sublet of closed print plant (19.4) 16.6
Other property-related costs (8.0) (4.6)
Pension administrative expenses and past service costs (5.5) (14.8)
Other items (9.3) (4.1)
Operating adjusted items in statutory costs (48.9) (33.4)
The Group has recorded a £20.2m decrease (2022: £11.0m increase) in the
provision for historical legal issues relating to the cost associated with
dealing with and resolving civil claims in relation to historical phone
hacking and unlawful information gathering. This material reduction is driven
by the judgment handed down during December 2023 in respect of test claims. As
a result of the ruling, all claims issued after 31 October 2020 are now likely
to be dismissed other than where individuals can demonstrate specific
exceptional circumstances, and therefore this has significantly reduced the
amounts that are expected to be paid out.
Restructuring charges of £26.9m (2022: £15.5m) principally relate to cost
management actions taken in the period.
Following the sublet of the vacant print site during 2022 which resulted in
the reversal of an impairment in right-of-use assets of £11.0m and previously
onerous costs of the vacant site of £5.6m, the sub-lessee entered into
administration during 2023. As a result, the corresponding £10.8m finance
lease receivable has been impaired along with the subsequent recognition of
onerous costs of £8.6m of the vacant site during the period.
Other property-related costs comprise the impairment of vacant freehold
property costs (£4.3m), vacant freehold property-related costs (£1.4m) and
onerous lease and related costs (£2.6m) less the profit on sale of assets
(£0.3m). In 2022, other property-related costs related to the impairment of
vacant freehold property (£4.2m) and plant and equipment (£0.8m) less the
profit on sale of impaired assets (£0.4m).
Pension costs of £5.5m (2022: £14.8m) comprise pension administrative
expenses (2022: £4.2m). 2022 also included £10.6m of past service costs
relating to a Barber Window equalisation adjustment.
Other adjusted items comprise the Group's legal fees in respect of historical
legal issues (£5.3m), adviser costs in relation to the triennial funding
valuations (£2.5m), internal pension administrative expenses (£0.6m),
corporate simplification costs (£0.5m), and other restructuring-related
project costs (£0.7m) less a reduction in National Insurance costs relating
to share awards (£0.3m). In 2022, other adjusted items comprise the Group's
legal fees in respect of historical legal issues (£5.2m), adviser costs in
relation to the triennial funding valuations (£1.6m), less a reduction in
National Insurance costs relating to share awards (£2.7m).
Adjusted operating profit bridge
Adjusted
£m
FY22 106
Revenue mix (33)
Inflation & volume 6
Investment (13)
Efficiencies 30
Other 1
FY23 97
Adjusted operating profit of £96.5m was down £9.6m or 9.0% reflecting the
decline in revenue of £32.8m or 5.4%, mitigated by a £23.1m or 4.6% decrease
in operating costs. This meant that adjusted operating margin decreased by 0.6
percentage points from 17.6% in 2022 to 17.0% in 2023.
The net cost saving of £23m was driven mainly from efficiencies (£30m). Half
of these efficiencies related to labour costs which were lower following the
cost reduction programmes with the balance coming from the rationalisation of
our property portfolio and other operational costs. Investments were made into
our US operations and youth brand, Curiously, alongside some digital product
development.
Reconciliation of statutory to adjusted results
Operating Pension
Statutory adjusted finance Adjusted
results items charge results
£m £m £m £m
Revenue 568.6 - - 568.6
Operating profit 46.1 50.4 - 96.5
Profit before tax 36.7 50.4 5.9 93.0
Profit after tax 21.5 42.4 4.5 68.4
Basic earnings per share (p) 6.8 13.6 1.4 21.8
The Group excludes adjusted operating items and the pension finance charge
from the adjusted results. Adjusted items relate to costs or income that
derive from events or transactions that fall within the normal activities of
the Group, but are excluded from the Group's adjusted profit measures,
individually or, if of a similar type in aggregate, due to their size and/or
nature in order to better reflect management's view of the performance of the
Group.
Items are adjusted on the basis that they distort the underlying performance
of the business where they relate to material items that can recur (including
impairment, restructuring and tax rate changes) or relate to historical
liabilities (including historical legal and contractual issues, defined
benefit pension schemes which are all closed to future accrual).
Other items may be included in adjusted items if they are not expected to
recur in future years, such as property rationalisation and items such as
transaction and restructuring costs incurred on acquisitions or the profit or
loss on the sale of subsidiaries, associates or freehold buildings.
Management excludes these from the results that it uses to manage the business
and on which bonuses are based to reflect the underlying performance of the
business and believes that the adjusted results, presented alongside the
statutory results, provide users with additional useful information. Further
details on the items excluded from the adjusted results are set out in note
20.
Like-for-like comparison
53 week LFL 52 week
FY 2023 FY 2023
YOY YOY
% %
Digital (15.0) (15.2)
Print (2.2) (3.5)
Circulation 1.6 0.0
Advertising (11.9) (13.0)
Group revenue (5.4) (6.5)
Adjusted operating costs YoY decline % (4.6) (5.7)
The results have been prepared for the 53 weeks ending 31 December 2023 and
the comparative period has been prepared for the 52 week period ending 25
December 2022. The revenue and costs have been adjusted to show the numbers on
a like-for-like basis. The additional week added £6.2m to revenue and £0.8m
to operating profit.
Balance sheet and cash flows
Historical legal issues provision
The historical legal issues provision relates to the cost associated with
dealing with and resolving civil claims in relation to historical phone
hacking and unlawful information gathering. Payments of £4.6m have been made
during the year and the provision has decreased by £20.2m, driven by the
judgment handed down on the test claims during December 2023. At the year end
a provision of £18.2m remains outstanding and this represents the current
best estimate of the amount required to resolve this historical matter.
Further details relating to the nature of the liability, the calculation basis
and the expected timing of payments are set out in note 18.
Decrease in accounting pension deficit
The IAS 19 pension deficit (net of deferred tax) in respect of the Group's
defined benefit pension schemes decreased by £36.8m from £113.9m to £77.1m
at the year end. The decrease in the deficit is due to the net aggregate of
many factors, mostly notable changes in market conditions leading to an
increase in discount rate, returns on the schemes' assets, Group contributions
and the easing of inflation. We concluded the 2019 triennial valuation, along
with the 2022 valuation, for the MGN pension scheme, and have subsequently
reached agreement with our other schemes which are expected to be completed by
the 31 March 2024 due date. The Group now benefits from an agreed position on
future pension funding commitments.
During 2022, similar to the West Ferry scheme, the Trustees of the Express
Newspapers Senior Managers Pension Fund purchased a bulk annuity (at no cost
to the Group) and the scheme now has all pension liabilities covered by
annuity policies. Group contributions in respect of the remaining four defined
benefit schemes in 2023 were £60.0m (2022: £55.1m). Contributions in 2024
are expected to be £60.9m under the current schedule of contributions for the
four schemes.
Deferred consideration
Deferred consideration is attributable to the acquisition of Express &
Star. The third and final payment of £7.0m was made on 28 February 2023.
There is no remaining liability in relation to deferred consideration.
Profit to cash measure
This ratio is a measure of our effectiveness at working capital management. It
is calculated as our adjusted operating cash flow as a proportion of adjusted
operating profit.
In order to calculate this measure, adjusted operating cash flow has been
aligned to the definition of adjusted operating profit. The change is largely
driven by the exclusion of the cash flow impact of restructuring payments and
other items classified as adjusted items in the income statement. This has
resulted in an increase in adjusted operating cash flow in 2022 from £64.8m
to £92.1m.
2023 2022
£m £m
Adjusted operating profit 96.5 106.1
Depreciation and amortisation 21.6 20.2
Adjusted EBITDA 118.1 126.3
Working capital movements (3.9) (12.3)
Lease payments (5.3) (6.7)
Capital expenditure (15.4) (13.3)
Other 1.3 0.9
Associates (2.9) (2.8)
Adjusted operating cash flow 91.9 92.1
Profit to cash ratio 95% 87%
During the year, adjusted operating profit was £96.5m (2022: £106.1m) and
the adjusted operating cash inflow was £91.9m (2022: £92.1m) with a profit
to cash ratio of 95% reflecting ongoing cash management. Working capital
improved year-on-year, predominantly from excess newsprint inventories which
built up during the escalation of the war in Ukraine in 2022 partially
unwinding during 2023.
Uses for cash
The table below shows how the Group is using the cash generated from
operations to meet its financial obligations. Adjusted cash generated from
operations is adjusted operating cash flow excluding the impact of net lease
payments and capital expenditure.
2023 2022
£m £m
Adjusted cash generated from operations 112.6 112.1
Pension payments (60.0) (55.1)
Historical legal issues (4.6) (9.0)
Restructuring (18.8) (13.8)
Capital expenditure (15.4) (13.3)
Final payment on acquisition (7.0) (17.1)
Other (19.2) (21.2)
Cash flow before returns to shareholders (12.4) (17.4)
Dividends paid (23.1) (22.9)
Cash flow after returns to shareholders (35.5) (40.3)
Net (debt)/cash (10.1) 25.4
Material uses for cash include pension contributions totalling £60.0m (2022:
£55.1m) and restructuring payments of £18.8m (2022: £13.8m) which mainly
relate to cost reduction programmes implemented at the start of the year. The
final payment on acquisition of £7.0m (2022: £17.1m) relates to the Express
& Star. Other comprises professional fees in respect of historical legal
issues and triennial funding valuations of £7.8m (2022: £6.8m), net lease
payments of £5.3m (2022: £6.7m), interest paid on borrowings of £3.1m
(2022: £1.9m) and other movements which account for the balance of cash
flows.
The Group paid a dividend in the period of £23.1m (2022: £22.9m).
Cash balances
Net debt at the year end is £10.1m (inclusive of £0.9m restricted cash),
from a net cash position of £25.4m at the end of 2022. The Group has £30.0m
drawn down on its revolving credit facility, with the overall total cash
position of £19.9m at the year end. The Group has a revolving credit facility
of £120.0m, which expires during November 2026.
Cash generated from operations on a statutory basis was £76.4m (2022:
£80.1m). The Group presents an adjusted cash flow which reconciles the
adjusted operating profit to the net change in cash and cash equivalents,
which is set out in note 21. A reconciliation between the statutory and the
adjusted cash flow is set out in note 22. The adjusted operating cash flow was
£91.9m (2022: £92.1m).
Dividends
The Board proposes a final dividend of 4.46 pence per share for 2023 (2022:
4.46 pence). The final dividend, which is subject to approval by shareholders
at the Annual General Meeting on 2 May 2024, will be paid on 31 May 2024 to
shareholders on the register at 10 May 2024.
An interim dividend for 2023 of 2.88 pence per share was paid on 22 September
2023 (2022: 2.88 pence per share).
In proposing a final dividend of 4.46 pence per share for 2023 (2022: 4.46
pence per share), the Board has considered all investment requirements and its
funding commitments to the defined benefit pension schemes.
Current trading and outlook
We remain focused on delivering our Customer Value Strategy and the areas
within our control, building a more resilient growing digital business and
delivering efficiencies. The sector-wide decline in referral traffic will
impact Q1 2024. We expect growing momentum across our digital business
thereafter. As previously announced we have made our operations better suited
for a digital world and are on track to deliver a 5-6% reduction in full-year
operating costs in 2024.
Our financial priorities remain profitability and cash. Next year we expect
working capital requirements excluding provisions to be broadly neutral, and a
small step down in our capital expenditure. We have started the process to
sell a number of our freehold properties which will support cash generation.
Our financial commitments for the year ahead are similar to 2023, including
the pensions contributions which will be broadly unchanged; we expect an
acceleration in the resolution of existing HLI claims and a further £13m
restructuring outflow relating to severance payments for the recent change
programme.
Trading performance across the first two months of 2024 has been robust, with
print advertising and digital performing well. We are on track with our full
year outlook, but continue to operate in an uncertain macroeconomic
environment.
Darren Fisher
Chief Financial Officer
5 March 2024
Statement of Directors' Responsibilities
The directors are responsible for preparing the Preliminary Audited Results
Announcement in accordance with applicable laws and regulations. The
responsibility statement below has been prepared in connection with the
Company's full Annual Report for the 53 weeks ended 31 December 2023. Certain
points thereof are not included within this Preliminary Audited Results
Announcement.
The directors confirm to the best of their knowledge:
a) the consolidated financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit and loss
of the Group; and
b) the Preliminary Audited Results Announcement includes a fair review
of the development and performance of the business and the position of the
Group together with a description of the principal risks and uncertainties
that it faces.
By order of the Board of Directors
Darren Fisher
Chief Financial Officer
5 March 2024
Consolidated income statement
for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022)
Adjusted items Adjusted items
Adjusted 2023 2023 Statutory Adjusted 2022 Statutory
£m £m 2023 2022 £m 2022
notes £m £m £m
Revenue 4 568.6 - 568.6 601.4 - 601.4
Cost of sales (344.7) - (344.7) (375.7) - (375.7)
Gross profit 223.9 - 223.9 225.7 - 225.7
Distribution costs (36.9) - (36.9) (38.1) - (38.1)
Administrative expenses 5 (93.4) (48.9) (142.3) (84.3) (33.4) (117.7)
Share of results of associates 2.9 (1.5) 1.4 2.8 (1.4) 1.4
Operating profit 96.5 (50.4) 46.1 106.1 (34.8) 71.3
Interest income 6 1.0 - 1.0 0.1 - 0.1
Finance costs 7 (4.5) - (4.5) (2.9) - (2.9)
Pension finance charge 15 - (5.9) (5.9) - (2.3) (2.3)
Profit before tax 93.0 (56.3) 36.7 103.3 (37.1) 66.2
Tax charge 8 (24.6) 9.4 (15.2) (18.8) 4.9 (13.9)
Profit for the period attributable to equity holders of the parent 68.4 (46.9) 21.5 84.5 (32.2) 52.3
Earnings per share notes 2023 2023 2022 2022
Pence Pence Pence Pence
Earnings per share - basic 10 21.8 6.8 27.1 16.8
Earnings per share - diluted 10 21.6 6.8 26.7 16.5
The above results were derived from continuing operations. Set out in note 20
is the reconciliation between the statutory and adjusted results.
Consolidated statement of comprehensive income
for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022)
2023 2022
notes £m £m
Profit for the period 21.5 52.3
Items that will not be reclassified to profit and loss:
Actuarial loss on defined benefit pension schemes 15 (0.5) (35.0)
Tax on actuarial loss on defined benefit pension schemes 8 0.1 7.4
Share of items recognised by associates after tax 0.4 (1.7)
Other comprehensive loss for the period - (29.3)
Total comprehensive income for the period 21.5 23.0
Consolidated statement of changes in equity
for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022)
Retained earnings / (accumulated loss) and other reserves
Share premium Capital £m
Share account Merger redemption
capital £m reserve reserve Total
£m £m £m £m
At 27 December 2021 32.2 605.4 17.4 4.4 (20.6) 638.8
Profit for the period - - - - 52.3 52.3
Other comprehensive loss for the period - - - - (29.3) (29.3)
Total comprehensive income for the period - - - - 23.0 23.0
Purchase of own shares (note 19) - - - - (1.0) (1.0)
Credit to equity for equity-settled share-based payments - - - - 1.8 1.8
Deferred tax charge for equity-settled share-based payments - - - - (2.2) (2.2)
Dividends paid - - - - (22.9) (22.9)
At 25 December 2022 32.2 605.4 17.4 4.4 (21.9) 637.5
Profit for the period - - - - 21.5 21.5
Other comprehensive loss for the period - - - - - -
Total comprehensive income for the period - - - - 21.5 21.5
Credit to equity for equity-settled share-based payments - - - - 1.3 1.3
Dividends paid (note 9) - - - - (23.1) (23.1)
Capital reduction (note 19) - (605.4) - - 605.4 -
At 31 December 2023 32.2 - 17.4 4.4 583.2 637.2
Consolidated cash flow statement
for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022)
2023 2022
notes £m £m
Cash flows from operating activities
Cash generated from operations 11 76.4 80.1
Pension deficit funding payments 15 (60.0) (55.1)
Income tax paid (0.5) (5.0)
Net cash inflow from operating activities 15.9 20.0
Investing activities
Interest received 6 0.6 0.1
Dividends received from associated undertakings 1.9 2.5
Proceeds on disposal of property, plant and equipment 0.9 0.4
Purchases of property, plant and equipment (3.5) (3.0)
Expenditure on capitalised internally generated development 12 (12.8) (10.7)
Interest received on leases 0.4 -
Finance lease receipts 0.2 -
Deferred consideration payment 16 (7.0) (17.1)
Net cash used in investing activities (19.3) (27.8)
Financing activities
Interest and charges paid on borrowings (3.1) (1.9)
Dividends paid 9 (23.1) (22.9)
Interest paid on leases 16 (1.2) (1.1)
Repayment of obligation under leases 16 (4.7) (5.6)
Purchase of own shares 19 - (1.0)
Drawdown of borrowings 15.0 15.0
Net cash used in financing activities (17.1) (17.5)
Net decrease in cash and cash equivalents (20.5) (25.3)
Cash and cash equivalents at the beginning of the period 16 40.4 65.7
Cash and cash equivalents at the end of the period 16 19.9 40.4
Consolidated balance sheet
at 31 December 2023 (at 25 December 2022)
notes 2023 2022
£m £m
Non-current assets
Goodwill 12 35.9 35.9
Other intangible assets 12 840.8 832.9
Property, plant and equipment 13 113.6 140.1
Right-of-use assets 14 13.0 10.9
Finance lease receivable - 10.4
Investment in associates 14.5 14.6
Retirement benefit assets 15 66.0 51.2
1,083.8 1,096.0
Current assets
Inventories 11.4 12.9
Trade and other receivables 85.1 95.2
Current tax receivable 8.1 13.9
Finance lease receivable - 0.6
Cash and cash equivalents 16 19.9 40.4
124.5 163.0
Assets classified as held for sale 17 11.0 -
135.5 163.0
Total assets 1,219.3 1,259.0
Non-current liabilities
Trade and other payables (1.1) (4.5)
Lease liabilities 16 (28.5) (26.8)
Retirement benefit obligations 15 (168.8) (202.1)
Provisions 18 (26.6) (36.6)
Deferred tax liabilities (200.1) (191.6)
(425.1) (461.6)
Current liabilities
Trade and other payables (96.2) (106.7)
Deferred consideration 16 - (7.0)
Borrowings 16 (30.0) (15.0)
Lease liabilities 16 (4.7) (4.9)
Provisions 18 (26.1) (26.3)
(157.0) (159.9)
Total liabilities (582.1) (621.5)
Net assets 637.2 637.5
Equity
Share capital 19 32.2 32.2
Share premium account 19 - 605.4
Merger reserve 19 17.4 17.4
Capital redemption reserve 19 4.4 4.4
Retained earnings/(accumulated loss) and other reserves 19 583.2 (21.9)
Total equity attributable to equity holders of the parent 637.2 637.5
1. General information
The financial information, which comprises the Consolidated income statement,
the Consolidated statement of comprehensive income, the Consolidated cash flow
statement, the Consolidated statement of changes in equity and the
Consolidated balance sheet and related notes ('Consolidated Financial
Information') in the Preliminary Audited Results announcement is derived from
but does not represent the full statutory accounts of Reach plc. The statutory
accounts for the 52 weeks ended 25 December 2022 have been filed with the
Registrar of Companies and those for the 53 weeks ended 31 December 2023 will
be filed following the Annual General Meeting on 2 May 2024. The auditors'
reports on the statutory accounts for the 52 weeks ended 25 December 2022 and
for the 53 weeks ended 31 December 2023 were unqualified, do not include
reference to any matters to which the auditors drew attention by way of
emphasis of matter without qualifying the reports and do not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006.
Whilst the Consolidated Financial Information included in this Preliminary
Audited Results Announcement has been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards (IFRS), this announcement does not itself contain sufficient
information to comply with IFRS. This Preliminary Audited Results Announcement
constitutes a dissemination announcement in accordance with Section 6.3 of the
Disclosure and Transparency Rules (DTR). The Annual Report for the 53 weeks
ended 31 December 2023 will be available on the Company's website at
www.reachplc.com (file:///C:/Users/lauraharris/Downloads/www.reachplc.com) and
at the Company's registered office at One Canada Square, Canary Wharf, London
E14 5AP before the end of March 2024 and will be sent to shareholders who have
elected to receive a hard copy with the documents for the Annual General
Meeting to be held on 2 May 2024.
The Consolidated Financial Information has been prepared for the 53 weeks
ended 31 December 2023 and the comparative period has been prepared for the 52
weeks ended 25 December 2022. Throughout this report, the Consolidated
Financial Information for the 53 weeks ended 31 December 2023 is referred to
and headed 2023 and for the 52 weeks ended 25 December 2022 is referred to and
headed 2022. The presentational currency of the Group is Sterling. The Company
presents the results on a statutory and adjusted basis and revenue trends on a
statutory and like-for-like basis as described in note 2.
2. Accounting policies
Basis of preparation
The Consolidated Financial Information has been prepared in accordance with
UK-adopted international accounting standards ('IFRS') and the applicable
legal requirements of the Companies Act 2006. These standards are subject to
ongoing amendment by the International Accounting Standards Board and are
therefore subject to change. As a result, the Consolidated Financial
Information contained herein will need to be updated for any subsequent
amendment to IFRS or any new standards that are issued. The Consolidated
Financial Information has been prepared under the historical cost convention.
The accounting policies used in the preparation of the Consolidated Financial
Information for the 53 weeks ended 31 December 2023 and for the 52 weeks ended
25 December 2022 have been consistently applied to all the periods presented.
These Consolidated Financial Statements have been prepared on a going concern
basis.
Going concern basis
The directors have made appropriate enquiries and consider that the Company
and the Group have adequate resources to continue in operational existence for
the foreseeable future, which comprises the period of at least 12 months from
the date of approval of the financial statements.
In accordance with LR 9.8.6(3) of the Listing Rules, and in determining
whether the Group's annual consolidated financial statements can be prepared
on a going concern basis, the directors considered all factors likely to
affect its future development, performance and its financial position,
including cash flows, liquidity position and borrowing facilities, and the
risks and uncertainties relating to its business activities.
The key factors considered by the directors were as follows:
• The performance of the business in 2023 and the progress being made in the
implementation of the Group's Customer Value Strategy and the implications of
the current economic environment including inflationary pressures. The Group
undertakes regular forecasts and projections of trading, identifying areas of
focus for management to improve the delivery of the Customer Value Strategy
and mitigate the impact of any deterioration in the economic outlook;
• The impact of the competitive environment within which the Group's businesses
operate;
• The impact on our business of key suppliers (in particular newsprint) being
unable to meet their obligations to the Group;
• The impact on our business of key customers being unable to meet their
obligations for services provided by the Group;
• The deficit funding contributions to the defined benefit pension schemes and
payments in respect of historical legal issues; and
• The available cash reserves and committed finance facilities available to the
Group. The Group has an expiry date for its £120.0m facility of 19 November
2026. The Group has drawn down £30.0m on the facility at the reporting date.
Having considered all the factors impacting the Group's businesses, including
downside sensitivities (relating to trading and cash flow), the directors are
satisfied that the Company and the Group will be able to operate within the
terms and conditions of the Group's financing facilities for the foreseeable
future.
The directors have reasonable expectations that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future, which comprises the period of at least 12 months from the date of
approval of the financial statements. Accordingly, they continue to adopt the
going concern basis in preparing the Group's annual consolidated financial
statements.
Changes in accounting policy
The same accounting policies, presentation and methods of computation are
followed in the Consolidated Financial Information as applied in the Group's
latest annual consolidated financial statements for the 52 weeks ended 25
December 2022.
In addition to the accounting policies disclosed in the Group's latest annual
consolidated financial statements, the Group also opts to present cash flows
relating to the use of its revolving credit facility net where the loans drawn
down through use of the facility are repaid within three months of the initial
draw down.
Alternative performance measures
The Company presents the results on a statutory and adjusted basis and revenue
trends on a statutory and like-for-like basis. The Company believes that the
adjusted basis and like-for-like trends will provide investors with useful
supplemental information about the financial performance of the Group, enable
comparison of financial results between periods where certain items may vary
independent of business performance, and allow for greater transparency with
respect to key performance indicators used by management in operating the
Group and making decisions. Although management believes the adjusted basis is
important in evaluating the Group, it is not intended to be considered in
isolation or as a substitute for, or as superior to, financial information on
a statutory basis. The alternative performance measures are not recognised
measures under IFRS and do not have standardised meanings prescribed by IFRS
and may be different to those used by other companies, limiting the usefulness
for comparison purposes. Note 20 sets out the reconciliation between the
statutory and adjusted results. An adjusted cash flow is presented in note 21
which reconciles the adjusted operating profit to the net change in cash and
cash equivalents. Set out in note 22 is the reconciliation between the
statutory and adjusted cash flow. Note 23 shows the reconciliation between the
statutory and like-for-like revenue.
Adjusting items
Adjusting items relate to costs or income that derive from events or
transactions that fall within the normal activities of the Group, but are
excluded from the Group's adjusted profit measures, individually or, if of a
similar type in aggregate, due to their size and/or nature in order to better
reflect management's view of the performance of the Group. The adjusted profit
measures are not recognised profit measures under IFRS and may not be directly
comparable with adjusted profit measures used by other companies. All
operating adjusting items are recognised within administrative expenses.
Details of adjusting items are set out in note 20 with additional information
in notes 5 and 15.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation
uncertainty that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year,
are discussed below:
Historical Legal Issues (note 18)
The historical legal issues provision relates to the cost associated with
dealing with and resolving civil claims in relation to historical phone
hacking and unlawful information gathering. Previously there have been three
parts to the provision: known claims, potential future claims and common court
costs. The key uncertainties in relation to this matter relate to how each
claim progresses, the amount of any settlement and the associated legal costs.
Our assumptions have been based on historical trends, our experience and the
expected evolution of claims and costs.
In December 2023, a judgment was handed down in respect of test claims and as
a result all claims issued after 31 October 2020 are now likely to be
dismissed other than where individuals can demonstrate specific exceptional
circumstances. This has significantly reduced the amounts that are expected to
be paid out and has resulted in a change to the provision estimate and a net
decrease of £20.2m (2022: £11.0m increase) in the year. At the period end, a
provision of £18.2m remains outstanding and this represents the current best
estimate of the amount required to resolve this historical matter. The
majority of the provision is expected to be utilised within the next two
years.
Our view on the range of outcomes at the reporting date for the provision,
applying more and less favourable outcomes to all aspects of the provision is
£12m to £22m (2022: £32m to £56m). Despite making a best estimate, the
timing of utilisation and ongoing legal matters related to provided for claims
could mean that the final outcome is outside of the range of outcomes.
Taxation (note 8)
There is uncertainty as to the tax deductibility of expenditure relating to
historical legal issues in the current year and additional tax liabilities
that may fall due in relation to earlier years. At the reporting date, the
maximum amount of the additional unprovided tax exposure relating to this
uncertain tax item is £4.4m (2022: £8.1m). There is uncertainty as to the
final outcome and timing of this item, with a possible range of outcomes for
the potential tax exposure being nil to £27.8m (2022: nil to £27.2m).
Retirement benefits (note 15)
Actuarial assumptions adopted and external factors can significantly impact
the surplus or deficit of defined benefit pension schemes. Valuations for
funding and accounting purposes are based on assumptions about future economic
and demographic variables. These result in risk of a volatile valuation
deficit and the risk that the ultimate cost of paying benefits is higher than
the current assessed liability value. Advice is sourced from independent and
qualified actuaries in selecting suitable assumptions at each reporting date.
Impairment review (note 12)
There is uncertainty in the value-in-use calculation. The most significant
area of uncertainty relates to expected future cash flows for the
cash-generating unit. Determining whether the carrying values of assets in a
cash-generating unit are impaired requires an estimation of the value-in-use
of the cash-generating unit to which these have been allocated. The
value-in-use calculation requires the Group to estimate the future cash flows
expected to arise from the cash-generating unit and a suitable discount rate
in order to calculate present value. Projections are based on both internal
and external market information and reflect past experience. The discount rate
reflects the weighted average cost of capital of the Group.
Restructuring and property provisions (note 18)
Provisions are measured at the best estimate of the expenditure required to
settle the obligation based on the assessment of the related facts and
circumstances at each reporting date. There is uncertainty in relation to the
size and length of property related provisions.
Critical judgements in applying the Group's accounting policies
In the process of applying the Group's accounting policies, described above,
management has made the following judgements that have the most significant
effect on the amounts recognised in the financial statements:
Indefinite life assumption in respect of publishing rights and titles (note
12)
There is judgement required in continuing to adopt an indefinite life
assumption in respect of publishing rights and titles. The directors consider
publishing rights and titles (with a carrying amount of £818.7m) have
indefinite economic lives due to the longevity of the brands and the ability
to evolve them in an ever-changing media landscape. The brands are central to
the delivery of the Customer Value Strategy which is delivering digital
revenue growth. At each reporting date management review the suitability of
this assumption.
Identification of cash-generating units (note 12)
There is judgement required in determining the cash-generating unit relating
to our Publishing brands. At each reporting date management review the
interdependency of revenues across our portfolio of Publishing brands to
determine the appropriate cash-generating unit. The Group operates its
Publishing brands such that a majority of the revenues are interdependent and
revenue would be materially lower if brands operated in isolation. As such,
management do not consider that an impairment review at an individual brand
level is appropriate or practical. As the Group continues to centralise
revenue generating functions and has moved to a matrix operating structure
over the past few years, all of the individual brands in Publishing have
increased revenue interdependency and are assessed for impairment as a single
Publishing cash-generating unit.
Historical Legal Issues (note 18)
Following the judgment handed down on 15 December 2023, all claims issued
after 31 October 2020 are now likely to be considered time barred and
subsequently dismissed, other than where individuals can demonstrate there
were exceptional circumstances why they could not have been aware of their
putative claims. This has significantly reduced the amounts that are expected
to be paid out and has resulted in a change to the provision estimate and a
net decrease of £20.2m. Subsequently, the test claimants' application for
permission to appeal was refused by the trial judge on 9 February 2024, with
claimants having a further short period to apply for permission to appeal to
the Court of Appeal. The prospects of permission being granted and a
successful appeal ensuing are deemed remote and as such no contingent
liability has been disclosed in the accounts.
3. Segments
The performance of the Group is presented as a single reporting segment as
this is the basis of internal reports regularly reviewed by the Board and
chief operating decision maker (executive directors) to allocate resources and
to assess performance. The Group's operations are primarily located in the UK
and the Group is not subject to significant seasonality during the year.
4. Revenue
2023 2022
£m £m
Print 438.8 448.6
Circulation 312.5 307.7
Advertising 76.6 86.9
Printing 20.2 23.1
Other 29.5 30.9
Digital 127.4 149.8
Other 2.4 3.0
Total revenue 568.6 601.4
The Group's operations are located primarily in the UK.
5. Operating adjusted items
2023 2022
£m £m
Provision for historical legal issues (note 18) 20.2 (11.0)
Restructuring charges in respect of cost reduction measures (note 18) (26.9) (15.5)
(Impairment of sublease)/sublet of closed print site (note 14 and 18) (19.4) 16.6
Other property-related costs (note 20) (8.0) (4.6)
Pension administrative expenses and past service costs (note 15) (5.5) (14.8)
Other items (note 20) (9.3) (4.1)
Operating adjusted items included in administrative expenses (48.9) (33.4)
Operating adjusted items included in share of results of associates (1.5) (1.4)
Total operating adjusted items (50.4) (34.8)
Operating adjusted items relate to costs or income that derive from events or
transactions that fall within the normal activities of the Group, but are
excluded from the Group's adjusted profit measures, individually or, if of a
similar type in aggregate, due to their size and/or nature in order to better
reflect management's view of the performance of the Group. The adjusted profit
measures are not recognised profit measures under IFRS and may not be directly
comparable with adjusted profit measures used by other companies. Set out in
note 20 is the reconciliation between the statutory and adjusted results which
includes descriptions of the items included in adjusted items.
The Group has recorded a £20.2m decrease (2022: £11.0m increase) in the
provision for historical legal issues relating to the cost associated with
dealing with and resolving civil claims in relation to historical phone
hacking and unlawful information gathering (note 18). This material reduction
is driven by the judgment handed down during December 2023 in respect of test
claims. As a result of the ruling, all claims issued after 31 October 2020 are
now likely to be dismissed other than where individuals can demonstrate
specific exceptional circumstances, and therefore this has significantly
reduced the amounts that are expected to be paid out.
Restructuring charges of £26.9m (2022: £15.5m) principally relate to cost
management actions taken in the period.
Following the sublet of the vacant print site during 2022 which resulted in
the reversal of an impairment in right-of-use assets of £11.0m and previously
onerous costs of the vacant site of £5.6m, the sub-lessee entered into
administration during 2023. As a result, the corresponding £10.8m finance
lease receivable has been impaired along with the subsequent recognition of
onerous costs of £8.6m of the vacant site during the period.
Other property-related costs comprise the impairment of vacant freehold
property costs (£4.3m), vacant freehold property-related costs (£1.4m) and
onerous lease and related costs (£2.6m) less the profit on sale of assets
(£0.3m). In 2022, other property-related costs related to the impairment of
vacant freehold property (£4.2m) and plant and equipment (£0.8m) less the
profit on sale of impaired assets (£0.4m).
Pension costs of £5.5m (2022: £14.8m) comprise pension administrative
expenses (2022: £4.2m). 2022 also included £10.6m of past service costs
relating to a Barber Window equalisation adjustment.
Other adjusted items comprise the Group's legal fees in respect of historical
legal issues (£5.3m), adviser costs in relation to the triennial funding
valuations (£2.5m), internal pension administrative expenses (£0.6m),
corporate simplification costs (£0.5m), and other restructuring-related
project costs (£0.7m) less a reduction in National Insurance costs relating
to share awards (£0.3m). In 2022, other adjusted items comprise the Group's
legal fees in respect of historical legal issues (£5.2m), adviser costs in
relation to the triennial funding valuations (£1.6m), less a reduction in
National Insurance costs relating to share awards (£2.7m).
6. Interest income
2023 2022
£m £m
Interest income on bank deposits 0.6 0.1
Interest on finance lease receivable 0.4 -
Interest income 1.0 0.1
7. Finance costs
2023 2022
£m £m
Interest and charges on borrowings (3.3) (1.8)
Interest on lease liabilities (1.2) (1.1)
Finance costs (4.5) (2.9)
8. Tax charge
2023 2022
£m £m
Corporation tax charge for the period (5.5) (4.5)
Prior period adjustment (1.1) (0.7)
Current tax charge (6.6) (5.2)
Deferred tax charge for the period (8.1) (9.0)
Prior period adjustment (1.0) 0.3
Deferred tax rate change 0.5 -
Deferred tax charge (8.6) (8.7)
Tax charge (15.2) (13.9)
Reconciliation of tax charge 2023 2022
£m £m
Profit before tax 36.7 66.2
Standard rate of corporation tax of 23.5% (2022: 19.0%) (8.6) (12.6)
Variance in overseas tax rates 0.9 -
Impact of change in tax rates 0.5 -
Tax effect of permanent items that are not included in determining taxable (5.8) (1.2)
profit
Deferred tax not recognised (0.4) --
Prior period adjustment (2.1) (0.4)
Tax effect of share of results of associates 0.3 0.3
Tax charge (15.2) (13.9)
The standard rate of corporation tax for the period is 23.5% (2022: 19.0%).
The tax effect of items that are not deductible in determining taxable profit
includes certain costs where there is uncertainty as to their deductibility.
The current tax receivable of £8.1m (2022: £13.9m) is net of the uncertain
tax provision of £23.4m (2022: £19.1m). At the reporting date, the maximum
amount of the additional unprovided tax exposure relating to an uncertain tax
item is £4.4m (2022: £8.1m). There is uncertainty as to the final outcome
and timing of this item, with a possible range of outcomes for the potential
tax exposure being nil to £27.8m (2022: nil to £27.2m).
The tax on actuarial losses (2022: losses) on defined benefit pension schemes
taken to the consolidated statement of comprehensive income is a deferred tax
credit of £0.1m (2022: credit of £7.4m).
The amount taken to the consolidated income statement as a result of pension
contributions was £11.4m (2022: £7.1m).
9. Dividends
2023 2022
Pence Pence
per share per share
Amounts recognised as distributions to equity holders in the period
Dividends paid per share - prior year final dividend 4.46 4.46
Dividends paid per share - interim dividend 2.88 2.88
Total dividends paid per share 7.34 7.34
Dividend proposed per share but not paid nor included in the accounting 4.46 4.46
records
The Board proposes a final dividend for 2023 of 4.46 pence per share. An
interim dividend for 2023 of 2.88 pence per share was paid on 22 September
2023 bringing the total dividend in respect of 2023 to 7.34 pence per share.
The 2023 final dividend payment is expected to amount to £14.0m.
On 3 May 2023, the final dividend proposed for 2022 of 4.46 pence per share
was approved by shareholders at the Annual General Meeting and was paid on 2
June 2023.
Total dividends paid in 2023 were £23.1m (2022 final dividend payment of
£14.0m and 2023 interim dividend payment of £9.1m).
10. Earnings per share
Basic earnings per share is calculated by dividing profit for the period
attributable to equity holders of the parent by the weighted average number of
ordinary shares during the period, and diluted earnings per share is
calculated by adjusting the weighted average number of ordinary shares in
issue on the assumption of conversion of all potentially dilutive ordinary
shares.
2023 2022
Thousand Thousand
Weighted average number of ordinary shares for basic earnings per share 314,206 312,153
Effect of potential dilutive ordinary shares in respect of share awards 2,893 4,828
Weighted average number of ordinary shares for diluted earnings per share 317,099 316,981
The weighted average number of potentially dilutive ordinary shares not
currently dilutive was 6,328,039 (2022: 5,406,814).
Statutory earnings per share 2023 2022
Pence Pence
Earnings per share - basic 6.8 16.8
Earnings per share - diluted 6.8 16.5
Adjusted earnings per share 2023 2022
Pence Pence
Earnings per share - basic 21.8 27.1
Earnings per share - diluted 21.6 26.7
Set out in note 20 is the reconciliation between the statutory and adjusted
results.
11. Cash flows from operating activities
2023 2022
£m £m
Operating profit 46.1 71.3
Depreciation of property, plant and equipment 13.9 15.2
Depreciation of right-of-use assets 2.8 2.9
Amortisation of other intangible assets 4.9 2.1
Impairment of property, plant and equipment 4.7 5.0
Reversal of impairment of right-of-use assets - (11.0)
Impairment of finance lease receivable 10.8 -
Impairment of right-of-use assets 1.3 -
Profit on disposal of property, plant and equipment (0.3) (0.4)
Share of results of associates (1.4) (1.4)
Share-based payments charge 1.3 1.5
Pension administrative expenses and past service costs 5.5 14.8
Operating cash flows before movements in working capital 89.6 100.0
Decrease/(increase) in inventories 1.5 (7.4)
Decrease in receivables 9.5 7.2
Decrease in payables (24.2) (19.7)
Cash flows from operating activities 76.4 80.1
12. Goodwill and other intangible assets
The carrying value of goodwill and other intangible assets is:
Goodwill Publishing Internally generated assets Intangible
£m rights and titles £m assets
£m £m
Opening carrying value 35.9 818.7 14.2 868.8
Additions - - 12.8 12.8
Amortisation - - (4.9) (4.9)
Closing carrying value 35.9 818.7 22.1 876.7
During the year, the Group capitalised internally generated assets relating to
software and website development costs of £12.8m (2022: £10.7m). These
assets are amortised using the straight-line method over their estimated
useful lives (3-5 years).
Publishing rights and titles are not amortised. There is judgement required in
continuing to adopt an indefinite life assumption in respect of publishing
rights and titles. The directors consider publishing rights and titles (with a
carrying amount of £818.7m) have indefinite economic lives due to the
longevity of the brands and the ability to evolve them in an ever-changing
media landscape. The brands are central to the delivery of the Customer Value
Strategy which is delivering digital revenue growth. This, combined with our
inbuilt and relentless focus on maximising efficiency, gives confidence that
the delivery of sustainable growth in revenue, profit and cash flow is
achievable in the future.
There is judgement required in determining the cash-generating units. At each
reporting date management review the interdependency of revenues across our
Publishing brands to determine the appropriate cash-generating unit. The Group
operates its Publishing brands such that a majority of the revenues are
interdependent and revenue would be materially lower if brands operated in
isolation. As such, management do not consider that an impairment review at an
individual brand level is appropriate or practical. As the Group continues to
centralise revenue generating functions and has moved to a matrix operating
structure over the past few years all of the individual brands in Publishing
have increased revenue interdependency and are assessed for impairment as a
single Publishing cash-generating unit.
The Group tests the carrying value of assets at the cash-generating unit level
for impairment annually or more frequently if there are indicators that assets
might be impaired. The review is undertaken by assessing whether the carrying
value of assets is supported by their value-in-use which is calculated as the
net present value of future cash flows derived from those assets, using cash
flow projections. If an impairment charge is required this is allocated first
to reduce the carrying amount of any goodwill allocated to the cash-generating
unit and then to the other assets of the cash-generating unit but subject to
not reducing any asset below its recoverable amount.
The impairment review in respect of the Publishing cash-generating unit
concluded that no impairment charge was required.
For the impairment review, cash flows have been prepared using the approved
Budget for 2024 and projections for a further nine years as this is the period
over which the transformation to digital can be assessed. The projections for
2025 to 2033 are internal projections based on continued decline in print
revenues and growth in digital revenues and the associated change in the cost
base as a result of the changing revenue mix, together with ongoing efficiency
initiatives. These projections are used to develop the key assumption of
EBITDA growth over the 10 year period. The long-term growth rates beyond the
10-year period have been assessed at 0.9% (2022: 1.0%) based on the Board's
view of the market position and in light of current market expectations
including the exposure to future digital growth opportunities. We continue to
believe that there are significant longer-term benefits of our scale national
and local digital audiences and there are opportunities to grow revenue and
profit in the longer term.
The discount rate reflects the weighted average cost of capital of the Group.
The current post-tax and equivalent pre-tax discount rate used is 10.2% (2022:
10.8%) and 13.6% (2022: 13.9%) respectively.
In respect of the values assigned by management to each of the above
assumptions used to develop the key assumption of EBITDA growth, revenue is
based on past performance and management's expectations of market development
in respect of volumes and prices are based on current industry trends and
long-term inflation forecasts. Sales margins are based on past performance and
management's expectations for the future. Other operating costs are based on
management's forecasts considering the current structure of the business,
adjusting for inflationary increases and the transition of the cost base
arising from the shift from print to digital. The long-term growth rate used
to extrapolate cash flows beyond the budget period is based on future
anticipated growth opportunities, including consideration of industry
forecasts. The discount rate reflects specific risks relating to the industry
in which the Group operates.
The impairment review is highly sensitive to reasonably possible changes in
key assumptions used in the value-in-use calculations and there is uncertainty
relating to the current challenging macroeconomic environment. The headroom in
the impairment review is £53m (2022: £183m). EBITDA in the 10-year
projections is forecast to grow at a CAGR of 0.2% (2022: 1.6%). Changes in one
or more assumptions used to develop the EBITDA growth assumption such as print
revenue declining at a faster rate than projected, digital revenue growth
being significantly lower than projected or the associated change in the cost
base being different than projected, could lead to a reasonably possible
change in EBITDA growth. This would lead to an impairment if these resulted in
the EBITDA in the 10-year projections declining at a CAGR of 0.6% (2022:
decline 0.9%). Alternatively, an increase in the discount rate by 0.6
percentage points (2022: 2.4 percentage points) would lead to the removal of
the headroom.
13. Property, plant and equipment
Freehold land and buildings Plant and equipment Asset under construction Total
£m £m £m £m
Cost
At 25 December 2022 204.6 341.2 0.5 546.3
Additions - 1.6 2.1 3.7
Disposals (2.3) (0.7) - (3.0)
Reclassification - 1.1 (1.1) -
Transfer to assets classified as held for sale (46.7) - - (46.7)
At 31 December 2023 155.6 343.2 1.5 500.3
Accumulated depreciation and impairment
At 25 December 2022 (106.1) (300.1) - (406.2)
Charge for the period (2.6) (11.3) - (13.9)
Eliminated on disposal 1.7 0.7 - 2.4
Impairment (4.3) (0.4) - (4.7)
Transfer to assets classified as held for sale 35.7 - - 35.7
At 31 December 2023 (75.6) (311.1) - (386.7)
Carrying amount
At 25 December 2022 98.5 41.1 0.5 140.1
At 31 December 2023 80.0 32.1 1.5 113.6
Impairment of vacant freehold property of £4.3m (2022: £4.2m) (note 5) was
as a result of the carrying value of certain Group properties being in excess
of their market value at the reporting date. Plant and equipment was impaired
by £0.4m (2022: £0.8m) in the period due to site closures and is included
within onerous lease and related costs of £2.6m (note 5).
14. Right-of-use assets
Properties Vehicles Total
£m £m £m
Cost
At 25 December 2022 27.4 3.2 30.6
Additions 4.1 2.0 6.1
Other movements 0.1 - 0.1
Derecognition at end of lease term (3.5) (1.6) (5.1)
At 31 December 2023 28.1 3.6 31.7
Accumulated depreciation and impairment
At 25 December 2022 (17.2) (2.5) (19.7)
Charge for the period (2.1) (0.7) (2.8)
Impairment (1.3) - (1.3)
Derecognition at end of lease term 3.5 1.6 5.1
At 31 December 2023 (17.1) (1.6) (18.7)
Carrying amount
At 25 December 2022 10.2 0.7 10.9
At 31 December 2023 11.0 2.0 13.0
Other movements include the impact of changes in lease term.
In 2022, the sublet of the vacant print site which was closed in 2020,
resulted in the reversal of an impairment in right-of-use assets of £11.0m
(note 5). The sublet was classified as a finance lease and the net investment
in the lease of £11.0m was recognised as a finance lease receivable in the
consolidated balance sheet at 25 December 2022.
15. Retirement benefit schemes
Defined contribution pension schemes
The Group operates defined contribution pension schemes for qualifying
employees, where the assets of the schemes are held separately from those of
the Group in funds under the control of Trustees.
The current service cost charged to the consolidated income statement for the
year of £17.3m (2022: £18.1m) represents contributions paid by the Group at
rates specified in the scheme rules. All amounts that were due have been paid
over to the schemes at all reporting dates.
Defined benefit pension schemes
Background
The defined benefit pension schemes operated by the Group are all closed to
future accrual. The Group has six defined benefit pension schemes:
• the MGN Pension Scheme (the 'MGN Scheme'), the Trinity Retirement Benefit
Scheme (the 'Trinity Scheme'), the Midland Independent Newspapers Pension
Scheme (the 'MIN Scheme'), the Express Newspapers 1988 Pension Fund (the 'EN88
Scheme'), the Express Newspapers Senior Management Pension Fund (the 'ENSM
Scheme') and the West Ferry Printers Pension Scheme (the 'WF Scheme').
Characteristics
The defined benefit pension schemes provide pensions to members, which are
based on their final pensionable salary, normally from age 65 (although some
schemes have some pensions normally payable from an earlier age) plus
surviving spouses or dependants' benefits following a member's death. Benefits
increase both before and after retirement either in line with statutory
minimum requirements or in accordance with the scheme rules if greater. Such
increases are either at fixed rates or in line with retail or consumer prices
but subject to upper and lower limits. All of the schemes are independent of
the Group with assets held independently of the Group. They are governed by
Trustees who administer benefits in accordance with the scheme rules and
appropriate UK legislation. The schemes each have a professional or
experienced independent Trustee as their Chairman with generally half of the
remaining Trustees nominated by the members and half by the Group.
Maturity profile and cash flow
Across all of the schemes, the uninsured liabilities related 65% to current
pensioners and their spouses or dependants and 35% to deferred pensioners. The
average term from the period end to payment of the remaining uninsured
benefits is expected to be around 12 years. Uninsured pension payments in
2023, excluding lump sums and transfer value payments, were £75m and these
are projected to rise to an annual peak in 2033 of £101m and reduce
thereafter.
Funding arrangements
The funding of the Group's schemes is subject to UK pension legislation as
well as the guidance and codes of practice issued by the Pensions Regulator.
Funding targets are agreed between each Trustee board and the Group and are
reviewed and revised usually every three years. The funding targets must
include a margin for prudence above the expected cost of paying the benefits
and so are different to the liability value for IAS 19 purposes. The funding
deficits revealed by these triennial valuations are removed over time in
accordance with an agreed recovery plan and schedule of contributions for each
scheme. The latest completed valuation date for five of the Group's schemes
was as at 31 December 2019, and the 31 December 2022 valuations are
progressing for four of the schemes and are expected to be concluded
satisfactorily by the 31 March 2024 due date. The ENSM scheme is expected to
commence winding up before the statutory deadline of 31 March 2024.
The funding valuation of the MGN Scheme at 31 December 2019 and at 31 December
2022 were agreed on 9 October 2023. The funding valuation of the MGN scheme:
at 31 December 2022 showed a deficit of £219.0m. The Group paid contributions
of £46.0m to the MGN Scheme in 2023 and the agreed schedule of contributions
includes payments of £46.0m pa from 2024 until January 2028.
The funding valuation of the Trinity Scheme at 31 December 2019 was agreed on
21 December 2022. This showed a deficit of £57.2m. The Group paid
contributions of £5.2m to this scheme in 2023 and agreed an unchanged
schedule of contributions of payments of £5.2m pa from 2024 to 2027.
The funding valuation of the MIN Scheme at 31 December 2019 was agreed on 3
February 2023. This showed a deficit of £73.8m. The Group paid contributions
of £6.9m to this scheme in 2023 and the agreed schedule of contributions
features payments of £6.9m pa in 2024 and 2025, £7.8m pa in 2026 and 2027
and £8.6m pa in 2028 and 2029.
The funding valuations of the EN88 Scheme and ENSM Scheme at 31 December 2019
were agreed on 10 December 2021. For the EN88 Scheme this showed a deficit of
£25.1m. In September 2023 the EN88 Scheme agreed with the Group to divert the
deficit contributions payable to the Scheme into a separate bank account held
by the Group for the period from September 2023 to March 2024, or earlier if
the 2022 valuation is agreed and completed. On completion of the 2022
valuation a new schedule of contributions will be agreed. If the 2022
valuation is not completed by the statutory deadline on 31 March 2024 the full
balance held in the bank account and any accrued interest will be payable to
the Scheme. During 2023, the Group paid contributions of £1.9m to the EN88
Scheme and £0.9m into the bank account. The agreed schedule of contributions
includes payments of £2.1m to the Scheme and £0.7m into the bank account for
2024, £2.8m pa to the Scheme from 2025 to 2026 and £0.8m in 2027. During
2022, the Trustees of the ENSM Scheme purchased a bulk annuity at no cost to
the Group and the scheme now has all pension liabilities covered by annuity
policies and no further funding is expected.
Group contributions in respect of the defined benefit pension schemes in the
year were £60.0m (2022: £55.1m).
At the reporting date, the funding deficits in all schemes are expected to be
removed before or around 2029 by a combination of the contributions and asset
returns. Contributions (which include funding for pension administrative
expenses) are payable monthly. Contributions per the current schedule of
contributions are £60.9m pa (including £0.7m for the EN88 scheme to a
separate bank account) in 2024, £60.9m in 2025, £61.8m in 2026, £59.8m in
2027, £12.5m in 2028 and £8.6m in 2029.
The future deficit funding commitments are linked to the three-yearly
actuarial valuations. Although the funding commitments do not generally impact
the IAS 19 position, IFRIC 14 guides companies to consider for IAS 19
disclosures whether any surplus can be recognised as a balance sheet asset and
whether any future funding commitments in excess of the IAS 19 liability
should be provisioned for. Based on its interpretation of the rules for each
of the defined benefit pension schemes, the Group considers that it has an
unconditional right to any potential surplus on the ultimate wind-up after all
benefits to members have been paid in respect of all of the schemes except the
WF Scheme. Under IFRIC 14 it is therefore appropriate to recognise any IAS 19
surpluses which may emerge in future and not to recognise any potential
additional liabilities in respect of future funding commitments of all of the
schemes except for the WF Scheme. For the WF Scheme at the reporting date, the
assets are surplus to the IAS 19 benefit liabilities and the impact of IFRIC
14 removes this surplus. As no further contributions are expected to the WF
Scheme, the Group no longer recognises a deficit of its future deficit
contribution commitment to the scheme.
The calculation of Guaranteed Minimum Pension ('GMP') is set out in
legislation and members of pension schemes that were contracted out of the
State Earnings-Related Pension Scheme ('SERPS') between 6 April 1978 and 5
April 1997 will have built up an entitlement to a GMP. GMPs were intended to
broadly replicate the SERPS pension benefits but due to their design they give
rise to inequalities between men and women, in particular, the GMP for a male
comes into payment at age 65 whereas for a female it comes into payment at the
age of 60 and GMPs typically receive different levels of increase to non GMP
benefits. On 26 October 2018, the High Court handed down its judgement in the
Lloyds Trustees vs Lloyds Bank plc and Others case relating to the
equalisation of member benefits for the gender effects of GMP equalisation.
This judgement creates a precedent for other UK defined benefit schemes with
GMPs. The judgement confirmed that GMP equalisation was required for the
period 17 May 1990 to 5 April 1997 and provided some clarification on legally
acceptable methods for achieving equalisation. An allowance for GMP
equalisation was first included within liabilities at 30 December 2018 and was
recognised as a charge for past service costs in the income statement. In 2020
further clarification was issued relating to GMP equalisation in respect of
transfers out of schemes and a further allowance for GMP equalisation was
included within liabilities at 27 December 2020 and was recognised as a charge
for past service costs in the income statement. The estimate is subject to
change as we undertake more detailed member calculations, as guidance is
issued and/or as a result of future legal judgements.
Past service costs of £10.6m in 2022 related to a Barber Window equalisation
adjustment identified by the Trustees of the MGN Scheme during the prior year.
The impact relates to the equalisation of retirement ages to 65, which was
previously implemented from 17 May 1990, rather than the date of the Deed of
Amendment of the Rules which was 4 April 1991.
Risks
Valuations for funding and accounting purposes are based on assumptions about
future economic and demographic variables. This results in the risk of a
volatile valuation deficit and the risk that the ultimate cost of paying
benefits is higher than the current assessed liability value.
The main sources of risk are:
• investment risk: a reduction in asset returns (or assumed future asset
returns);
• inflation risk: an increase in benefit increases (or assumed future
increases); and
• longevity risk: an increase in average life spans (or assumed life
expectancy).
These risks are managed by:
• investing in insured annuity policies: the income from these policies exactly
matches the benefit payments for the members covered, removing all of the
above risks. At the reporting date the insured annuity policies covered 15% of
total liabilities;
• investing a proportion of assets in other classes such as government and
corporate bonds and in liability driven investments: changes in the values of
the assets aim to broadly match changes in the values of the uninsured
liabilities, reducing the investment risk, however some risk remains as the
durations of the bonds are typically shorter than those of the liabilities and
so the values may still move differently. At the reporting date non-equity
assets amounted to 98% of assets excluding the insured annuity policies;
• investing a proportion of assets in equities: with the aim of achieving
outperformance and so reducing the deficits over the long term. At the
reporting date this amounted to 2% of assets excluding the insured annuity
policies; and
• the gradual sale of equities over time to purchase additional annuity policies
or liability matching investments: to further reduce risk as the schemes,
which are closed to future accrual, mature.
Pension scheme accounting deficits are snapshots at moments in time and are
not used by either the Group or Trustees to frame funding policy. The Group
and Trustees seek to be aligned in focusing on the long-term sustainability of
the funding policy which aims to balance the interests of the Group's
shareholders and members of the schemes. The Group and Trustees also seek to
be aligned in reducing pensions risk over the long term and at a pace which is
affordable to the Group.
The EN88 Scheme, the ENSM Scheme, the Trinity Scheme and the WF Scheme have an
accounting surplus at the reporting date, before allowing for the IFRIC 14
asset ceiling. Across the MGN Scheme and the MIN Scheme, the invested assets
are expected to be sufficient to pay the uninsured benefits due up to 2043,
based on the reporting date assumptions. The remaining uninsured benefit
payments, payable from 2044, are due to be funded by a combination of asset
outperformance and the deficit contributions currently scheduled to be paid up
to 2027 for the MGN Scheme and 2029 for the MIN Scheme. For the MGN Scheme and
MIN Scheme, actuarial projections at the year-end reporting date show removal
of the accounting deficit by the end of 2026 for the MGN Scheme and 2029 for
the MIN Scheme due to scheduled contributions and asset returns at the current
target rate. From this point, the assets are projected to be sufficient to
fully fund the liabilities on the accounting basis. The Group is not exposed
to any unusual, entity specific or scheme specific risks. Other than the
impact of the Barber Window equalisation adjustment in the prior period, there
were no plan amendments, settlements or curtailments in 2023 or 2022 which
resulted in a pension cost.
In June 2023, the UK High Court (Virgin Media v NTL Pension Trustees II
Limited) ruled that certain historical amendments for contracted out defined
benefit schemes were invalid if they were not accompanied by the correct
actuarial confirmation. The judgment is subject to appeal. The Trustees and
Group are monitoring developments and will consider if there are any
implications for the pension schemes, if the ruling is upheld.
Results
For the purposes of the Group's consolidated financial statements, valuations
have been performed in accordance with the requirements of IAS 19 with scheme
liabilities calculated using a consistent projected unit valuation method and
compared to the estimated value of the scheme assets at 31 December 2023.
Based on actuarial advice, the assumptions used in calculating the scheme
liabilities are:
2023 2022
Financial assumptions (nominal % pa)
Discount rate 4.62 4.90
Retail price inflation rate 3.08 3.29
Consumer price inflation rate 1.0% pa lower than RPI to 2030 and equal to RPI thereafter 1.0% pa lower than RPI to 2030 and equal to RPI thereafter
Rate of pension increases in deferment 2.71 2.90
Rate of pension increases in payment 3.34 3.38
Mortality assumptions - future life expectancies from age 65 (years)
Male currently aged 65 21.4 21.6
Female currently aged 65 23.7 24.0
Male currently aged 55 21.0 21.3
Female currently aged 55 24.2 24.5
The defined benefit pension liabilities are valued using actuarial assumptions
about future benefit increases and scheme member demographics, and the
resulting projected benefits are discounted to the reporting date at
appropriate corporate bond yields. For 2022 and 2023, the financial
assumptions have been derived as a yield curve with different rates per year,
with the figures in the table above representing a weighted average of these
rates across all of the schemes. This is considered to be a more robust and
accurate approach to setting assumptions as it allows for each scheme's
individual circumstances, rather than considering the schemes in aggregate as
has been done in the past.
The discount rate should be chosen to be equal to the yield available on 'high
quality' corporate bonds of appropriate term and currency. For 2022 and 2023,
the discount rate has been set as the full corporate bond yield curve.
The inflation assumptions are based on market expectations over the period of
the liabilities. For 2022 and 2023, the inflation assumptions have been set
using the full inflation curve. The RPI assumption is set based on the
break-even RPI inflation curve with a margin deducted. This margin, called an
inflation risk premium, reflects the fact that the RPI market implied
inflation curve can be affected by market distortions and as a result it is
thought to overstate the underlying market expectations for future RPI
inflation. Allowing for the extent of RPI linkage on the schemes' benefits pre
and post 2030, the average inflation risk premium has been set at 0.2% per
annum to 2030 and 0.4% per annum thereafter. The CPI assumption is set based
on a margin deducted from the RPI assumption, due to lack of market data on
CPI expectations. Following the UK Statistics Authority's announcement of the
intention to align RPI with CPIH from 2030 the assumed gap between RPI and CPI
inflation is 1.0% per annum up to 2030 and 0.0% per annum beyond 2030,
consistent with 2022.
The estimated impacts on the IAS 19 liabilities and on the IAS 19 deficit at
the reporting date, due to a reasonably possible change in key assumptions
over the next year, are set out in the table below:
Effect on Effect on
liabilities deficit
£m
£m
Discount rate +/- 1.0% pa -185/+225 -165/+200
Retail price inflation rate +/- 0.5% pa +24/-24 +15/-15
Consumer price inflation rate +/- 0.5% pa +24/-22 +23/-20
Life expectancy at age 65 +/- 1 year +80/-85 +70/-70
The RPI sensitivity impacts the rate of increases in deferment for some of the
pensions in the EN88 Scheme and some of the pensions in payment for all
schemes except the MGN Scheme. The CPI sensitivity impacts the rate of
increases in deferment for some of the pensions in most schemes and the rate
of increases in payment for some of the pensions in payment for all schemes.
The effect on the deficit is usually lower than the effect on the liabilities
due to the matching impact on the value of the insurance contracts held in
respect of some of the liabilities. Each assumption variation represents a
reasonably possible change in the assumption over the next year but might not
represent the actual effect because assumption changes are unlikely to happen
in isolation.
The estimated impact of the assumption variations makes no allowance for
changes in the values of invested assets that would arise if market conditions
were to change in order to give rise to the assumption variation. If allowance
were made, the estimated impact would likely be lower as the values of
invested assets would normally change in the same directions as the liability
values.
The amounts included in the consolidated income statement, consolidated
statement of comprehensive income and consolidated balance sheet arising from
the Group's obligations in respect of its defined benefit pension schemes are
as follows:
Consolidated income statement 2023 2022
£m £m
Pension administrative expenses (5.5) (4.2)
Past service costs - (10.6)
Pension finance charge (5.9) (2.3)
Defined benefit cost recognised in income statement (11.4) (17.1)
Consolidated statement of comprehensive income 2023 2022
£m £m
Actuarial gain/(loss) due to liability experience 14.1 (60.1)
Actuarial (loss)/gain due to liability assumption changes (6.9) 940.4
Total liability actuarial gain 7.2 880.3
Returns on scheme assets less than discount rate (8.7) (915.9)
Impact of IFRIC 14 1.0 0.6
Total loss recognised in statement of comprehensive income (0.5) (35.0)
Consolidated balance sheet 2023 2022
£m £m
Present value of uninsured scheme liabilities (1,557.7) (1,571.5)
Present value of insured scheme liabilities (277.9) (288.5)
Total present value of scheme liabilities (1,835.6) (1,860.0)
Invested and cash assets at fair value 1,455.1 1,421.8
Value of liability matching insurance contracts 277.9 288.5
Total fair value of scheme assets 1,733.0 1,710.3
Funded deficit (102.6) (149.7)
Impact of IFRIC 14 (0.2) (1.2)
Net scheme deficit (102.8) (150.9)
Non-current assets - retirement benefit assets 66.0 51.2
Non-current liabilities - retirement benefit obligations (168.8) (202.1)
Net scheme deficit (102.8) (150.9)
Net scheme deficit included in consolidated balance sheet (102.8) (150.9)
Deferred tax included in consolidated balance sheet 25.7 37.0
Net scheme deficit after deferred tax (77.1) (113.9)
Movement in net scheme deficit 2023 2022
£m £m
Opening net scheme deficit (150.9) (153.9)
Contributions 60.0 55.1
Consolidated income statement (11.4) (17.1)
Consolidated statement of comprehensive income (0.5) (35.0)
Closing net scheme deficit (102.8) (150.9)
Changes in the present value of scheme liabilities 2023 2022
£m £m
Opening present value of scheme liabilities (1,860.0) (2,788.4)
Past service costs - (10.6)
Interest cost (88.5) (49.9)
Actuarial gain/(loss) - experience 14.1 (60.1)
Actuarial gain - change to demographic assumptions 35.7 6.7
Actuarial (loss)/gain - change to financial assumptions (42.6) 933.7
Benefits paid 105.7 108.6
Closing present value of scheme liabilities (1,835.6) (1,860.0)
Impact of IFRIC 14 2023 2022
£m £m
Opening impact of IFRIC 14 (1.2) (1.8)
Decrease in impact of IFRIC 14 1.0 0.6
Closing impact of IFRIC 14 (0.2) (1.2)
Changes in the fair value of scheme assets 2023 2022
£m £m
Opening fair value of scheme assets 1,710.3 2,636.3
Interest income 82.6 47.6
Actual return on assets less than discount rate (8.7) (915.9)
Contributions by employer 60.0 55.1
Benefits paid (105.7) (108.6)
Administrative expenses (5.5) (4.2)
Closing fair value of scheme assets 1,733.0 1,710.3
Fair value of scheme assets 2023 2022
£m £m
UK equities 2.2 27.5
Other overseas equities 32.5 76.9
Property 28.3 33.2
Corporate bonds 279.0 315.9
Fixed interest gilts 1.1 6.7
Liability driven investment 1,029.2 816.5
Cash and other 82.8 145.1
Invested and cash assets at fair value 1,455.1 1,421.8
Value of insurance contracts 277.9 288.5
Fair value of scheme assets 1,733.0 1,710.3
The assets of the schemes are primarily held in pooled investment vehicles
which are unquoted. The pooled investment vehicles hold both quoted and
unquoted investments. Scheme assets include neither direct investments in the
Company's ordinary shares nor any property assets occupied nor other assets
used by the Group.
16. Net cash/(debt)
The net cash/(debt) for the Group is as follows:
26 December 2022 Cash IFRS 16 lease liabilities movement
£m flow
£m
New leases 31 December 2023
Loan Interest £m Other movements £m
drawdown £m £m
£m
Liabilities from financing activities
Borrowings (15.0) - (15.0) - - - (30.0)
Lease liabilities (31.7) 5.9 - (1.2) (6.1) (0.1) (33.2)
(46.7) 5.9 (15.0) (1.2) (6.1) (0.1) (63.2)
Current assets
Cash and cash equivalents 40.4 (35.5) 15.0 - - - 19.9
Net cash less lease liabilities (6.3) (43.3)
Net cash/(debt) 25.4 (35.5) - - - - (10.1)
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits with an original maturity of one week or less. The carrying amount of
these assets approximates their fair value. The cash and cash equivalents
disclosed above and in the statement of cash flows include £0.9m of
restricted cash relating to potential pension contributions to the EN88 Scheme
if the funding is deemed required (note 15). This is not available for general
use within the Group.
The Group has a revolving credit facility of £120.0m which expires on 19
November 2026. The Group had drawings of £30.0m at the reporting date. The
facility is subject to two covenants: Interest Cover and Net Debt to EBITDA,
both of which were met at the reporting date.
Deferred consideration is in respect of the acquisition of Express & Star
Payment of the first instalment of £18.9m was made on 28 February 2020. The
second instalment of £16.0m was made on 28 February 2021, the third
instalment of £17.1m was made on 28 February 2022 and the final instalment of
£7.0m was made on 28 February 2023. At the reporting date, there was no
deferred consideration balance remaining.
17. Assets classified as held for sale
At 31 December 2023, three properties were recognised as assets classified as
held for sale with a total carrying value of £11.0m. As part of measuring the
properties at the lower of their carrying amount and fair value less costs to
sell, a £2.7m impairment loss has been recognised within impairment of vacant
freehold property costs (note 5). The fair value was determined by the sale
price or the value of offers received on the property. One of these properties
has been sold since the year end and the remaining two properties are expected
to complete within the next 12 months.
18. Provisions
Share-based payments Historical
£m Property Restructuring legal issues Other Total
£m £m £m £m £m
At 26 December 2022 (0.9) (9.4) (6.6) (43.0) (3.0) (62.9)
Charged to income statement (0.1) (10.3) (27.0) (5.9) (0.8) (44.1)
Released to income statement 0.3 0.2 0.1 26.1 0.1 26.8
Utilisation of provision 0.2 2.4 18.8 4.6 1.5 27.5
Reclassification - (2.0) 2.0 - - -
At 31 December 2023 (0.5) (19.1) (12.7) (18.2) (2.2) (52.7)
The provisions have been analysed between current and non-current as follows:
2023 2022
£m £m
Current (26.1) (26.3)
Non-current (26.6) (36.6)
(52.7) (62.9)
The share-based payments provision relates to National Insurance obligations
attached to the future crystallisation of awards. This provision will be
utilised over the next three years.
The property provision relates to property-related onerous contracts and
onerous committed costs related to vacant properties. The provision will be
utilised over the remaining term of the leases or expected period of vacancy.
The restructuring provision relates to restructuring charges incurred in the
delivery of cost reduction measures. The net charge of £26.9m principally
relates to cost management actions taken in the period (note 5). The severance
costs provision is expected to be utilised within the next year. A provision
of £2.0m for closure costs relating to a print plant has been reclassified to
property to better reflect the nature of the provision.
The historical legal issues provision relates to the cost associated with
dealing with and resolving civil claims in relation to historical phone
hacking and unlawful information gathering. Previously there have been three
parts to the provision: known claims, potential future claims and common court
costs. The key uncertainties in relation to this matter relate to how each
claim progresses, the amount of any settlement and the associated legal costs.
Our assumptions have been based on historical trends, our experience and the
expected evolution of claims and costs. The known and common costs part of the
provision is calculated using the most likely outcome method, with the
expected value method being used previously for the potential claims
provision.
In December 2023, a judgment was handed down in respect of test claims and as
a result all claims issued after 31 October 2020 are now likely to be
dismissed other than where individuals can demonstrate specific exceptional
circumstances. This has significantly reduced the amounts that are expected to
be paid out and has resulted in a change to the provision estimate and a net
decrease of £20.2m (2022: £11.0m increase) in the year. At the period end, a
provision of £18.2m remains outstanding and this represents the current best
estimate of the amount required to resolve this historical matter. The
majority of the provision is expected to be utilised within the next two years
(2022: three years).
Our view on the range of outcomes at the reporting date for the provision,
applying more and less favourable outcomes to all aspects of the provision is
£12m to £22m (2022: £32m to £56m). Despite making a best estimate, the
timing of utilisation and ongoing legal matters related to provided for claims
could mean that the final outcome is outside of the range of outcomes.
Successful appeal is considered remote.
The other provision balance of £2.2m at the period end relates to libel and
other matters and is expected to be utilised over the next two years.
19 Share capital and reserves
The share capital comprises 322,085,269 (2022: 322,085,269) allotted, called
up and fully paid ordinary shares of 10p each.
The share premium account reflects the premium on issued ordinary shares. The
merger reserve comprises the premium on the shares allotted in relation to the
acquisition of Express & Star. The capital redemption reserve represents
the nominal value of the shares purchased and subsequently cancelled under
share buy-back programmes.
On 18 December 2023, a capital reduction of £605.4m became effective. The
balance on the share premium account of £605.4m was cancelled, creating
distributable reserves of the same amount within retained earnings.
The Company holds 4,110,884 shares as Treasury shares (2022: 5,014,410
shares). In 2023, 903,526 shares were withdrawn from Treasury to satisfy the
vesting of awards granted in 2020 under the Reach Long Term Incentive Plan and
buy-out awards granted in 2023.
Cumulative goodwill written off to accumulated loss and other reserves in
respect of continuing businesses acquired prior to 1998 is £25.9m (2022:
£25.9m). On transition to IFRS, the revalued amounts of freehold properties
were deemed to be the cost of the asset and the revaluation reserve has been
transferred to accumulated loss and other reserves.
Shares purchased by the Trinity Mirror Employees' Benefit Trust are included
in retained earnings and other reserves at £3.8m (2022: £3.9m). In 2022 the
Trust purchased 521,310 shares for a cash consideration of £1.0m. The Trust
received a payment of £1.0m from the Company to purchase these shares. During
the year, 1,229,928 were released relating to grants made in prior years
(2022: 2,621,142).
During the year, awards relating to 1,623,678 shares were granted to executive
directors on a discretionary basis under the Long Term Incentive Plan (2022:
667,448). The exercise price of each award is £1 for each block of awards
granted. The awards vest after three years, subject to the continued
employment of the participant and satisfaction of certain performance
conditions and are required to be held for a further two years. During the
period, awards relating to 394,666 shares were granted to an executive
director under the Long Term Incentive Plan representing a buy-out of awards
that were forfeited on joining the Group. The awards vest in line with the
original vesting dates of the forfeited awards, subject to the continued
employment up to the relevant vesting dates. 95,760 of these shares had a
vesting date in 2023.
During the year, awards relating to 3,085,852 shares were granted to senior
managers on a discretionary basis under the Long Term Incentive Plan (2022:
1,256,413). The exercise price of each award is £1 for each block of awards
granted. The awards vest after three years, subject to the continued
employment of the participant and satisfaction of certain performance
conditions.
During the year, no awards relating to shares were granted to executive
directors under the Restricted Share Plan (2022: 121,575 shares). The award
vests after three years.
20. Reconciliation of statutory to adjusted results
53 weeks ended 31 December 2023
Operating Pension
adjusted finance
Statutory items charge Adjusted
results (a) (b) results
£m £m £m £m
Revenue 568.6 - - 568.6
Operating profit 46.1 50.4 - 96.5
Profit before tax 36.7 50.4 5.9 93.0
Profit after tax 21.5 42.4 4.5 68.4
Basic earnings per share (p) 6.8 13.6 1.4 21.8
52 weeks ended 25 December 2022
Operating Pension
adjusted finance
Statutory items charge Adjusted
results (a) (b) results
£m £m £m £m
Revenue 601.4 - - 601.4
Operating profit 71.3 34.8 - 106.1
Profit before tax 66.2 34.8 2.3 103.3
Profit after tax 52.3 30.3 1.9 84.5
Basic earnings per share (p) 16.8 9.7 0.6 27.1
(a) Operating adjusted items relate to the items charged or credited to
operating profit as set out in note 5.
(b) Pension finance charge relates to the defined benefit pension schemes
as set out in note 15.
Set out in note 2 is the rationale for the alternative performance measures
adopted by the Group. The reconciliations in this note highlight the impact on
the respective components of the income statement.
Items are adjusted on the basis that they distort the underlying performance
of the business where they relate to material items that can recur (including
impairment, restructuring, tax rate changes) or relate to historical
liabilities (including historical legal and contractual issues, defined
benefit pension schemes which are all closed to future accrual). Other items
may be included in adjusted items if they are not expected to recur in future
years, such as property rationalisation and items such as transaction and
restructuring costs incurred on acquisitions or the profit or loss on the sale
of subsidiaries, associates or freehold buildings.
Impairments to non-current assets arise following impairment reviews or where
a decision is made to close or retire printing assets. These non-cash items
are included in adjusted items on the basis that they are material and vary
considerably each year, distorting the underlying performance of the business.
The opening deferred tax position is recalculated in the period in which a
change in the standard rate of corporation tax has been enacted or
substantively enacted by parliament. The impacts of the change in rates are
included in adjusted items on the basis that when they occur they are
material, distorting the underlying performance of the business.
Provision for historical legal issues relates to the cost associated with
dealing with and resolving civil claims for historical phone hacking and
unlawful information gathering. This is included in adjusted items as the
amounts are material, it relates to historical matters and movements in the
provision can vary year to year.
The Group's defined benefit pension schemes are all closed to new members and
to future accrual and are therefore not related to the current business. The
pension administration expenses and the pension finance charge are included in
adjusted items as the amounts are significant and they relate to the
historical pension commitment.
Included in adjusted items in 2023 are the impairment of finance lease
receivable of £10.8m and recognition of onerous costs of £8.6m of a vacant
print site where the sub-lessee entered into administration during 2023. Other
adjusted items comprise impairment of vacant freehold property (£4.3m),
vacant freehold property-related costs (£1.4m), onerous lease and related
costs (£2.6m), the Group's legal fees in respect of historical legal issues
(£5.3m), adviser costs in relation to the triennial funding valuations
(£2.5m), internal pension administrative expenses (£0.6m), corporate
simplification costs (£0.5m), and other restructuring-related project costs
(£0.7m) less a reduction in National Insurance costs relating to share awards
(£0.3m) and the profit on sale of impaired assets (£0.3m). These are
included in adjusted items as they relate to historic liabilities or are
one-off items not expected to recur.
Included in adjusted items in 2022 are the reversal of an impairment in
right-of-use assets of £11.0m and previously onerous costs of £5.6m due to
the sublet of a vacant print site which was closed in 2020. Other adjusted
items comprise the Group's legal fees in respect of historical legal issues
(£5.2m), adviser costs in relation to the triennial funding valuations
(£1.6m), impairment of vacant freehold property (£4.2m) and plant and
equipment (£0.8m) less a reduction in National Insurance costs relating to
share awards (£2.7m) and the profit on sale of impaired assets (£0.4m).
These are included in adjusted items as they relate to historic liabilities or
are one-off items not expected to recur.
21. Adjusted cash flow
2023 2022
£m £m
Adjusted operating profit 96.5 106.1
Depreciation and amortisation 21.6 20.2
Adjusted EBITDA 118.1 126.3
Working capital movements (3.9) (12.3)
Net capital expenditure (15.4) (13.3)
Net interest paid on leases (0.8) (1.1)
Finance lease receipts 0.2 -
Repayment of obligation under leases (4.7) (5.6)
Other 1.3 0.9
Associates (2.9) (2.8)
Adjusted operating cash flow 91.9 92.1
Net interest and charges paid on borrowings (2.5) (1.8)
Income tax paid (0.5) (5.0)
Restructuring payments (18.8) (13.8)
Historical legal issues payments (4.6) (9.0)
Dividends paid (23.1) (22.9)
Purchase of own shares - (1.0)
Pension funding payments (60.0) (55.1)
Dividends received from associated undertakings 1.9 2.5
Legal fee payments in respect of historical legal issues (5.3) (5.2)
Adviser cost payments in relation to triennial funding valuations (2.5) (1.6)
Other adjusted items payments (5.0) (2.4)
Adjusted net cash flow (28.5) (23.2)
Bank facility drawdown 15.0 15.0
Acquisition-related cash flows (7.0) (17.1)
Net decrease in cash and cash equivalents (20.5) (25.3)
Adjusted operating cash flow has been aligned to the definition of adjusted
operating profit. The change is largely driven by the exclusion of the cash
flow impact of restructuring payments and other items classified as adjusted
items in the income statement. This has resulted in an increase in adjusted
operating cash flow in 2022 from £64.8m to £92.1m.
22. Reconciliation of statutory to adjusted cash flow
53 weeks ended 31 December 2023 Statutory (a) (b) Adjusted
2023 £m £m 2023
£m £m
Cash flows from operating activities
Cash generated from operations 76.4 (20.7) 36.2 91.9 Adjusted operating cash flow
Pension deficit funding payments (60.0) - - (60.0) Pension funding payments
- - (18.8) (18.8) Restructuring payments
- - (4.6) (4.6) Historical legal issues payments
- - (5.3) Legal fee payments in respect of historical legal issues
(5.3)
- - (2.5) Adviser cost payments in relation to triennial funding valuations
(2.5)
- - (5.0) (5.0) Other adjusted items payments
Income tax paid (0.5) - - (0.5) Income tax paid
Net cash inflow from operating activities 15.9
Investing activities
Interest received - 0.6 Net interest and charges paid on bank borrowings
0.6 -
Dividends received from associated undertakings - 1.9 Dividends received from associated undertakings
1.9 -
Proceeds on disposal of property, plant and equipment 0.9 (0.9) - - Net capital expenditure
Purchases of property, plant and equipment (3.5) 3.5 - - Net capital expenditure
Expenditure on capitalised internally generated development (12.8) 12.8 - - Net capital expenditure
Interest received on leases 0.4 (0.4) - - Net interest paid on leases
Finance lease receipts 0.2 (0.2) - - Finance lease receipts
Deferred consideration payment (7.0) - - (7.0) Acquisition-related cash flow
Net cash used in investing activities (19.3)
Financing activities
Interest and charges paid on borrowings - - (3.1) Net interest and charges paid on bank borrowings
(3.1)
Dividends paid (23.1) - - (23.1) Dividends paid
Interest paid on leases (1.2) 1.2 - - Net interest paid on leases
Repayment of obligations under leases (4.7) 4.7 - - Repayment of obligation under leases
Drawdown of borrowings 15.0 - - 15.0 Bank facility drawdown
Net cash used in financing activities (17.1)
Net decrease in cash and cash equivalents (20.5) - - (20.5)
(a) Items included in the statutory cash flow on separate lines which for
the adjusted cash flow are included in adjusted operating cash flow.
(b) Payments in respect of adjusted items are shown separately in the
adjusted cash flow.
52 weeks ended 25 December 2022 Statutory (a) (b) Adjusted
2022 £m £m 2022
£m £m
Cash flows from operating activities
Cash generated from operations 80.1 (20.0) 32.0 92.1 Adjusted operating cash flow
Pension deficit funding payments (55.1) - - (55.1) Pension funding payments
- - (13.8) (13.8) Restructuring payments
- - (9.0) (9.0) Historical legal issues payments
- - (5.2) (5.2) Legal fee payments in respect of historical legal issues
- - (1.6) (1.6) Adviser cost payments in relation to triennial funding valuations
- - (2.4) (2.4) Other adjusted items payments
Income tax paid (5.0) - - (5.0) Income tax paid
Net cash inflow from operating activities 20.0
Investing activities
Interest received 0.1 - - 0.1 Net interest and charges paid on bank borrowings
Dividends received from associated undertakings 2.5 - - 2.5 Dividends received from associated undertakings
Proceeds on disposal of property, plant and equipment 0.4 (0.4) - - Net capital expenditure
Purchases of property, plant and equipment (3.0) 3.0 - - Net capital expenditure
Expenditure on capitalised internally generated development (10.7) 10.7 - - Net capital expenditure
Deferred consideration payment (17.1) - - (17.1) Acquisition-related cash flow
Net cash used in investing activities (27.8)
Financing activities
Interest and charges paid on borrowings (1.9) - - (1.9) Net interest and charges paid on bank borrowings
Dividends paid (22.9) - - (22.9) Dividends paid
Interest paid on leases (1.1) 1.1 - - Net interest paid on leases
Repayment of obligations under leases (5.6) 5.6 - - Repayment of obligation under leases
Purchase of own shares (1.0) - - (1.0) Purchase of own shares
Drawdown of borrowings 15.0 - - 15.0 Bank facility drawdown
Net cash used in financing activities (17.5)
Net decrease in cash and cash equivalents (25.3) - - (25.3)
(a) Items included in the statutory cash flow on separate lines which for
the adjusted cash flow are included in adjusted operating cash flow.
(b) Payments in respect of adjusted items are shown separately in the
adjusted cash flow.
23. Reconciliation of statutory to like-for-like revenue
Statutory and like-for-like 2022
Statutory Like-for-like £m
2023 (a) 2023
2023 v 2022 £m £m £m
Print 438.8 (5.9) 432.9 448.6
Circulation 312.5 (4.7) 307.8 307.7
Advertising 76.6 (1.0) 75.6 86.9
Printing 20.2 (0.2) 20.0 23.1
Other 29.5 - 29.5 30.9
Digital 127.4 (0.3) 127.1 149.8
Other 2.4 - 2.4 3.0
Total revenue 568.6 (6.2) 562.4 601.4
(a) Exclusion of week 53
Principal Risks and Uncertainties
We have considered our risks in the context of delivering our strategy through
a more data-led digital business and the evolving external environment. The
evolving external environment has seen the macroeconomic conditions continue
to be challenging, particularly in the areas of inflation and consumer
confidence, interest rates, and advertising spend. We have seen an accelerated
decline in digital referral volumes driven by the evolution of referral
approaches used by the different platforms.
This has caused our risk of digital growth deceleration to increase and our
risks around deterioration in the macroeconomic environment, supply chain
disruption and cyber security breach to remain elevated throughout the year.
The risk environment for data protection failure has also changed during the
year with our expansion into the US.
We have reviewed and evolved our mitigating actions for our principal risks to
ensure they adapted to the changing risk environment. The Board has undertaken
a robust risk assessment and review of our principal risks in this context and
the Audit & Risk Committee has also performed a deep-dive review of the
following principal risks during the year: cyber security, data protection,
brand reputation, treasury management and future funding, and US operations
risk. Our principal risks and progress against them are set out below.
Risk and description How we mitigate the risk What we've done this year
Strategic
Deterioration in macroeconomic conditions The economic uncertainty continues. We closely monitor the risk and impact and We have closely monitored and assessed the macroeconomic factors and during
continue to take action when needed. We have a proven track record of the year we have seen continued inflationary pressures and increasing interest
responding quickly and delivering additional cost savings as necessary when rates. We have continued to take action to closely monitor costs and be as
faced with unexpected revenue declines. efficient as possible, taking timely actions to mitigate inflation cost
Risk owner: Full Executive Committee pressures in the year.
No change
Continued deterioration in macroeconomic conditions could result in an
uncertain trading environment with reduced customer and advertiser spending,
higher interest rates, higher inflation and increased costs, leading to lower
cash flow and profits.
Deceleration of digital growth alongside acceleration in decline of print Our strategic development is led by an experienced Board and Executive Our strategy, led by an experienced Executive Committee, is built around
revenues Committee. moving to a digital-led model and remains the key strategic focus for the
Executive Committee.
We focus on developing digital revenue streams through the CVS.
During the year we have focused on building our direct relationships with
Risk owner: Full Executive Committee We continue to take tactical measures to minimise print revenue declines and customers; social video content; our strategy for affiliates; and Curiously,
maintain profits, such as taking appropriate cost mitigation or pricing which aims to grow revenue from new audiences.
measures.
Specifically, we have launched the Secure Audience Strategy, which focuses
Increase We have governance structures which enable the ongoing review of performance newsrooms on increasing the number of page views which come from reliable
against targets and strategic goals, including a weekly structured trading sources - those built on intentional relationships with us by readers.
meeting.
Content is analysed by age profile to understand what will appeal to under-35s
Changes in the traditional publishing industry have led to an ongoing decline We keep under consideration acquisition, joint venture and other corporate in particular. This was rolled out in August, as part of the wider cultural
in print advertising and circulation revenues, which is being exacerbated by development opportunities, which are aligned to our CVS. change Curiously is tasked with delivering.
macroeconomic factors. A lack of appropriate strategic focus could result in
us losing further revenue from existing products, while also failing to grow We have also launched an operation in the US, which gives us another route to
digital revenues quickly enough to offset the decline in print. a digital population of 360m people, which in turn will open up new revenue
opportunities.
Operational
Cyber security breach All business-critical systems are well established and are supported by Given our continued strategic focus on customer data as a source of revenue,
appropriate disaster recovery plans. the potential impact of a cyber security breach is increasing all the time.
During the year we continued to deliver our cyber security improvement
We regularly assess our vulnerability to cyber attack and our ability to programme and have focused on the preparedness of our technology leaders to
Risk owner: Chief Financial Officer/Chief Information Officer re-establish operations in the event of a failure. manage cyber incidents including cyber incident training and table-top
exercises to rehearse re-establishing operations in the event of a failure. We
The technical infrastructure supporting our websites is within the cloud and have continued to harden our cloud environments to contain the damage from a
our sites have been designed to provide adequate resilience and continued potential cyber attack and performed regular penetration tests to identify
No change performance in the event of a significant failure. vulnerabilities.
We continue to invest in enhancing our cyber security infrastructure as new
threats emerge.
An internal or external cyber threat or attack, or a breach within one of our
suppliers, could lead to breaches of confidential data, interruption to our
systems and services, reputational damage with our stakeholders and financial
loss.
Supply chain disruption We carefully monitor and manage all our third-party print and information During the year we continued to monitor our key suppliers, with a particular
systems and technology providers - these include: focus on suppliers to our print site operations.
Ad producers and planners We also continued to review our contingency arrangements to ensure we have
Risk owner: Chief Operating Officer/Chief Financial Officer
robust stock management processes and that there are contingency arrangements
Wholesalers and distributors in place with our key suppliers.
Newsprint suppliers
No change
Manufacturing maintenance and parts providers
IT providers; and
Disruption or failure in our supply chain could lead to business disruption,
increased costs, reduced service and product quality, and ultimately mean we Global digital partners
are unable to deliver our strategy.
We have business continuity/disaster recovery plans in place with all our key
Print: Our print products, which rely on a small number of key suppliers (for partners.
example, newsprint suppliers, wholesalers and distributors), could be
adversely affected, operationally and financially, by changes to supplier For our IT partners, we have clear governance arrangements covering risk
dynamics. management, change control, security and service delivery.
Information systems and technology: A major failure, breach or prolonged
performance issues at a third-party provider could have an adverse impact on
our business.
Health and safety incident Every site has a professionally qualified and experienced health and safety During the year we have worked to embed the refreshed Health and Safety Policy
manager and an occupational health provider. The health and safety manager and framework that was implemented in 2022.
oversees the implementation of our health and safety management system, which
includes an adverse event reporting system. This allows investigations to be We have continued to enhance our risk assessment processes for events, our
Risk owner: Chief Operating Officer carried out in a timely manner by the health and safety team. hubs and work in high-risk environments.
The system includes a process for assessing risks in different areas of the We have continued to offer appropriate health and wellbeing support to all of
business and covers risks such as external work in hostile and high-risk our employees. Online threats and abuse towards our journalists is an area of
No change environments. increasing concern, so addressing this issue and protecting our journalists
will continue to be a priority for us.
It also includes internal and external auditing to ensure continuing
compliance across our print and publishing sites.
Failure to adhere to our health and safety systems could result in our
employees or other workers on our sites having accidents, including, We offer health and wellbeing support, including for mental health, to all our
potentially, fatal ones. employees.
Lack of funding capability Financing Financing
We have committed loan facilities sufficient to deliver our strategy. Following the extension of our full loan facility for an additional year
during 2022 (until November 2026) to mitigate the risk of any unexpected
Risk owner: Chief Financial Officer Through regular dialogue, we maintain constructive relationships with our increases in interest rates or liabilities, no changes to the facility have
syndicate banks. been made during 2023.
We forecast and monitor cash flow regularly through our treasury reporting
No change processes.
Commitments
Our exposure to foreign exchange fluctuation is limited.
We made significant payments to our pension schemes in the year and we remain
Our main financial risk is the lack of funding capability to meet business Commitments committed to addressing our historical pension deficits. This includes the
needs. This may be caused by a lack of working capital, unexpected increases
successful resolution of the 2019 triennial review during the year for the one
in interest rates or increased liabilities, in particular: Regular reporting to the Board (including facility utilisation and covenant remaining scheme. Discussions are ongoing with the Group's other schemes
compliance). regarding the 2022 triennial valuations and are expected to be concluded
pension deficits may grow at such a rate that annual funding costs consume a
satisfactorily by the 31 March 2024 due date.
disproportionate level of profit We hold regular discussions with pension scheme trustees.
In December, the High Court's judgement on time limitation provided a clearer
volume and level of claims for historical legal issues (HLI) We continually review ways of de-risking our pension liabilities. view on our future liabilities in relation to HLI.
We continually monitor and manage ongoing HLI claim levels, and work with
external lawyers on HLI civil claims.
Inability to recruit and retain talent We continually monitor and review: Against the backdrop of this year having a recruitment freeze we have been
continuing to monitor this risk while taking into account the current business
Digital capabilities of our workforce environment. We are currently downsizing our workforce. Throughout this
exercise, we ensured that we retained skills and talent. Against this backdrop
Risk owner: Group Human Resources Director Turnover levels and the changing business environment we are closely reviewing our employee
proposition in order to retain the best talent going forward.
Pay and benefits
No change Opportunities to expand our talent pool (for example, outside London)
The recruitment channels we use
The inability to recruit, develop and retain talent with appropriate skills, Diversity and inclusion.
knowledge and experience would compromise our ability to deliver our strategy.
Damage to brand reputation We have highly experienced and capable people in our key senior management We have clear internal expectations around the management of editorial risk,
roles. including a mandatory escalation policy of significant risks to senior
editorial and legal colleagues, and monthly reporting on editorial risk. We
Our governance structures provide clear accountability for compliance with all have reviewed and updated all our Editorial Legal policies in 2023, and
Risk owner: Full Executive Committee laws and regulations, and we have policies and procedures in place to meet all created new versions for use in the US. These have formed the subject of
relevant requirements, including a crisis management procedure that is editorial training and been publicised to all members of our editorial teams
communicated to all relevant staff. via our legal bulletin, which is circulated monthly.
No change We train all editorial employees on how to create content that complies with
relevant legislation.
We continually monitor upcoming legislative changes and emerging trends.
Breaches of regulations or editorial best practice guidelines; editorial
errors; and issues with employees' behaviour or the tone of our editorial
could damage our reputation, cause us to lose readership, and put us at risk
of legal proceedings.
Regulatory
Data protection failure We have clear governance structures to direct and oversee our data protection During the year we continued to focus on embedding data protection controls
strategy. and processes and ensuring that data protection forms part of 'business as
usual' in everything we do. This included reviewing and enhancing our Data
Our Data Protection Officer and Data Protection team promote and advise on Protection risk and reporting framework to incorporate new legislative
Risk owner: Group General Counsel/Data Protection Officer compliance with data protection regulations, address rights requests, provide requirements and regulatory focus areas and ensuring third parties met the
oversight and help mitigate the risk of compliance breaches. The team works legislative requirements and correct provisions were in place. We also advised
with a network of data protection champions and teams across the business to on matters arising from new projects involving personal data including the US
assist the business in delivering its data protection obligations. expansion and artificial intelligence initiatives, and monitored completion of
No change
data protection awareness training.
We have well-established data protection policies, processes and controls to
govern how colleagues carry out day-to-day activities involving the handling
of personal data, plus clear terms with regards to the collection, use,
A contravention of data protection regulations applicable to Reach such as the sharing and retention of user data, including data transferred to third
UK or EU General Data Protection Regulations (GDPR), Privacy and Electronic parties.
Communications Regulations 2003 (PECR), various state and federal legislation
in the US and Canada (e.g. the updated California Consumer Privacy Act CCPA When developing new products and services, we use a 'data protection by design
Amended), could lead to monetary penalties, reputational damage and a loss of and default' approach to collecting and using personal data, to ensure we
customer trust. remain compliant with data protection regulations.
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