REG - Reach PLC - Half-year Report
25/07/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230725:nRSY0243Ha&default-theme=true
RNS Number : 0243H Reach PLC 25 July 2023
Reach plc - Interim Results - 26 weeks to 25 June 2023
25 July 2023
Customer Value Strategy driving stronger, more sustainable revenue
Cost actions support stronger H2 performance; full year profit expectations
maintained
Jim Mullen Chief Executive
"We continue to execute on our Customer Value Strategy, which is driving
higher quality, more sustainable digital revenues. Digital growth for the
period has been materially affected by lower referral traffic across the
sector, particularly following Facebook's deprioritisation of news content,
which has driven page view declines for publishers.
In spite of this and continued macroeconomic uncertainty, our focus on
customer data means we're driving more diversified, higher performing
revenues, with greater exposure to directly sold, higher value advertising.
Our scale audience and base of registered customers supports the growth of
first party data, a key advantage in a market moving closer to a future
without third party cookies.
The ongoing resilience and predictability of print underpins continued
investment in a strong digital offering, with circulation revenue growing and
newsprint costs starting to decline. Cash generation is supported by a focus
on driving efficiencies, with cost reductions on plan and expected to support
a stronger second half performance. We expect full year profits for 2023 to be
in line with the current market consensus. The business has a strong balance
sheet which supports long term growth, dividend and pension commitments. "
Business Highlights
Digital revenue impacted by sector decline in page views, data-led
outperformance improves digital mix
• Data-driven revenue((1)) continues to outperform; now representing 41% of
digital (H122: 35%, FY19: 24%)
• Overall digital revenue reflects 16% page view decline (2% excluding Facebook)
and lower open market yields
• Registrations 13.2m (H122: 11.5m) with 5.4m 28 day actives
• US operation established; editorial team of more than 30, Express.com
launched, Mirror.com live in coming months
• Innovation continuing; agreements to share Mantis data with Google and Amazon
and trials of metered paywalls
Growing circulation revenue, cost action phasing supports stronger H2 profit
delivery
• Strong print circulation performance - revenue up by 2% and volumes in line
with our expectations
• Newsprint pricing beginning to decline driven by lower cost of energy
• On track to deliver 5-6% reduction in overall operating cost base, with the
majority of savings during H2
Results Overview
Financial Summary
26 weeks to 25 June 2023 Adjusted results((2)) Statutory results
2023 2022 Change 2023 2022 Change
Revenue £m 279.4 297.4 (6.1%) 279.4 297.4 (6.1%)
Operating costs £m 244.6 251.6 2.8% 268.9 263.6 (2.0%)
Operating profit £m 36.1 47.2 (23.5%) 11.1 34.5 (67.8%)
Earnings per share Pence 8.7 12.0 (27.5%) 1.5 8.1 (81.5%)
Net (debt)/cash £m (3.5) 43.8 NA (3.5) 43.8 NA
Dividend per share Pence 2.88 2.88 - 2.88 2.88 -
Group revenue down 6.1% - strong circulation performance; page view decline
impacting digital
• Print £217.3m (H122: £223.4m) down 2.7%, circulation up 2.4%, advertising
down 18.3%
• Digital revenue £60.8m (H122: £72.5m) down 16.1%; data-led revenue £24.9m
broadly flat but outperforming; with other digital down 24% to £35.9m (H122:
£47.2m) predominantly driven by page view decline
• Circulation growth reflects print resilience; volumes continuing as expected
after latest price increases
• Print advertising revenue continuing to move in line with circulation volumes
Quarterly Year-on-Year Revenue Movements
2023 Q1 YOY Q2 YOY H1 YOY
% % %
Digital Revenue (13.4%) (18.7%) (16.1%)
Print Revenue (3.0%) (2.5%) (2.7%)
- circulation revenue 2.6% 2.2% 2.4%
- advertising revenue (21.1%) (15.7%) (18.3%)
Group Revenue (5.6%) (6.5%) (6.1%)
Newsprint inflation easing, cost reduction running to plan - savings H2
weighted
• Adjusted operating profit of £36.1m down £11.1m or 23.5% (H122: £47.2m);
reflecting decline in revenue
• Significant reduction in wholesale energy costs driving quarter on quarter
reduction in the price of newsprint
• Lower overall operating costs; on track for full year reduction of 5-6% with
savings H2 weighted
• Statutory operating profit of £11.1m (H122: £34.5m) down 67.8%, driven by
revenue decline and an increase in adjusting items, £25.0m (H122: £12.7m),
which include the legal costs of the HLI trial and higher restructuring
charges in relation to cost savings
• Statutory EPS of 1.5p (H122: 8.1p) down 81.5% due to lower operating profit
Pensions
• The IAS19 pension accounting deficit (net of deferred tax) at the half year
was £106.4m (FY22: £113.9m), with the increase in discount rate and
contributions, offset by reduction in asset values
• We continue to work with Trustees of the one remaining scheme to achieve
resolution of the 2019 triennial review of pensions. Discussions with Trustees
around the 2022 triennial review of pension commitments now ongoing
Cash & Capital Allocation
• Lower adjusted operating cash flow((3)) of £18.9m (H122: £39.2m) reflects
both lower in period profit and restructuring payments £12.1m (H122: £4.0m)
following cost reduction plans
• Net debt((4)) of £3.5m is a decrease in cash of £28.9m versus the FY22
closing position of £25.4m. The movement includes payments of £3.5m related
to historical legal issues and the £7.0m final deferred consideration in
respect of the Express & Star. Credit facility of £120m had a drawing of
£15.0m at the reporting date
• Interim dividend proposed of 2.88 pence per share (H122: 2.88p) reflecting
Board's confidence in the resilience of the Reach business model and
understanding of the importance of dividends to shareholders
Full Year Outlook
We remain on track with expectations for the full year, despite macroeconomic
uncertainty and the year on year decline in page views. Although external
factors are impacting digital growth for 2023, our focus on customer
engagement and diversifying digital revenues is helping to mitigate the impact
and we expect to benefit from less demanding second half comparatives.
In print, while we annualise the uplift from last year's cover price changes
during H2, revenues remain resilient and predictable, with lower newsprint
prices supporting profitability.
Plans to reduce full year operating costs by 5-6% are on track with H2
weighted savings supporting profit expectations for 2023 which remain in-line
with the current market consensus.((5))
The High Court trial around historic legal issues has now concluded - we
expect a judgement on time limitation during the autumn. The balance sheet
remains strong with full year cash conversion benefiting from an improved
working capital position. We expect a small net debt position at the year end.
Reach is well positioned to benefit when external conditions improve, with
more diversified revenues, growing customer engagement and audience expansion
supporting a stronger digital future.
Notes
(1) Includes revenue from advertising activity which utilises data generated via
registrations, audience behavioural or Mantis contextual. It also includes
other strategically driven revenues, less dependent on audience volumes such
as affiliates, partnerships and ecommerce. Revenues included in 'data-driven'
has been revised to reflect the continued evolution of the Customer Value
Strategy. Comparatives have been restated to reflect this change. Full
disclosure of historic comparatives can be found within the Finance Review and
in the appendices of our interims slide presentation.
(2) Set out in note 18 is the reconciliation between the statutory and adjusted
results. The current period is for the 26 weeks ended 25 June 2023 ('2023')
and the comparative period is for the 26 weeks ended 26 June 2022 ('2022').
(3) An adjusted cash flow is presented in note 19 which reconciles the adjusted
operating profit to the net change in cash and cash equivalents. Note 20
provides a reconciliation between the statutory and adjusted cash flows.
(4) Net debt balance comprises cash and cash equivalents of £11.5m (note 14) less
bank borrowings of £15.0m (note 14) but excludes lease obligations.
(5) Market expectations compiled by the Company are an average of analyst
published forecasts - consensus adjusted operating profit for FY23 £94.9m.
Enquiries
Reach
Jim Mullen, Chief Executive Officer communications@reachplc.com
Darren Fisher, Chief Financial Officer 07341 470 722
Lija Kresowaty, Head of External Communications
Matt Sharff, Investor Relations Director
Teneo reachplc@teneo.com
Giles Kernick / David Allchurch 020 7353 4200
Jim Mullen, Chief Executive Officer and Darren Fisher, Chief Financial Officer
will be hosting a webcast at 9:00am (BST) on 25 July 2023. It will be followed
by a live question and answer session.
The presentation slides will be available on www.reachplc.com from 7.00am
(BST). An archive of all materials, including a Q&A transcript will also
be available after the event.
You can join the webcast to watch the presentation or listen to the Q&A
via the following weblink, which you can copy and paste into your browser:
https://edge.media-server.com/mmc/p/9bcqwxcf
(https://edge.media-server.com/mmc/p/9bcqwxcf)
To participate in the Q&A session and register to ask a question, please
access the following weblink and register your details
https://register.vevent.com/register/BI4ad40d19b9cd48bbb4cf13a12c7d0ad4
(https://register.vevent.com/register/BI4ad40d19b9cd48bbb4cf13a12c7d0ad4)
Please try to allow at least 10 minutes prior to the start time to provide
sufficient time to access the event.
Forward looking statements
This announcement has been prepared in relation to the financial results for
the 26 weeks ended 25 June 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
Execution of strategy supports long term growth
We are executing our strategy and creating a platform for digitally led growth
over the long term. While external market conditions have impacted our
financial performance, limiting our near term growth potential, we are
committed to strengthening and diversifying our digital offering, ensuring
that we're well positioned to grow as the macro environment improves.
Our strategy is focused around getting to know our customers better, using
data-led insights to create more relevant content and a more engaging customer
experience. And we are delivering. With a greater proportion of revenue now
supported by first party data, we are diversifying digital revenues and
generating more from higher value advertising while reducing our reliance on
the open market. Since implementing the Customer Value Strategy in 2019, we
have registered close to 30% of our UK audience, with just over 40% of digital
revenue now 'data-driven' which will grow further as advertisers continue to
seek alternatives to third party cookie based targeting.
Near term digital performance held back by external factors
In the near term, it's clear that performance reflects significant external
headwinds, which have inflated operating costs and suppressed topline growth.
While group revenue continues to benefit from strong and predictable print
circulation, digital has been held back by a decline in traffic which is
affecting the sector more broadly. Following a three-year period in which the
business generated around 10% annual growth in page views (from c.1.3bn per
month to 1.7bn per month) recent changes to Facebook's news feed have driven a
significant decrease in customers being referred to our sites. As a result,
page views during H1 fell by 16% (2% excl. Facebook) to 1.4bn which was a
material driver of digital revenue decline in the period.
Driving deeper engagement; growing new audiences
Despite this, we remain the UK's largest commercial publisher and sixth
largest digital business with an audience equal to three quarters of the
digital population(1). We have 13.2 million registered customers, with 5.4
million active on a monthly basis (up 14%).
Engagement is central to our digital strategy and we're continually exploring
new ways to build stronger relationships with our wider audience. During the
period, this included both web push browser notifications and the use of
WhatsApp Communities, in addition to our well established roster of
newsletters, as part of a focus on broadening the ways we directly communicate
with customers.
We continue to upgrade our machine learning tools to improve the site
experience and extend customer time on site, with further upgrades in content
recommendation tools. We're also continuing to drive a better on-site customer
experience with the trial of a new front end platform which should improve
page load speeds which is key to how our sites rank in search.
The expansion of our US business is progressing well with an editorial staff
of more than 30 now up and running in our New York office. We're seeing a good
pick up of our US content by aggregators like MSN and expect to drive a
growing level of on site traffic during H2 following the recent launch of the
Express US site and Mirror, which launches shortly.
Diversifying revenues
As well as using data to grow engagement and differentiate our ad supply,
we've continued to focus on areas less dependent on direct customer volumes.
Our development of revenues from ecommerce, partnerships and affiliates in
particular are all supporting the growing proportion of data-driven revenues.
We've made good progress on the development of curated marketplace revenues,
signing new data partnerships with Google, Microsoft and Amazon. The Google Ad
Exchange agreement is the first time that publisher data has been used to
enrich the value of ad slots on the open market, while the Amazon deal makes
Reach the first external partner hosting ads with first party data signals on
behalf of the site's own ad sales operation. We're also exploring
opportunities for direct customer revenues, testing a metered paywall on the
M.E.N. app and introducing a series of paid for newsletters.
(1) Data from Ipsos Iris - Reach average UK audience Jan-May 2023: 37.2m (Jan-May
2022: 38.6m). Total UK internet population Jan-May 2023: 50.0m (Jan-May 2022:
49.9m)
Exploring AI opportunities
We continue to explore the ways in which AI could benefit our business, with
our ad tech, product and editorial teams working closely on several pilot
initiatives as we test and learn. We are in the early stages, focusing on the
ways that tools can improve efficiency, for example in interrogating data and
information gathering, potentially freeing up time to produce more content.
While we do this work, it's important we maintain trust with our audience and
advertisers, which is why we've also been establishing editorial principles
for transparency, for example, making clear to readers when AI tools have been
used in creating a story.
Growth in circulation revenue supports strong print cashflow
The performance of our print business remains resilient. Circulation revenue
grew during the period by just over 2%, volumes continue to be predictable and
advertising has been robust, moving in-line with newspaper volumes and down
c.18%. With over 70% of print revenue generated by circulation, revenue and
cashflow are supported by the habitual nature of newspaper consumption - one
in five UK adults read a Reach print title last month. Revenue growth in H1
has been driven by cover price increases, but also through the growing use of
themed one-off specials. These one-off publications included 'Rising Dragons',
a celebration of Wrexham's promotion to league two, 'Treble Winners' a Man
City souvenir publication and 'Love TV', a celebration of the best of British
television.
We continue to think creatively around maximising value from our print assets.
The Reach Sport business continues to grow revenue from programme production
and sales for Premier League clubs, with the Rugby World Cup to come during
H2. We're also consolidating our archival assets with over 200 million
original photographs helping grow revenue through syndication and licensing.
Revenue management is also supported by detailed footfall and frequency
modelling which means we align volume supplied and availability by outlet
type. Since 2019 we have increased availability from c.80% to c.90% across key
national and regional titles to support this. Continuous improvement of
production and distribution ensures we maximise sales at lowest cost. We're
reducing the cost of energy in print sites with the installation of solar
panels, have lowered the cost of ink and printing plates and expect to benefit
from reducing newsprint costs during H2.
Telling the stories of our communities
This year our local titles have done a tremendous job telling the stories of
their communities, whether uncovering injustices or celebrating the happy
moments. The Manchester Evening News has earned well-deserved recognition for
their Awaab's Law investigation and campaign. Their exposé into the housing
shortfalls in Rochdale and the tragic death of Awaab Ishak earned them Scoop
of the Year at the Regional Press Awards, an Orwell Prize shortlisting and an
INMA Global Media Award. SussexLive also dug deep into their own local housing
crisis, with a special investigation, while Nottinghamshire Live sensitively
led the way on the tragic university murders that have shaken the community.
Meanwhile, our national newsbrands continue to break the stories which rock
the political landscape, notably this year the Sunday Mail in Scotland which
first broke the story on the SNP membership scandal.
And so often our titles excel at bringing out the fun in life. WalesOnline
have made the most of Wrexham FC becoming an unlikely celeb hotspot, the
Liverpool Echo made themselves the trusted guide to all things Eurovision, and
the Daily Star continue to turn heads with their irreverent front pages,
whether covering politics or UFOs. Their world-famous Lizzie Lettuce continued
her hot streak well into 2023, with the team taking home a bronze from the
prestigious Cannes Lions International Festival of Creativity.
We also continue to tell stories in different ways, whether with the written
word, snappy videos or with podcasts. Our increasingly popular Curiously
TikTok channel has found particular success reaching a younger audience with
wellness, pop culture and gaming content and these learnings have also proven
useful in informing the video strategies of our more established newsbrands.
We've won several awards for our podcasts this year so far, including the
Northern Agenda winning Best Local & Community Podcast at the Publisher
Podcast Awards, and our commercial team winning in the branded content
category at the Campaign Media Awards for their Let's Talk About Grief Podcast
for Co-op, while our D&I team won Best New Podcast at the Quill Podcast
Awards for their D&I Spy podcast.
Building our culture around sustainability
The challenges currently faced by businesses, their people, their customers
and by society in general are significant. We've made real progress to ensure
we're sustainable and able to grow as these challenges subside. The changes
we're making are not always easy and I want to recognise the dedication of
everyone at Reach and thank them for their hard work and professionalism as we
continue to deliver our strategy and evolve.
Now that we have built a formalised ESG framework and strategy, we continue to
gather the data we need to build a clearer picture of Scope 3 emissions - this
essential work will inform our science based targets and net zero goals. Just
to name one example of progress in this area, this summer our teams are
working to install 9000m(2) of solar panels at our print sites in Watford,
Glasgow and Oldham, a project which will be not only environmentally friendly
but both cost and energy efficient.
A key part of our sustainability roadmap is to better educate and engage all
of our colleagues in our efforts, and our newest colleague network, called
ReachSustainability, will play a crucial role in this work. Earlier this
spring our gender equality network, ReachEquality, and the industry body Women
in Journalism, worked together with our Online Safety Editor Dr Rebecca
Whittington to deliver a groundbreaking piece of research, which received
widespread industry praise and paved the way for further cross-industry
cooperation to find solutions. Keeping our journalists safe remains one of our
top priorities and we are proud to be leading the way in this area.
Continuing to drive efficiencies
Increased inflation had a significant impact on our profitability during 2022,
particularly due to a 60% increase in the like for like cost of newsprint. To
help mitigate the impact of external headwinds we announced plans to reduce
our operating cost base by 5-6% for the year. We remain on track with those
plans which are enabling continued investment in digital expansion and are
expected to deliver stronger H2 profits.
Addressing future cashflows - HLI and pensions
The High Court trial relating to allegations of historical voicemail
interception and other forms of unlawful information gathering which was heard
in May and June, has now completed. We expect a judgement around time
limitation during the Autumn.
We have concluded the 2019 triennial valuation review of pension commitments
for five of the six Group's defined benefit pension schemes. We are continuing
discussions with trustees of the MGN scheme. Discussions on the 2022 triennial
valuation reviews are now underway for all of the groups' schemes.
Balance sheet strength underpins cash commitments
The reliability of our cash flows and strength of our balance sheet provides a
strong base for the growth in the long term. It ensures we can continue to
build our digital capabilities and support all ongoing commitments, to both
pension holders and to investors.
Jim Mullen
Chief Executive Officer
25 July 2023
Finance Review
While we continue to deliver our Customer Value Strategy our first half
digital performance reflects a significant reduction in page views from
Facebook which is impacting the whole sector, and the impact of ongoing
macroeconomic uncertainty. Print revenue has been robust, with growth in
circulation revenues driven by cover price increases. The cost reduction plans
we put in place at the start of the year have helped to mitigate the ongoing
impact of inflation, with overall operating costs lower by around 3%, partly
offsetting the impact of lower revenue on operating profit.
Our statutory performance reflects a period on period increase in adjusted
items, which include the legal costs of the HLI trial and higher restructuring
charges in relation to cost reduction plans. The Group has a strong balance
sheet and liquidity with a closing cash balance of £11.5m and a £15.0m
drawdown on the facilities resulting in a net debt position of £3.5m. The
expiry date of the Group's revolving credit facility of £120.0m is November
2026.
Summary income statement
Adjusted Adjusted Statutory Statutory
2023 2022 2023 2022
£m £m £m £m
Revenue 279.4 297.4 279.4 297.4
Costs (244.6) (251.6) (268.9) (263.6)
Associates 1.3 1.4 0.6 0.7
Operating profit 36.1 47.2 11.1 34.5
Finance costs (1.3) (1.3) (4.4) (2.5)
Profit before tax 34.8 45.9 6.7 32.0
Tax charge (7.6) (8.5) (2.1) (6.8)
Profit after tax 27.2 37.4 4.6 25.2
Earnings per share - basic 8.7 12.0 1.5 8.1
Group revenue fell by £18.0m or 6.1% with print down 2.7% and digital revenue
down 16.1%.
Adjusted costs decreased by £7.0m or 2.8%, partially offsetting the decline
in revenue. The H1 cost base benefitted from newsprint cost inflation easing
and cost savings delivered through the ongoing cost programme. Statutory costs
were higher by £5.3m or 2.0%, driven by the increase in operating adjusted
items of £12.3m (£24.3m in 2023 versus £12.0m in 2022).
Adjusted operating profit declined £11.1m or 23.5%. The adjusted operating
margin of 12.9% in 2023 compares to 15.9% for 2022. Statutory operating profit
decreased by £23.4m or 67.8% primarily due to the increase in operating
adjusted items.
Adjusted earnings per share decreased by 3.3p or 27.5% to 8.7p. Statutory
earnings per share decreased by 6.6p to 1.5p, principally due to the decrease
in operating profit.
Revenue
2023 2022
Actual Actual
£m £m
Print 217.3 223.4
Circulation 155.4 151.8
Advertising 37.0 45.3
Printing 10.3 11.5
Other 14.6 14.8
Digital 60.8 72.5
Other 1.3 1.5
Total revenue 279.4 297.4
Actual Actual Actual Actual
Q1 2023 Q2 2023 H1 2023 H1 2022
YOY YOY YOY YOY
% % % %
Digital revenue (13.4) (18.7) (16.1) 5.4
Print revenue (3.0) (2.5) (2.7) (3.9)
Circulation 2.6 2.2 2.4 (5.1)
Advertising (21.1) (15.7) (18.3) (9.9)
Total Revenue (5.6) (6.5) (6.1) (1.6)
Revenue bridge
Actual YOY
£m %
2022HY revenue 297
Circulation 3 2.4
Advertising (8) (18.3)
Printing (1) (10.4)
Other - (1.4)
Print (6) (2.7)
Digital (12) (16.1)
Other - (13.3)
2023HY revenue 279 (6.1)
Print revenue decreased by £6.1m or 2.7% (2022: down 3.9%).
Strong circulation performance with revenue up 2.4% (2022: down 5.1%) for the
period driven by cover price increases, which were above recent historical
levels during the second half of 2022.
Print advertising revenue declined 18.3% (2022: down 9.9%). H122 benefited
from elevated government spending on public health messaging during the
period. Entertainment, media and retail were the biggest drivers on the year
on year decline partially offset by growth in holidays and travel and a small
decline in telecoms.
Print revenue also includes external or third-party printing revenues and
other print-related revenues. Printing revenue decreased by 10.4% (2022: up
19.8%) impacted by the year end closure of one print plant which reduced spare
capacity available for third-party printing. Other print revenue decreased
marginally by 1.4% (2022: up 18.4%).
Digital revenue decreased by 16.1% to £60.8m (2022: £72.5m). Revenue has
been impacted by lower advertising demand in a continued period of
macroeconomic uncertainty and due to a material impact from reduced page views
following Facebook's deprioritisation of news content which has driven a
reduction in referral traffic for publishers across the sector. Strategically
driven or 'data-led revenues' of £24.9m were down 1.2% and now represent 41%
of digital (2022 35%, FY2019 24%).
Revised data-driven revenue definition
As explained in footnote 1 on page 3, the definition of 'data-driven' revenue
has been revised to reflect the continued evolution of the Customer Value
Strategy. This includes revenue from advertising activity which utilises data
generated via registrations, audience behavioural or Mantis contextual. It
also includes other strategically driven revenues, less dependent on audience
volumes such as affiliates, partnerships and ecommerce. Comparatives have been
restated to reflect this change. As previously disclosed, data-driven revenues
were; £12.5m in H12021, £30.6m in FY2021, £22.5m in H12022, £47.7m in
FY2022. Under revised definition those comparatives are; £16.6m in H12021,
£37.8m in FY2021, £25.2m in H12022, £57.6m in FY2022.
Costs
Adjusted Adjusted Statutory Statutory
2023 2022 2023 2022
£m £m £m £m
Labour (114.5) (119.0) (114.5) (119.0)
Newsprint (33.4) (38.8) (33.4) (38.8)
Depreciation and amortisation (10.3) (9.9) (10.3) (9.9)
Other (86.4) (83.9) (110.7) (95.9)
Total costs (244.6) (251.6) (268.9) (263.6)
Adjusted costs of £244.6m (2022: £251.6m) decreased by £7.0m or 2.8%. This
was driven by reduction in circulation volumes, in addition to reduced labour
costs as a result of our cost reduction programme. Other costs increased due
to continued inflation on overheads. Statutory costs were higher by £5.3m or
2.0% primarily due to higher operating adjusted items which were £12.3m
higher at £24.3m.
Operating adjusted items included in statutory costs related to the following:
Statutory Statutory
2023 2022
£m £m
Provision for historical legal issues (5.9) (5.9)
Restructuring charges in respect of cost reduction measures (10.2) (5.4)
Pension administrative expenses (2.6) (2.2)
Other items (5.6) 1.5
Operating adjusted items in statutory costs (24.3) (12.0)
The Group has incurred a £5.9m (2022: £5.9m) increase in the provision for
historical legal issues relating to the costs associated with dealing with and
resolving civil claims in relation to historical phone hacking and unlawful
information gathering.
Restructuring charges of £10.2m (2022: £5.4m) incurred in respect of cost
reduction measures are principally severance costs that relate to cost
management actions taken in the period.
Pension costs of £2.6m (2022: £2.2m) comprise external pension
administrative expenses.
Other adjusted items comprise the Group's legal fees in respect of historical
legal issues (£4.6m), adviser costs in relation to the triennial funding
valuations (£1.2m), internal pension administrative expenses (£0.3m) and
corporate simplification costs (£0.2m), less a reduction in National
Insurance costs relating to share awards (£0.4m) and the profit on sale of
impaired assets (£0.3m).
In 2022 other adjusted items related to adviser costs in relation to pension
valuation costs (£0.8m), less a reduction in National Insurance costs
relating to share awards (£1.9m) and the profit on sale of an impaired asset
(£0.4m).
Profit
Adjusted operating profit of £36.1m was down £11.1m or 23.5% reflecting the
decline in revenue of 6.1% partially offset by a decrease in adjusted
operating costs of 2.8%.
This is also reflected in our adjusted operating margin which decreased by 3.0
percentage points from 15.9% in 2022 to 12.9% in 2023.
Adjusted operating profit bridge Adjusted YOY
£m %
2022HY adjusted operating profit 47
Revenue mix (18)
Inflation (8)
Investment (5)
Efficiencies 22
Other (2)
2023HY adjusted operating profit 36 (24%)
Reconciliation of statutory to adjusted results
2023 Operating Pension
Statutory results adjusted finance charge Adjusted results
£m items £m £m
£m
Revenue 279.4 - - 279.4
Operating profit 11.1 25.0 - 36.1
Profit before tax 6.7 25.0 3.1 34.8
Profit after tax 4.6 20.2 2.4 27.2
Basic earnings per share (p) 1.5 6.4 0.8 8.7
The Group excludes from the adjusted results: operating adjusted items and the
pension finance charge. 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 historic
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 the property rationalisation in the previous
years 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 5.
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 £3.5m have been made
during the year and the provision has been increased by £5.9m. At the half
year a provision of £45.4m 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 15.
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 £7.5m from £113.9m at year end
to £106.4m at the half year. The increase in the discount rate and Group
contributions has been partially offset by reductions in asset values. The
triennial valuations for funding of the defined benefit pension schemes as at
31 December 2019 have been agreed for five of the schemes, with one scheme
outstanding. We continue to work with both the Trustees of the one remaining
scheme and the Pensions Regulator. The process to determine the 31 December
2022 valutions has now commenced.
During 2022, 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. In 2021, the Trustees of
the West Ferry scheme purchased a bulk annuity and the scheme now has all
pension liabilities covered by annuity policies. Group contributions in
respect of the remaining four defined benefit pension schemes in the first
half were £23.3m (2022: £23.0m) under the current schedule of contributions.
Contributions in 2023 are expected to be £55.8m under the current schedule of
contributions for the four schemes.
Deferred consideration
Deferred consideration is attributable to the acquisition of the 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.
Adjusted cash flow
£m £m
Adjusted EBITDA 46
Tax 1
Restructuring (12)
Capital expenditure (7)
Lease repayments (2)
Interest inc. on leases (1)
Working capital movements (6)
Adjusted operating cash flow 19
Historical legal issues (4)
Pension payments (23)
Dividends (14)
Adjusted net cash flow (22)
Payment for Express & Star (7)
Cash movement (29)
Cash balances
Net debt at the half year is £3.5m, a result of a £28.9m reduction in cash
balances during the year, from a net cash position of £25.4m at the end of
2022. The Group has £15.0m drawn down on the Group's revolving credit
facility, with the overall total cash position of £11.5m at the half year.
The Group has a revolving credit facility of £120.0m, which expires during
November 2026.
Cash generated from operations on a statutory basis was £24.8m (2022:
£47.5m). 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 19. A reconciliation between the statutory and the
adjusted cash flow is set out in note 20. The adjusted operating cash flow was
£18.9m (2022: £39.2m).
Dividends
The Board paid a final dividend for 2022 of 4.46 pence per share in June 2023.
An interim dividend for 2023 of 2.88 pence per share will be paid on 22
September 2023 to shareholders on the register on 11 August 2023.
In declaring interim dividend of 2.88 pence per share for 2023 (2022: 2.88
pence per share), the Board has considered all investment requirements and its
funding commitments to the defined benefit pension schemes.
Principal risks and uncertainties
The Group recognises the importance of the effective understanding and
management of risk in enabling us to identify factors, both externally and
internally, that may materially affect our ability to achieve our goals. There
is an ongoing process for the identification, evaluation and management of the
principal risks faced by the Group, including emerging risks. Appropriate
mitigating actions are in place to minimise the impact of the risks and
uncertainties which are identified as part of the risk process. All risks are
considered in the context of our strategic objectives, the changing regulatory
and compliance landscape and enabling the continuity of our operations.
These principal risks and uncertainties, the risk appetite in relation to
these and the resulting actions are set out in the Reach plc 2022 Annual
Report which is available on our website at www.reachplc.com.
The principal risks and uncertainties continue to be: deterioration in
macroeconomic conditions; print revenue decline acceleration; insufficient
digital revenue growth; cyber security breach; data protection failure; supply
chain failure; health and safety issue; lack of funding capability; inability
to recruit and retain talent and brand reputation damage.
Going concern statement
The directors assessed the Group's prospects, both as a going concern and its
longer term viability, at the time of approval of the Group's 2022 Annual
Report. Further information is set out in the Reach plc 2022 Annual Report.
At the half year, the directors have reviewed the going concern assessment,
specifically any potential impact of the downturn in pages views experienced
in the digital market during 2023. The Group undertakes regular forecasts and
projections of trading, identifying areas of focus for management to improve
delivery of the Strategy and to continue to mitigate the current impact of
macroeconomic headwinds. The Group has a strong balance sheet and liquidity
with a cash balance of £11.5m. The Group has drawn £15.0m of its revolving
credit facility which expires during 2026, with £105.0m remaining available.
Accordingly, the directors have adopted the going concern basis of accounting
in the preparation of the Group's half-yearly financial report.
Statement of directors' responsibilities
The directors are responsible for preparing the half-yearly financial report
in accordance with applicable laws and regulations. The directors confirm to
the best of their knowledge:
a) that the interim condensed consolidated financial statements have been
prepared in accordance with UK-adopted International Accounting Standard 34,
'Interim Financial Reporting' and that the interim management report includes
a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 namely:
i. an indication of important events that have occurred during the first six
months and their impact on the interim condensed consolidated financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
ii. material related-party transactions in the first six months and any material
changes in the related-party transactions described in the last annual report.
By order of the Board of Directors
Darren Fisher
Chief Financial Officer 25 July 2023
Condensed interim consolidated financial statements
Consolidated income statement
for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks
ended 25 December 2022)
Adjusted Items Adjusted Items Adjusted Items
Adjusted 26 weeks ended Statutory Adjusted 26 weeks ended Statutory Adjusted 52 weeks ended Statutory
26 weeks ended 25 June 26 weeks ended 26 weeks ended 26 June 26 weeks ended 52 weeks ended 25 December 2022 52 weeks ended
notes 25 June 2023 (unaudited) 25 June 26 June 2022 (unaudited) 26 June 25 December 2022 (audited) 25 December 2022
2023 (unaudited) £m 2023 (unaudited) 2022 (unaudited) £m 2022 (unaudited) (audited) £m (audited)
£m £m £m £m £m £m
Revenue 4 279.4 - 279.4 297.4 - 297.4 601.4 - 601.4
Cost of sales (178.4) - (178.4) (187.3) - (187.3) (375.7) - (375.7)
Gross profit 101.0 - 101.0 110.1 - 110.1 225.7 - 225.7
Distribution costs (19.1) - (19.1) (19.9) - (19.9) (38.1) - (38.1)
Administrative expenses (47.1) (24.3) (71.4) (44.4) (12.0) (56.4) (84.3) (33.4) (117.7)
Share of results of associates 1.3 (0.7) 0.6 1.4 (0.7) 0.7 2.8 (1.4) 1.4
Operating profit 36.1 (25.0) 11.1 47.2 (12.7) 34.5 106.1 (34.8) 71.3
Interest income 6 0.6 - 0.6 - - - 0.1 - 0.1
Pension finance charge 13 - (3.1) (3.1) - (1.2) (1.2) - (2.3) (2.3)
Finance costs 7 (1.9) - (1.9) (1.3) - (1.3) (2.9) - (2.9)
Profit before tax 34.8 (28.1) 6.7 45.9 (13.9) 32.0 103.3 (37.1) 66.2
Tax charge 8 (7.6) 5.5 (2.1) (8.5) 1.7 (6.8) (18.8) 4.9 (13.9)
Profit for the period attributable to equity holders of the parent 27.2 (22.6) 4.6 37.4 (12.2) 25.2 84.5 (32.2) 52.3
Earnings per share Notes 2023 2023 2022 2022 2022 2022
Pence Pence Pence Pence Pence Pence
Earnings per share - basic 10 8.7 1.5 12.0 8.1 27.1 16.8
Earnings per share - diluted 10 8.6 1.5 11.7 7.9 26.7 16.5
The above results were derived from continuing operations. Set out in note 18
is the reconciliation between the statutory and adjusted results.
Consolidated statement of comprehensive income
for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks
ended 25 December 2022)
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
notes
Profit for the period 4.6 25.2 52.3
Items that will not be reclassified to profit and loss:
Actuarial (loss)/gain on defined benefit pension schemes 13 (7.9) 42.9 (35.0)
Tax on actuarial (loss)/gain on defined benefit pension schemes 8 2.0 (10.7) 7.4
Share of items recognised by associates after tax - - (1.7)
Other comprehensive (loss)/income for the period (5.9) 32.2 (29.3)
Total comprehensive (loss)/income for the period (1.3) 57.4 23.0
Consolidated cash flow statement
for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks
ended 25 December 2022)
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
notes
Cash flows from operating activities
Cash generated from operations 11 24.8 47.5 80.1
Pension deficit funding payments 13 (23.3) (23.0) (55.1)
Income tax received/(paid) 0.5 (4.0) (5.0)
Net cash inflow from operating activities 2.0 20.5 20.0
Investing activities
Interest received 0.3 - 0.1
Dividends received from associated undertakings - - 2.5
Proceeds on disposal of property, plant and equipment 0.5 0.4 0.4
Purchases of property, plant and equipment (1.7) (3.1) (3.0)
Expenditure on internally generated development 12 (6.0) (4.0) (10.7)
Interest received on leases 0.3 - -
Finance lease receipts 0.6 - -
Deferred consideration payment 14 (7.0) (17.1) (17.1)
Net cash used in investing activities (13.0) (23.8) (27.8)
Financing activities
Interest and charges paid on bank borrowings (0.9) (0.9) (1.9)
Dividends paid 9 (14.0) (13.9) (22.9)
Interest paid on leases (0.5) (0.5) (1.1)
Repayments of obligations under leases (2.5) (2.3) (5.6)
Purchase of own shares 16 - (1.0) (1.0)
Drawdown of borrowings - - 15.0
Net cash used in financing activities (17.9) (18.6) (17.5)
Net decrease in cash and cash equivalents (28.9) (21.9) (25.3)
Cash and cash equivalents at the beginning of the period 14 40.4 65.7 65.7
Cash and cash equivalents at the end of the period 14 11.5 43.8 40.4
Consolidated statement of changes in equity
for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks
ended 25 December 2022)
(Accumulated loss) / retained earnings and other reserves
Share premium Capital £m
Share account Merger redemption
capital £m reserve reserve Total
£m £m £m £m
At 26 December 2022 (audited) 32.2 605.4 17.4 4.4 (21.9) 637.5
Profit for the period - - - - 4.6 4.6
Other comprehensive loss for the period - - - - (5.9) (5.9)
Total comprehensive loss for the period - - - - (1.3) (1.3)
Purchase of own shares - - - - - -
Credit to equity for equity-settled share-based payments - - - - 0.9 0.9
Dividends paid (note 9) - - - - (14.0) (14.0)
At 25 June 2023 (unaudited) 32.2 605.4 17.4 4.4 (36.3) 623.1
At 27 December 2021 (audited) 32.2 605.4 17.4 4.4 (20.6) 638.8
Profit for the period - - - - 25.2 25.2
Other comprehensive income for the period - - - - 32.2 32.2
Total comprehensive income for the period - - - - 57.4 57.4
Purchase of own shares - - - - (1.0) (1.0)
Credit to equity for equity-settled share-based payments - - - - 1.1 1.1
Dividends paid - - - - (13.9) (13.9)
At 26 June 2022 (unaudited) 32.2 605.4 17.4 4.4 23.0 682.4
At 27 December 2021 (audited) 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 - - - - (1.0) (1.0)
Credit to equity for equity-settled share-based payments - - - - 1.8 1.8
Deferred tax credit for equity-settled share-based payments - - - - (2.2) (2.2)
Dividends paid - - - - (22.9) (22.9)
At 25 December 2022 (audited) 32.2 605.4 17.4 4.4 (21.9) 637.5
Consolidated balance sheet
at 25 June 2023 (at 26 June 2022 and 25 December 2022)
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
notes £m £m £m
Non-current assets
Goodwill 12 35.9 35.9 35.9
Other intangible assets 12 836.8 827.6 832.9
Property, plant and equipment 134.8 153.1 140.1
Right-of-use assets 11.7 11.1 10.9
Finance lease receivable 9.8 - 10.4
Investment in associates 15.2 18.1 14.6
Retirement benefit assets 13 56.4 94.4 51.2
1,100.6 1,140.2 1,096.0
Current assets
Inventories 12.7 7.5 12.9
Trade and other receivables 88.2 91.2 95.2
Current tax receivable 8 12.2 13.1 13.9
Finance lease receivable 0.6 - 0.6
Cash and cash equivalents 14 11.5 43.8 40.4
125.2 155.6 163.0
Total assets 1,225.8 1,295.8 1,259.0
Non-current liabilities
Trade and other payables (2.8) (6.2) (4.5)
Lease liabilities 14 (27.0) (27.8) (26.8)
Retirement benefit obligations 13 (197.6) (185.8) (202.1)
Provisions 15 (43.7) (40.6) (36.6)
Deferred tax liabilities (189.9) (201.2) (191.6)
(461.0) (461.6) (461.6)
Current liabilities
Trade and other payables (104.6) (110.5) (106.7)
Deferred consideration 14 - (7.0) (7.0)
Borrowings (15.0) - (15.0)
Lease liabilities 14 (4.5) (5.9) (4.9)
Provisions 15 (17.6) (28.4) (26.3)
(141.7) (151.8) (159.9)
Total liabilities (602.7) (613.4) (621.5)
Net assets 623.1 682.4 637.5
Equity
Share capital 16 32.2 32.2 32.2
Share premium account 16 605.4 605.4 605.4
Merger reserve 16 17.4 17.4 17.4
Capital redemption reserve 16 4.4 4.4 4.4
(Accumulated loss)/retained earnings and other reserves 16 (36.3) 23.0 (21.9)
Total equity attributable to equity holders of the parent 623.1 682.4 637.5
Notes to the consolidated financial statements
for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks
ended 25 December 2022)
1. General information
The financial information in respect of the 52 weeks ended 25 December 2022
does not constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. A copy of the statutory accounts for that period has
been delivered to the Registrar of Companies and is available at the Company's
registered office at One Canada Square, Canary Wharf, London E14 5AP and on
the Company's website at www.reachplc.com. The auditors' report was
unqualified, did not include reference to any matters to which the auditors
drew attention by way of emphasis without qualifying the report and did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial information for the 26 weeks ended 25 June 2023 and the 26 weeks
ended 26 June 2022 do not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006 and have not been audited. No statutory
accounts for these periods have been delivered to the Registrar of Companies.
This half-yearly financial report constitutes a dissemination announcement in
accordance with Section 6.3 of the Disclosure and Transparency Rules.
The auditors, PricewaterhouseCoopers LLP, have carried out a review of the
condensed set of financial statements and their report is set out at the end
of this announcement.
The half-yearly financial report was approved by the directors on 25 July
2023. This announcement is available at the Company's registered office at One
Canada Square, Canary Wharf, London E14 5AP and on the Company's website at
www.reachplc.com.
2. Accounting policies
Basis of preparation
The Group's annual consolidated financial statements are prepared
in accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards. The condensed consolidated financial statements
included in this half-yearly financial report have been prepared in
accordance with the UK-adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. Taxes on
income in the interim period are accrued using the tax rate that would be
applicable to expected total annual profit or loss. There are no material
changes to the nature and type of related party transactions since the 2022
Annual Report.
Going concern
The directors assessed the Group's prospects, both as a going concern and its
longer term viability, at the time of approval of the Group's 2022 Annual
Report. Further information is set out in the Reach plc 2022 Annual Report.
At the half year, the directors have reviewed the going concern assessment,
specifically any potential impact of the downturn in pages views experienced
in the digital market during 2023. The Group undertakes regular forecasts and
projections of trading, identifying areas of focus for management to improve
delivery of the Strategy and to continue to mitigate the current impact of
macroeconomic headwinds. The Group has a strong balance sheet and liquidity
with a cash balance of £11.5m. The Group has drawn £15.0m of its revolving
credit facility which expires during 2026, with £105.0m remaining available.
Accordingly, the directors have adopted the going concern basis of accounting
in the preparation of the Group's half-yearly financial report.
Changes in accounting policy
The same accounting policies, presentation and methods of computation are
followed in the interim condensed consolidated financial statements as applied
in the Group's latest annual consolidated financial statements.
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 3 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, they are not intended to be considered in
isolation or as a substitute for, or as superior to, financial information on
a statutory basis. Revenue trends on an actual and like-for-like basis are the
same for the 26 weeks ended 25 June 2023. 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 18 sets out the
reconciliation between the statutory and adjusted results. An adjusted cash
flow is presented in note 19 which reconciles the adjusted operating profit to
the net change in cash and cash equivalents. Set out in note 20 is the
reconciliation between the statutory and adjusted cash flow.
Adjusted items
Adjusted items relate to costs or incomes 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. Details of
adjusted items are set out in notes 5 and 18.
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 15)
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. There are 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 many claims will be
received, 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.
During the first half of the year, the associated settlement costs have been
ahead of historical trends and experience. This has resulted in a change to
the provision estimate and a further charge of £5.9m in the year. At the
period end, a provision of £45.4m 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 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
£35m to £64m (26 June 2022: £32m to £53m and 25 December 2022: £32m to
£56m). However, it is unknown how long it will take to fully resolve this
matter and despite making a best estimate of the provision, the timing of
utilisation and possible range, the total universe of claims is unknown and
there are both ongoing legal matters (including a trial which commenced in May
2023 and finished on 30 June 2023 where we expect a verdict from the trial at
some point in the latter part of 2023) and the potential for new legal matters
which could mean that the final outcome is outside of the range of outcomes.
Due to these unquantifiable uncertainties, a contingent liability has been
highlighted in note 17.
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 £8.4m (26 June 2022: £7.7m and 25 December 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
£28.6m (26 June 2022: nil to £26.2m and 25 December 2022: nil to £27.2m).
Retirement benefits (note 13)
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 each
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. 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. For the 26 weeks to 25 June 2023, there have been no indicators of
impairment and therefore no review has been undertaken.
Restructuring and property provisions (note 15)
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.
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
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
Print 217.3 223.4 448.6
Circulation 155.4 151.8 307.7
Advertising 37.0 45.3 86.9
Printing 10.3 11.5 23.1
Other 14.6 14.8 30.9
Digital 60.8 72.5 149.8
Other 1.3 1.5 3.0
Total revenue 279.4 297.4 601.4
The Group's operations are located primarily in the UK.
5. Operating adjusted items
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
Provision for historical legal issues (note 15) (5.9) (5.9) (11.0)
Restructuring charges in respect of cost reduction measures (note 15) (10.2) (5.4) (15.5)
Pension administrative expenses and past service costs (note 13) (2.6) (2.2) (14.8)
Sublet of closed print site - - 16.6
Other items (note 18) (5.6) 1.5 (8.7)
Operating adjusted items included in administrative expenses (24.3) (12.0) (33.4)
Operating adjusted items included in share of results of associates (0.7) (0.7) (1.4)
Total operating adjusted items (25.0) (12.7) (34.8)
Operating adjusted items relate to costs or incomes 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 18 is the reconciliation between the statutory and adjusted results which
includes descriptions of the items included in adjusted items.
The Group has incurred a £5.9m (26 weeks ended 26 June 2022: £5.9m and 52
weeks ended 25 December 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 15).
Restructuring charges of £10.2m (26 weeks ended 26 June 2022: £5.4m and 52
weeks ended 25 December 2022: £15.5m) incurred in respect of cost reduction
measures are principally severance costs that relate to cost management
actions taken in the period.
Pension costs of £2.6m (26 weeks ended 26 June 2022: £2.2m and 52 weeks
ended 25 December 2022: £14.8m) comprise pension administrative expenses of
£2.6m (26 weeks ended 26 June 2022: pension administrative expenses of £2.2m
and 52 weeks ended 25 December 2022: pension administrative expenses of £4.2m
and past service costs relating to a Barber Window equalisation adjustment of
£10.6m).
In the 52 weeks ended 25 December 2022, the sublet of the vacant print site
which was closed in 2020 has resulted in the reversal of an impairment in
right-of-use assets of £11.0m and previously onerous costs of the vacant
print site of £5.6m. The impairment and onerous closure costs of the vacant
print site were recognised in operating adjusted items in 2020.
Other adjusted items comprise the Group's legal fees in respect of historical
legal issues (£4.6m), adviser costs in relation to the triennial funding
valuations (£1.2m), internal pension administration expenses (£0.3m) and
corporate simplification costs (£0.2m), less a reduction in National
Insurance costs relating to share awards (£0.4m) and the profit on sale of
impaired assets (£0.3m).
In the 26 weeks ended 26 June 2022, other adjusted items related to adviser
costs in relation to triennial funding valuations (£0.8m), less a reduction
in National Insurance costs relating to share awards (£1.9m) and the profit
on sale of impaired assets (£0.4m).
In the 52 weeks ended 25 December 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), 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).
6. Interest income
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
Interest income on bank deposits 0.3 - 0.1
Interest on finance lease receivable 0.3 - -
Interest income 0.6 - 0.1
7. Finance costs
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
Interest and charges on bank borrowings (1.4) (0.8) (1.8)
Interest on lease liabilities (0.5) (0.5) (1.1)
Finance costs (1.9) (1.3) (2.9)
8. Tax charge
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
Corporation tax charge for the period (1.8) (4.4) (4.5)
Prior period adjustment - - (0.7)
Current tax charge (1.8) (4.4) (5.2)
Deferred tax charge for the period (0.3) (2.4) (9.0)
Prior period adjustment - - 0.3
Deferred tax charge (0.3) (2.4) (8.7)
Tax charge (2.1) (6.8) (13.9)
Reconciliation of tax charge £m
Profit before tax 6.7 32.0 66.2
Standard rate of corporation tax of 23.5% (2022: 19%) (1.6) (6.1) (12.6)
Tax effect of permanent items that are not included in determining taxable (0.1) (0.8) (1.2)
profit
Overseas profits taxed at rate lower than UK (0.5) - -
Prior period adjustment - - (0.4)
Tax effect of share of results of associates 0.1 0.1 0.3
Tax charge (2.1) (6.8) (13.9)
The standard rate of corporation tax for the period is 23.5% (2022: 19%). 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 amounted to £12.2m (26 June 2022: £13.1m
receivable and 25 December 2022: £13.9m receivable). At the reporting date
the maximum amount of the unprovided tax exposure relating to uncertain tax
items is some £8.4m (26 June 2022: £7.7m and 25 December 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 £28.6m
(26 June 2022: nil to £26.2m and 25 December 2022: nil to £27.2m).
The tax on actuarial gains or losses on defined benefit pension schemes taken
to the consolidated statement of comprehensive income is a deferred tax credit
of £2.0m (26 weeks ended 26 June 2022: charge of £10.7m and 52 weeks ended
25 December 2022: credit of £7.4m).
9. Dividends
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
Pence Pence Pence
Per share 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 4.46
Dividends paid per share - interim dividend - - 2.88
Total dividend paid per share 4.46 4.46 7.34
Dividend proposed per share but not paid nor included in the accounting 2.88 2.88 4.46
records
The Board has approved an interim dividend for 2023 of 2.88 pence per share.
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. The total dividend payment amounted to £14.0m.
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.
26 weeks ended 25 weeks ended 52 weeks ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
Thousand Thousand Thousand
Weighted average number of ordinary shares for basic earnings per share 313,768 311,636 312,153
Effect of potential dilutive ordinary shares in respect of share awards 3,214 6,848 4,828
Weighted average number of ordinary shares for diluted earnings per share 316,982 318,484 316,981
The weighted average number of potentially dilutive ordinary shares not
currently dilutive was 5,614,749 (26 June 2022: 4,414,629 and 25 December
2022: 5,406,814).
Statutory earnings per share
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Pence Pence Pence
Earnings per share - basic 1.5 8.1 16.8
Earnings per share - diluted 1.5 7.9 16.5
Adjusted earnings per share
26 weeks ended 26 weeks ended 52 weeks ended
25 June 26 June 25 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Pence Pence Pence
Earnings per share - basic 8.7 12.0 27.1
Earnings per share - diluted 8.6 11.7 26.7
Set out in note 18 is the reconciliation between the statutory and adjusted
results.
11. Cash flows from operating activities
26 weeks 26 weeks 52 weeks
ended ended ended
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (audited)
£m (unaudited) £m
£m
Operating profit 11.1 34.5 71.3
Depreciation of property, plant and equipment 6.9 7.7 15.2
Depreciation of right-of-use assets 1.3 1.5 2.9
Amortisation of other intangible assets 2.1 0.7 2.1
Share of results of associates (0.6) (0.7) (1.4)
Share-based payments charge 0.9 0.9 1.5
Impairment of property, plant and equipment - - 5.0
Impairment of right-of-use assets 0.2 - -
Reversal of impairment of right-of-use assets - - (11.0)
Profit on disposal of property, plant and equipment (0.3) (0.4) (0.4)
Pension administrative expenses and past service costs 2.6 2.2 14.8
Operating cash flows before movements in working capital 24.2 46.4 100.0
Decrease/(increase) in inventories 0.2 (2.0) (7.4)
Decrease in receivables 6.9 11.0 7.2
Decrease in payables (6.5) (7.9) (19.7)
Cash generated from operations 24.8 47.5 80.1
12. Goodwill and other intangible assets
Other intangible assets
Goodwill Publishing rights Internally generated assets Total
and titles
£m £m £m £m
Cost
At 25 December 2022 (audited) 189.9 2,100.3 16.7 2,306.9
Additions - - 6.0 6.0
At 25 June 2023 (unaudited) 189.9 2,100.3 22.7 2,312.9
Accumulated depreciation and impairment
At 25 December 2022 (audited) (154.0) (1,281.6) (2.5) (1,438.1)
Charge for the period - - (2.1) (2.1)
At 25 June 2023 (unaudited) (154.0) (1,281.6) (4.6) (1,440.2)
Carrying amount
At 25 December 2022 (audited) 35.9 818.7 14.2 868.8
At 25 June 2023 (unaudited) 35.9 818.7 18.1 872.7
During the period, the Group has capitalised internally generated assets
relating to software and website development costs of £6.0m (26 weeks ended
26 June 2022: £4.0m and 52 weeks ended 25 December 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. No indicators have been
identified as at 25 June 2023. The last annual impairment test was undertaken
as at 25 December 2022. The details of the impairment assessment are included
in note 16 of the 2022 Annual Report.
13. 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
period of £8.7m (26 weeks ended 26 June 2022: £9.0m and 52 weeks ended 25
December 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 the final salary pension payable, 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 60% to current
pensioners and their spouses or dependants and 40% 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
2022, excluding lump sums and transfer value payments, were £73m and these
are projected on the prior reporting date assumptions to rise to an annual
peak in 2034 of £104m and reducing 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 the Trustees 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 for five of the Group's schemes was as at 31
December 2019, and the process to determine the 31 December 2022 valuations
has now commenced.
Discussions in relation to the funding valuations of the MGN Scheme at 31
December 2019 are ongoing. The funding valuation of the MGN scheme at 31
December 2016 showed a deficit of £476.0m. The Group paid contributions of
£17.0m to the MGN Scheme in the first half of 2023 and the current schedule
of contributions includes payments of £40.9m pa from 2023 to 2027.
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 £2.2m to this scheme in the first half of 2023 and agreed an
unchanged schedule of contributions of payments of £5.2m pa from 2023 to
2027.
The funding valuation of the MIN Scheme at 31 December 2019 was agreed after
the year end on 3 February 2023. This showed a deficit of £73.8m. The Group
paid contributions of £2.9m to this scheme in the first half of 2023 and the
agreed schedule of contributions features payments of £6.9m pa from 2023 to
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. The Group paid contributions of £1.2m to this scheme in the first
half of 2023 and the agreed schedule of contributions includes payments of
£2.8m pa from 2023 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. The Group paid £9.6m to the WF Scheme in 2021
which together with the payment of £5.0m made in 2020 enabled the Trustees to
purchase a bulk annuity 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
period were £23.3m (2022 H1: £23.0m). £32.5m of Group contributions
relating to these schemes are due to be paid in the second half of the year.
At the prior year end, the funding deficits in all schemes were 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 £55.8m pa in 2023 to 2025, £56.7m in 2026, £54.7m in 2027
and £8.6m pa in 2028 and 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 the 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.
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 94% 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 6% 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 2041,
based on the prior reporting date assumptions. The remaining uninsured benefit
payments, payable from 2042, 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 prior reporting date show removal of
the accounting deficit by the end of 2026 for MGN and 2028 for MIN due to
scheduled contributions and asset returns at the target rate assumed at the
last reporting date. 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 Barber Window equalisation adjustment in the prior period,
there were no plan amendments, settlements or curtailments which in the
current and prior period resulted in a pension cost.
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 25 June 2023.
Based on actuarial advice, the assumptions used in calculating the scheme
liabilities are:
25 June 26 June 25 December 2022
2023 2022 £m
£m £m
Financial assumptions (nominal % pa)
Discount rate 5.38 3.72 4.90
Retail price inflation rate 3.29 3.40 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 1.0% pa lower than RPI to 2030 and equal to RPI thereafter
Rate of pension increases in deferment 2.92 3.08 2.90
Rate of pension increases in payment 3.39 3.38 3.38
Mortality assumptions - future life expectancies from age 65 (years)
Male currently aged 65 21.3 21.8 21.6
Female currently aged 65 23.7 24.1 24.0
Male currently aged 55 20.9 21.5 21.3
Female currently aged 55 24.1 24.6 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 the 2022 year-end and 2023 half year,
the financial assumptions have been derived as a yield curve with different
rates per year, with the figures in the tables 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 the 2022
year-end and 2023 half year, the discount rate has been set to reflect the
full corporate bond yield curve with a different average assumption for each
scheme, based on the scheme-specific cash flows and set separately for
uninsured and insured liabilities within each scheme, reflecting their
respective durations.
The inflation assumptions are based on market expectations over the period of
the liabilities. For the 2022 year-end and 2023 half year, 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.
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 -175/+210 -155/+185
Retail price inflation rate +/- 0.5% pa +22/-22 +14/-14
Consumer price inflation rate +/- 0.5% pa +23/-21 +22/-20
Life expectancy at age 65 +/- 1 year +70/-70 +55/-60
The RPI sensitivity impacts the rate of increases in deferment for some of the
pensions in the EN88 Scheme and the ENSM 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:
Past service costs of £10.6m for the 52 weeks ended 25 December 2022 relates
to a Barber Window equalisation adjustment identified by the Trustees of the
MGN Scheme during 2022. 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.
Consolidated income statement 26 weeks ended 26 weeks 52 weeks
25 June ended ended
2023 (unaudited) 26 June 25 December 2022
£m 2022 (unaudited) (audited)
£m £m
Pension administrative expenses (2.6) (2.2) (4.2)
Past service costs - - (10.6)
Pension finance charge (3.1) (1.2) (2.3)
Defined benefit cost recognised in income statement (5.7) (3.4) (17.1)
Consolidated statement of comprehensive income 26 weeks ended 26 weeks 52 weeks
25 June ended ended
2023 (unaudited) 26 June 25 December 2022
£m 2022 (unaudited) (audited)
£m £m
Actuarial loss due to liability experience (16.9) (34.3) (60.1)
Actuarial gain due to liability assumption changes 125.3 645.7 940.4
Total liability actuarial gain 108.4 611.4 880.3
Returns on scheme assets less than discount rate (116.7) (568.8) (915.9)
Impact of IFRIC 14 0.4 0.3 0.6
Total (loss)/gain recognised in statement of comprehensive income (7.9) 42.9 (35.0)
Consolidated balance sheet 25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
Present value of uninsured scheme liabilities (1,475.2) (1,836.7) (1,571.5)
Present value of insured scheme liabilities (268.4) (312.2) (288.5)
Total present value of scheme liabilities (1,743.6) (2,148.9) (1,860.0)
Invested and cash assets at fair value 1,334.8 1,746.8 1,421.8
Value of liability matching insurance contracts 268.4 312.2 288.5
Total fair value of scheme assets 1,603.2 2,059.0 1,710.3
Funded deficit (140.4) (89.9) (149.7)
Impact of IFRIC 14 (0.8) (1.5) (1.2)
Net scheme deficit (141.2) (91.4) (150.9)
Non-current assets - retirement benefit assets 56.4 94.4 51.2
Non-current liabilities - retirement benefit obligations (197.6) (185.8) (202.1)
Net scheme deficit (141.2) (91.4) (150.9)
Net scheme deficit included in consolidated balance sheet (141.2) (91.4) (150.9)
Deferred tax included in consolidated balance sheet 34.8 22.3 37.0
Net scheme deficit after deferred tax (106.4) (69.1) (113.9)
Movement in net scheme deficit 26 weeks 26 weeks 52 weeks
ended ended ended
25 June 26 June 25 December 2022
2023 2022 (audited)
(unaudited) (unaudited) £m
£m £m
Opening net scheme deficit (150.9) (153.9) (153.9)
Contributions 23.3 23.0 55.1
Consolidated income statement (5.7) (3.4) (17.1)
Consolidated statement of comprehensive income (7.9) 42.9 (35.0)
Closing net scheme deficit (141.2) (91.4) (150.9)
Changes in the present value of scheme liabilities 26 weeks 26 weeks 52 weeks
ended ended ended
25 June 26 June 25 December 2022
2023 2022 (audited)
(unaudited) (unaudited) £m
£m £m
Opening present value of scheme liabilities (1,860.0) (2,788.4) (2,788.4)
Past service costs - - (10.6)
Interest cost (44.2) (25.0) (49.9)
Actuarial loss - experience (16.9) (34.3) (60.1)
Actuarial gain/(loss) - change to demographic assumptions 32.2 (3.4) 6.7
Actuarial gain - change to financial assumptions 93.1 649.1 933.7
Benefits paid 52.2 53.1 108.6
Closing present value of scheme liabilities (1,743.6) (2,148.9) (1,860.0)
Changes in impact of IFRIC 14 26 weeks 26 weeks 52 weeks
ended ended ended
25 June 26 June 25 December 2022
2023 2022 (audited)
(unaudited) (unaudited) £m
£m £m
Opening impact of IFRIC 14 (1.2) (1.8) (1.8)
Decrease in impact of IFRIC 14 0.4 0.3 0.6
Closing impact of IFRIC 14 (0.8) (1.5) (1.2)
Changes in the fair value of scheme assets 26 weeks 26 weeks 52 weeks
ended ended ended
25 June 26 June 25 December 2022
2023 2022 (audited)
(unaudited) (unaudited) £m
£m £m
Opening fair value of scheme assets 1,710.3 2,636.3 2,636.3
Interest income at discount rate 41.1 23.8 47.6
Actual return on assets less than discount rate (116.7) (568.8) (915.9)
Contributions by employer 23.3 23.0 55.1
Benefits paid (52.2) (53.1) (108.6)
Administrative expenses (2.6) (2.2) (4.2)
Closing fair value of scheme assets 1,603.2 2,059.0 1,710.3
Fair value of scheme assets 25 June 26 June 25 December 2022
2023 (unaudited) 2022 (audited)
£m (unaudited) £m
£m
UK equities 9.8 53.5 27.5
US equities 27.5 159.7 48.5
Other overseas equities 38.2 102.1 28.4
Property 29.7 39.5 33.2
Corporate bonds 365.8 291.3 315.9
Fixed interest gilts 6.2 37.7 6.7
Index linked gilts - 13.9 -
Liability driven investment 587.8 564.6 816.5
Cash and other 269.8 484.5 145.1
Invested and cash assets at fair value 1,334.8 1,746.8 1,421.8
Value of insurance contracts 268.4 312.2 288.5
Fair value of scheme assets 1,603.2 2,059.0 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.
14. 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
25 June 2023
Interest New Leases Other movements £m
£m £m £m
Liabilities from financing activities
Borrowings (15.0) - - - - (15.0)
Lease liabilities (31.7) 3.0 (0.5) (2.2) (0.1) (31.5)
(46.7) 3.0 (0.5) (2.2) (0.1) (46.5)
Current assets
Cash and cash equivalents 40.4 (28.9) - - - 11.5
Net cash/(debt) less lease liabilities (6.3) (35.0)
Net cash/(debt) 25.4 (28.9) - - - (3.5)
The Group has a revolving credit facility of £120.0m which expires on 19
November 2026. The Group had drawings of £15.0m at the reporting date and 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.
15. Provisions
Share-based payments Historical legal issues
£m
Property Restructuring £m Other Total
£m £m £m £m
At 26 December 2022 (audited) (0.9) (9.4) (6.6) (43.0) (3.0) (62.9)
Charged to income statement (0.1) (0.1) (10.3) (5.9) (0.5) (16.9)
Released to income statement 0.4 0.2 0.1 - - 0.7
Utilisation of provision 0.2 1.2 12.1 3.5 0.8 17.8
At 25 June 2023 (unaudited) (0.4) (8.1) (4.7) (45.4) (2.7) (61.3)
The provisions have been analysed between current and non-current as follows:
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
Current (17.6) (28.4) (26.3)
Non-current (43.7) (40.6) (36.6)
(61.3) (69.0) (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 occupied, let and 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 balance at the period end comprises
severance costs of £2.6m and closure costs relating to a print plant of
£2.1m. The severance costs provision is expected to be utilised within the
next year. The closure costs provision includes £0.1m expected to be utilised
within the next year and £2.0m expected to be utilised at the end of a
long-term print plant lease related to the print restructure in 2020.
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. There are 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 many claims will be
received, 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 used for the potential claims
provision.
During the first half of the year, the associated settlement costs have been
ahead of historical trends and experience. This has resulted in a change to
the provision estimate and a further charge of £5.9m in the year. At the
period end, a provision of £45.4m 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 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
£35m to £64m (26 June 2022: £32m to £53m and 25 December 2022: £32m to
£56m). However, it is unknown how long it will take to fully resolve this
matter and despite making a best estimate of the provision, the timing of
utilisation and possible range, the total universe of claims is unknown and
there are both ongoing legal matters (including a trial which commenced in May
2023 and finished on 30 June 2023 where we expect a verdict from the trial at
some point in the latter part of 2023) and the potential for new legal matters
which could mean that the final outcome is outside of the range of outcomes.
Due to these unquantifiable uncertainties, a contingent liability note has
been highlighted in note 17.
The other provision balance of £2.7m at the period end relates to libel and
other matters and is expected to be utilised over the next two years.
16. Share capital and reserves
The share capital comprises 322,085,269 allotted, called-up and fully paid
ordinary shares of 10p each.
The share premium 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.
The Company holds 4,314,917 shares (26 June 2022: 7,020,988 shares and 25
December 2022: 5,014,410 shares) as Treasury shares. During the first half of
the year, 699,493 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)/retained earnings and
other reserves in respect of continuing businesses acquired prior to 1998 is
£25.9m (26 June 2022: £25.9m and 25 December 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)/retained earnings and other reserves.
Shares purchased by the Reach Employee Benefit Trust are included in
(accumulated loss)/retained earnings and other reserves at £3.4m (26 June
2022: £5.0m and 25 December 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
period, 1,025,833 were released relating to grants made in prior years (26
June 2022: 1,118,050 and 25 December 2022: 2,621,142).
During the period, awards relating to 1,623,678 shares were granted to
executive directors on a discretionary basis under the Long Term Incentive
Plan (26 June 2022: 667,448 and 25 December 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 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.
During the period, awards relating to 2,967,720 shares were granted to senior
managers on a discretionary basis under the Long Term Incentive Plan under the
Senior Management Incentive Plan (26 June 2022: 1,138,083 and 25 December
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 period, no awards relating to shares were granted to executive
directors under the Restricted Share Plan (26 June 2022 and 25 December 2022:
121,575). The awards vest after three years.
17. Contingent liabilities
It is unknown how long it will take to fully resolve historical legal issues
set out in note 15 and despite making a best estimate of the provision, the
timing of utilisation and possible range, the total universe of claims is
unknown and there are both ongoing legal matters (including a trial which
commenced in May 2023 and finished on 30 June 2023 where we expect a verdict
from the trial at some point in the latter part of 2023) and the potential for
new legal matters which could mean that the final outcome is outside our view
on the range of outcomes of £35m to £64m (26 June 2022: £32m to £53m and
25 December 2022: £32m to £56m).
18. Reconciliation of statutory to adjusted results
26 weeks ended 25 June 2023 (unaudited)
Operating Pension
adjusted finance
Statutory items charge Adjusted
results (a) (b) results
£m £m £m £m
Revenue 279.4 - - 279.4
Operating profit 11.1 25.0 - 36.1
Profit before tax 6.7 25.0 3.1 34.8
Profit after tax 4.6 20.2 2.4 27.2
Basic earnings per share (p) 1.5 6.4 0.8 8.7
26 weeks ended 26 June 2022 (unaudited)
Operating Pension
adjusted finance
Statutory items charge Adjusted
results (a) (b) results
£m £m £m £m
Revenue 297.4 - - 297.4
Operating profit 34.5 12.7 - 47.2
Profit before tax 32.0 12.7 1.2 45.9
Profit after tax 25.2 11.2 1.0 37.4
Basic earnings per share (p) 8.1 3.6 0.3 12.0
52 weeks ended 25 December 2022 (audited)
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 relating to the defined benefit pension
schemes as set out in note 13.
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 historic 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 the property
rationalisation in the previous years 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.
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.
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 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, the past service costs and the pension
finance charge are included in adjusted items as the amounts are significant
and they relate to the historical pension commitment.
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 or when a decision is reversed. The impact
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.
Included in adjusted items in 2023 are restructuring charges of £10.2m,
principally severance costs that relate to cost management actions taken in
the period. Other adjusted items comprise the Group's legal fees in respect of
historical legal issues (£4.6m), adviser costs in relation to the triennial
funding valuations (£1.2m), internal pension administration expenses (£0.3m)
and corporate simplification costs (£0.2m), less a reduction in National
Insurance costs relating to share awards (£0.4m) and the profit on sale of
impaired assets (£0.3m).
Included in adjusted items in 2022 are restructuring charges of £5.4m,
principally severance costs that relate to cost management actions taken in
the period. Other items relate to a National Insurance Cost credit relating to
share awards (£1.9m) and the profit on sale of impaired assets (£0.4m) less
adviser costs in relation to the triennial funding valuations (£0.8m).
19. Adjusted cash flow
25 June 26 June 25 December 2022
2023 (unaudited) 2022 (unaudited) (audited)
£m £m £m
Adjusted operating profit 36.1 47.2 106.1
Depreciation and amortisation 10.3 9.9 20.2
Adjusted EBITDA 46.4 57.1 126.3
Net interest and charges paid on bank borrowings (0.6) (0.9) (1.8)
Income tax received/(paid) 0.5 (4.0) (5.0)
Restructuring payments (12.1) (4.0) (13.8)
Net capital expenditure (7.2) (6.7) (13.3)
Net interest paid on leases (0.2) (0.5) (1.1)
Finance lease receipts 0.6 - -
Repayment of obligation under leases (2.5) (2.3) (5.6)
Working capital and other (6.0) 0.5 (20.9)
Adjusted operating cash flow 18.9 39.2 64.8
Historical legal issues payments (3.5) (6.1) (9.0)
Dividends paid (14.0) (13.9) (22.9)
Purchase of own shares - (1.0) (1.0)
Pension funding payments (23.3) (23.0) (55.1)
Adjusted net cash flow (21.9) (4.8) (23.2)
Bank facility drawdown - - 15.0
Acquisition-related cash flows (7.0) (17.1) (17.1)
Net decrease in cash and cash equivalents (28.9) (21.9) (25.3)
20. Reconciliation of statutory to adjusted cash flow
26 weeks ended 25 June 2023 2023 2023
Statutory (a) (b) Adjusted
£m £m £m £m
Cash flows from operating activities
Cash generated from operations 24.8 (9.4) 3.5 18.9 Adjusted operating cash flow
Pension deficit funding payments (23.3) - - (23.3) Pension funding payments
- (3.5) (3.5) Historical legal issues payments
Income tax received 0.5 (0.5) - -
Net cash inflow from operating activities 2.0
Investing activities
Interest received 0.3 (0.3) - - Net interest and charges paid on bank borrowings
Proceeds on disposal of property, plant and equipment 0.5 (0.5) - - Net capital expenditure
Purchases of property, plant and equipment (1.7) 1.7 - - Net capital expenditure
Expenditure on internally generated development (6.0) 6.0 - - Net capital expenditure
Interest received on leases 0.3 (0.3) - - Net interest paid on leases
Finance lease receipts 0.6 (0.6) - -
Deferred consideration payment (7.0) - - (7.0) Acquisition related cash flow
Net cash used in investing activities (13.0)
Financing activities
Interest and charges paid on bank borrowings (0.9) 0.9 - - Net interest and charges paid on bank borrowings
Dividends paid (14.0) - - (14.0) Dividends paid
Interest paid on leases (0.5) 0.5 - - Net interest paid on leases
Repayments of obligations under leases (2.5) 2.5 - -
Net cash used in financing activities (17.9)
Net decrease in cash and cash equivalents (28.9) - - (28.9)
(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 historical legal issues are shown
separately in the adjusted cash flow.
26 weeks ended 26 June 2022 2022 2022
Statutory (a) (b) Adjusted
£m £m £m £m
Cash flows from operating activities
Cash generated from operations 47.5 (14.4) 6.1 39.2 Adjusted operating cash flow
Pension deficit funding payments (23.0) - - (23.0) Pension funding payments
- (6.1) (6.1) Historical legal issues payments
Income tax paid (4.0) 4.0 - -
Net cash inflow from operating activities 20.5
Investing activities
Proceeds on disposal of property, plant and equipment 0.4 (0.4) - - Net capital expenditure
Purchases of property, plant and equipment (3.1) 3.1 - - Net capital expenditure
Expenditure on internally generated development (4.0) 4.0 - - Net capital expenditure
Deferred consideration payment (17.1) - - (17.1) Acquisition related cash flow
Net cash used in investing activities (23.8)
Financing activities
Dividends paid (13.9) - - (13.9) Dividends paid
Interest and charges paid on bank borrowings (0.9) 0.9 - -
Purchase of own shares (1.0) - - (1.0) Purchase of own shares
Interest paid on leases (0.5) 0.5 - -
Repayments of obligations under leases (2.3) 2.3 - -
Net cash used in financing activities (18.6)
Net decrease in cash and cash equivalents (21.9) - - (21.9)
(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 historical legal issues 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 (24.3) 9.0 64.8 Adjusted operating cash flow
Pension deficit funding payments (55.1) - - (55.1) Pension funding payments
- - (9.0) (9.0) Historical legal issues payments
Income tax paid (5.0) 5.0 - -
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) - -
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 - -
Repayment of obligations under leases (5.6) 5.6 - -
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 historical legal issues are shown
separately in the adjusted cash flow.
Independent review report to Reach plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Reach plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Interim Results of
Reach plc for the 26 week period ended 25 June 2023 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
• the consolidated balance sheet as at 25 June 2023;
• the consolidated income statement and the consolidated statement of
comprehensive income for the period then ended;
• the consolidated cash flow statement for the period then ended;
• the consolidated statement of changes in equity for the period then ended; and
• the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Results of Reach plc
have been prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Interim Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Interim Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Interim Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
25 July 2023
LEI: 213800GNI5XF3XOATR61
Classification: 1.2 Half yearly financial reports and audit reports/limited
reviews
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR VZLFLXDLBBBVRecent news on Reach
See all newsREG - Reach PLC - Holding(s) in Company
AnnouncementREG - Reach PLC - Notice of Meeting
AnnouncementREG - Reach PLC - Annual Report Publication
AnnouncementREG - Reach PLC - Annual Results for 53 weeks ended 31 December 2023
AnnouncementREG - Reach PLC - Notice of Results
Announcement