TIDMRCH
RNS Number : 0707S
Reach PLC
07 March 2023
Reach plc - Full Year Results - 52 weeks to 25 December 2022
7 March 2023
Growing customer engagement & audience expansion support
stronger digital future
FY23 continued macro headwinds - addressing through cost action
plan
Jim Mullen Chief Executive
"Reach is continuing to deliver our Customer Value Strategy and
is becoming a fundamentally different business; more efficient,
more digitally capable and more focused on building the foundation
for growing sustainable and data led digital revenues. Our award
winning journalism and continued strategic investment is supporting
a growing base of engaged and active customers. The improved depth
and breadth of our content and businesswide focus on data is
driving an increasing proportion of higher yielding digital revenue
and a decreasing reliance on open market programmatically driven
advertising.
We expect uncertain macroeconomic conditions to persist during
2023 but, as shown during the pandemic, we are effective at
managing them, with an action plan in place to help mitigate the
current headwinds. We will continue to invest in areas which
support digital expansion, such as the US, where we'll leverage our
scale and apply the proven Customer Value Strategy playbook which
is positioning us favourably to benefit when economic conditions
improve."
Business Highlights - FY22 in line with revised expectations,
CVS driving improved digital mix
Data-led revenue improves digital mix; resilient circulation
& cost efficiency mitigates inflation & advertising
slowdown
-- Growth of 56% in data-led revenues which are now 32% of total digital
(FY21: 21%)
-- Engagement up strongly; registrations 12.7m with 5.6m active up 30%,
page views +4%, page views per user +7%
-- Additional print cover price increases and resilient volume performance
support strong circulation revenue
-- Inflation impact on operating costs of c.GBP40 million during year;
mitigating actions protect strategic investment
-- Industry wide decline in open-market advertising yields holds back
overall digital growth
-- New dedicated US operation in 2023; expect growth from expansion of
audience and data-led engagement
Financial Summary
------------------------- ------- --------------------------- -------------------------
52 weeks to 25 Dec Adjusted results(1) Statutory results
2022
------- --------------------------- -------------------------
2022 2021 Change 2022 2021 Change
--------------------------------- ------- ------- --------- ------ ------ ---------
Revenue GBPm 601.4 615.8 (2.3%) 601.4 615.8 (2.3%)
------------------------- ------- ------- ------- --------- ------ ------ ---------
106. 146.
Operating profit GBPm 1 1 (27.4%) 71.3 79.3 (10.1%)
------------------------- ------- ------- ------- --------- ------ ------ ---------
Operating profit margin % 17. 6% 23. 7% (610bps) 11.9% 12.9% (100bps)
------------------------- ------- ------- ------- --------- ------ ------ ---------
Earnings per share Pence 27.1 37.6 (27.9%) 16.8 0.9 N/A
------------------------- ------- ------- ------- --------- ------ ------ ---------
Net cash GBPm 25.4 6 5.7 (61.3%) 25.4 65.7 (61.3%)
------------------------- ------- ------- ------- --------- ------ ------ ---------
Dividend per share
(2) Pence 7.34 7.21 1.8% 7.34 7.21 1.8%
------------------------- ------- ------- ------- --------- ------ ------ ---------
Outlook and current trading
The current trading environment remains challenging and we
expect this to continue in 2023, with sustained inflation and
suppressed market demand for digital advertising. Although input
costs remain elevated, we are confident that our cost action plan
will enable us to deliver a 5-6% like for like reduction in our
operating cost base for FY23.
Trading for January and February has been in line with our
expectations. As anticipated, we have continued to see a decline in
demand for digital advertising, with open market yields and traffic
down across the whole sector, against stronger prior year
comparators, particularly during the earlier part of the year
(digital revenue H1'22 up 5.4%; H2'22 down 2.7%). Circulation
revenue continues to benefit from increased cover price activity
during the second half of FY22, with print trends overall, similar
to Q4'22 and in line with expectations. For the year to date;
digital revenue year over year was down 11.9%, print down 3.6% and
circulation up 1.8%. Total Group revenue was down 5.8%.
While external factors are affecting near term performance,
consistent strategic delivery is supporting the growth of higher
quality digital revenues, which with our US expansion, puts us in a
strong position to grow when macro headwinds subside. Profit
expectations for the full year are in line with the current market
consensus(3) .
Results Overview
Group revenue down 2.3% - robust print driven by circulation
performance; yield pressure impacts digital
-- Print revenue GBP448.6m (FY21: GBP465.1m) down 3.5%, circulation and
advertising down 1.7% and 15.9% respectively
-- Digital revenue of GBP149.8m (FY21: GBP148.3m) was up 1.0%; growth
of 56% in data-led revenues offset by macro related decline in market
yield for ad space sold programmatically in the open market, which
was down c.33% during the year and c.40% in H2
-- Circulation strengthened by cover price increases with minimal impact
on long term trend in print volumes
-- Decline in print advertising broadly in line with movement in print
volumes; accelerated decline during H2 due to impact on the advertising
market from The Queen's death and lower ad demand during Black Friday
and Christmas
Newsprint inflation impacts profit, mitigated through cost
actions and increased cover prices
-- A djusted operating profit of GBP106.1m down GBP40.0m or 27.4% (FY21:
GBP146.1m); reflecting decline in revenue and significant increase
in input cost inflation, largely due to increase in the cost of newsprint,
up c.40% on 2021
-- Savings from changes to print production, including printed volumes
and pagination (book size) help mitigate other inflationary pressures
and support strategic investment
-- Statutory operating profit of GBP71.3m (FY21: GBP79.3m) down 10.1%,
with decline in adjusted profits, partly offset by a reduction in
adjusted items to GBP34.8m (FY21: GBP66.8m); prior year charges relate
to increases in the HLI provision and the move to flexible working
model
-- Statutory EPS of 16.8p (FY21: 0.9p) ahead due to the reflection of
the future change to the UK corporation tax rate in last year's comparator
Cash & Capital Allocation
-- Lower adjusted operating cash flow (4) of GBP64.8m (2021: GBP141.3m)
reflects both lower in year profit and a negative movement in working
capital, driven in part by an increase in newsprint inventories as
part of increased hedging
-- Net cash(5) decreased by GBP40.3m to GBP25.4m, including payment of
GBP9.0m related to historical legal issues and the penultimate payment
of GBP17.1m for the Express & Star; final payment of GBP7.0m subsequently
made in Feb 2023
-- The IAS19 pension accounting deficit (net of deferred tax) at year
end was GBP113.9m (FY21: GBP117.2m), with the increase in the discount
rate and contributions offset by asset return decreases
-- We continue to work with pension trustees of the one remaining scheme
where we've yet to achieve resolution of the 2019 triennial review
of pension commitments
-- Final dividend proposed of 4.46 pence per share, flat with 2021, with
full year dividend of 7.34p up 1.8%
Formalising our approach to business responsibility
-- Formalised responsible business framework, following stakeholder consultation
- aligns our purpose and strategy
-- Set 5-year climate strategy roadmap as part of journey to net-zero;
working towards full measurement of Scope 3 emissions and production
of complete carbon footprint
-- Introduced TCFD aligned reporting for 2022 Annual Report and Accounts
-- Ranked number 29 (42 in 2021) in Inclusive Companies Top 50 listing
and top rated in Sustainalytics ESG rankings
Quarterly Year-on-Year Revenue Movements
2022 Q1 YOY Q2 YOY Q3 YOY Q4 YOY FY YOY
% % % % %
Digital Revenue 10.4% 0.3% 1.1% (5.9%) 1.0%
------- -------- -------- -------- --------
Print Revenue (3.9%) (3.9%) (2.9%) (3.6%) (3.5%)
------- -------- -------- -------- --------
* circulation revenue (6.2%) (4.0%) 2.0% 1.8% (1.7%)
------- -------- -------- -------- --------
* advertising revenue (8.5%) (11.4%) (23.1%) (20.2%) (15.9%)
------- -------- -------- -------- --------
Group Revenue (0.5%) (2.8%) (1.9%) (4.2%) (2.3%)
------- -------- -------- -------- --------
Notes
(1) Set out in note 20 is the reconciliation between the statutory and
adjusted results. The current period is for the 52 weeks ended 25
December 2022 ('2022') and the comparative period is for the 52 weeks
ended 26 December 2021 ('2021').
(2) Full year dividend of 7.34 pence per share comprised of interim dividend
of 2.88 pence per share and proposed final dividend of 4.46 pence
per share.
(3) Market expectations compiled by the company are an average of analyst
published forecasts - consensus adjusted operating profit for FY23
is GBP95.4m.
(4) An adjusted cash flow is presented in note 21 which reconciles the
adjusted operating profit to the net change in cash and cash equivalents.
Note 22 provides a reconciliation between the statutory and adjusted
cash flows.
(5) Net cash balance comprises cash and cash equivalents of GBP40.4m (note
16) less bank borrowings of GBP15.0m (note 16) but excludes lease
obligations.
Enquiries
Reach
Jim Mullen, Chief Executive Officer
Darren Fisher, Chief Financial Officer
Lija Kresowaty, Head of External Communications communications@reachplc.com
Matt Sharff, Investor Relations Director 07341 470 722
Tulchan Communications reachplc@tulchangroup.com
Giles Kernick 020 7353 4200
Jim Mullen, Chief Executive Officer, Darren Fisher, Chief
Financial Officer and Lloyd Embley, Group Editor-in-Chief, will be
hosting a webcast at 9:00am (UK) on 7 March 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 (UK). 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/oqz5mt9r
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/BI12882b2754ba48fd9ea81aa5e0c77b31
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 52 weeks ended 25 December 2022. 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
Rising to the challenge
Reach is and continues to be a resilient and adaptable business.
Although external factors - including the war in Ukraine, the
aftermath of COVID and resulting global supply chain disruption -
are affecting our financial performance in the near term, we're
looking beyond this.
We've taken action to preserve our strong foundations and to
ensure we continue to deliver our Customer Value Strategy, which is
creating a stronger and more sustainable business for our
stakeholders.
And with a long-term view - we are a fundamentally different
business today; more efficient, more digitally capable and more
focused on growth.
Addressing macro headwinds
As a result of these global factors, the unit cost of newsprint,
our most significant print production cost outside of labour, has
increased by around 60% - reaching a level not seen since the
global financial crisis.
In 2022, this contributed to almost GBP40m of additional
operating costs due to inflation. We've also seen advertising
demand slowing across the sector, which in digital, has been
reflected in lower yields for 'programmatically' served ads which
are sold via open market platforms. Trading during the final
quarter of the year was disappointing, with Black Friday and
Christmas failing to provide the seasonal uplift seen in previous
years.
We're assuming that external conditions will remain tough and
have planned accordingly. We're a resilient and flexible
organisation, with a long track record of driving operating
efficiencies with the evolution of our operating model and through
the process of continuous cost improvement. In 2023 we expect to
generate significant savings supported by efficiencies in print
procurement and distribution, the simplification of support
functions and through managing the size of our teams - in some
areas slowing down hiring while in others, regrettably, making some
redundancies. We're confident that our cost action plan will enable
us to reduce operating costs by between 5% and 6%.
Strategy delivering, despite market uncertainty
Our strategy is to get to know customers better - drawing on
behavioural insights to create a virtuous circle of value from more
relevant content, a more engaging experience, and greater loyalty,
which drives sustainable, data-led revenue. And I'm pleased to say
we're making good progress and tracking to plan.
Earlier in the year, we surpassed our 10m registrations target
and now have over 12.7m customers registered, which is over 25% of
our UK digital audience. Even more significantly, the number of
those customers who are regularly 'active' is growing. We now have
around 5.6m registered users who accessed our content within the
last 28 days. That's important because these relationships are the
lifeblood of our brands. Being a growing part of our customers'
daily lives means customer interactions and the data they generate
are more recent, more relevant and more valuable for
advertisers.
Registrations continue to be an important source of first-party
data from our customers. Postcodes in particular are key to
multiple customer insights and enable personalisation of content at
a local level. They also enable geographically specific
advertising, attractive to brands who want to run a campaign across
our national network and titles, while only serving ads to
customers in a specific area. During the recent train strikes for
example, we worked with several national rail companies, who
displayed ads for bus services but only in areas affected by rail
disruption. We also worked with a well-known national furniture
company, who, with our help, were able to target customers based
within a certain number of miles of a showroom.
Registrations aren't the only source of data. In fact, our fully
owned ad tech software, Mantis, is enabling us to capture detailed
contextual and behavioural data on around three-quarters of our UK
audience, the majority of whom aren't registered. We know whether
they enjoy reading about the Royal Family, UK beach holidays or
women's fashion. And Mantis can identify the sentiment and emotion
attached to the content they read. This is improving our ability to
sell digital advertising directly, with data supporting an
increasing number of campaign segments and more effective
advertising for brands.
The proportion of our digital revenues supported by data is
growing. That means we're improving our revenue mix, with a lower
proportion of our digital business driven by the open market. This
is the 'volume' element of our revenues where we don't control the
price or yield. The scale of our business, with c.300-400m daily ad
impressions means the open market will always be important. More
directly sold advertising, which forms part of more strategic or
'data-led' revenues, offers a greater opportunity for value or
'yield-driven' growth. Total data-led revenues grew by over 50%
during 2022 and are now over 30% of total digital.
Data also provides the insights that help shape our content,
deliver a more personalised experience and drive customer
engagement. Page views for the year grew by 4%, page views per user
by 7% while page views from registered customers, another strong
indicator of engagement, were up around 70% year on year.
Print scale and resilience supports investment
While digital data is key to growing customer engagement, it's
print that makes our investment in data possible. Circulation
trends have remained steady and broadly predictable, benefiting
from relative price resilience and our ability to drive production
efficiencies, which support significant cash generation over the
medium term.
Inflationary headwinds during the year have been felt largely
within print, where we've seen production cost increases in energy,
ink, plates and particularly newsprint. The newsprint market has
been severely impacted by changing demand and supply dynamics in
the aftermath of COVID, in addition to then being hit by the
increase in energy prices that resulted from the outbreak of the
war in Ukraine.
To protect print margins, we increased cover prices more than
average this year, which supported stronger circulation revenue,
particularly during the second half of the year, and will also see
us benefit in the early part of 2023. Circulation revenue for the
year declined by 1.7% overall this year, down c.5% during H1 and up
almost 2% in H2.
From a cost perspective, we made changes to print supply (the
volume we print) and pagination (the number of pages). We made
reductions to supply levels during the year with no material impact
on availability and reduced the size of our newspapers by around
four pages, still leaving the average page count higher than it was
before the pandemic.
As part of our cost reduction plan for 2023, we expect to make
savings in our print supply chain, driven by more efficient raw
materials sourcing and distribution planning.
Enhancing the customer experience
As we improve our data capabilities we need also to improve the
overall digital experience our customers get when they use our
website and apps. A more user-friendly experience is another key
part of keeping them engaged for longer.
This work includes improving site load times and ensuring the
optimum balance between content and advertising, with our product
team exploring multiple options including the trial of an ad-light,
paid-for experience on mobile. We're also rolling out new site
personalisation tools like polls and surveys, which increase
interaction, support registrations and capture richer data.
Our Neptune Recommender, one of our 'next action' tools, uses
Mantis data to promote content to customers that's most relevant to
them. It also enables brands to sponsor content which relates only
to specific topics or sentiments. For example, TSB used this tool
to great effect by sponsoring existing advice-based cost-of-living
content.
The continued development of Mantis shows our strength in
developing our own IP. The team will look to take this further in
2023 via the development of global private or curated marketplaces
which are key to scaling the benefits of data-led advertising. We
are uniquely positioned to partner with the tech platforms to
develop this opportunity by licensing access to Mantis contextual
data which then enables brands to target customers across multiple
publishers.
Developing new audiences
While we've been enhancing the experience for our existing
audience, our strategy also supports us in reaching new audiences.
Our digital launches over the past three years have provided us
with valuable insight and a 'CVS playbook' which we can now apply
to new ventures - expanding both geographically and
demographically.
The US is already a significant market for us, with a growing
audience served by our UK websites, but there's huge potential to
develop this further. And our success in gathering customer data
and in launching multiple newsbrands from scratch over the past few
years puts us in a strong position as we begin the process of
launching a dedicated US operation.
Our focus is on building our existing American audience for the
Mirror, Express and the Irish Star, with IrishStar.com catering to
the sizeable Irish American population, particularly in the New
York and Boston areas. Leveraging our position as the UK's biggest
commercial sports publisher, we'll be adding more 24/7 sports
coverage for our millions of US-based 'soccer' fans.
Creating a brand for youth audiences
As a mainstream publisher, it's our job to appeal to and
represent all parts of society. The evidence is clear that the way
we consume news is changing, with the younger generation in
particular now preferring social media as their main route to
accessing news content. At our half-year results in July, I spoke
about the work we've been doing to grow our relevance with younger
audiences, looking at short-form video as part of positioning
ourselves to attract the next generation of talented journalists
and content creators.
Towards the end of the year we soft-launched Curiously, our new
social-first, video-focused brand designed to appeal to a more
diverse and culturally aware audience. Curiously will be empathetic
and non-political, aiming to cover a broad range of subjects in a
more distinctive and relevant way for 16- to 34-year-olds. It's an
exciting development which we'll update on as the year
progresses.
The stories that matter
In 2022 our editorial teams once again demonstrated their talent
and persistence, the strength of their relationships with their
readers and the mainstream appeal of our brands. The way our
editorial teams pulled together and delivered for their readers
following the death of Her Majesty The Queen was a privilege to
watch - a once-in-a-generation moment that our journalists captured
expertly.
There are many stories from this year that will stick with me.
Including the Mirror's exclusives on Partygate, which, whatever
your personal political beliefs, so clearly showed the vital part
that a strong press plays in democracy.
The Express's successful campaign to add 'Zach's Law' to the
Online Safety Bill and strengthen prison time for internet trolls
who deliberately endanger people with epilepsy. And the Liverpool
Echo's powerful coverage of the fatal shooting of Olivia
Pratt-Korbel, whose life was taken when a gunman forced his way
into her family's home in Kingsheath Avenue, Dovecot, on 22
August.
For these feats and others, our titles and journalists have won
dozens of awards this year, from the Mirror being named Newspaper
of the Year at the London Press Club Awards to the Daily Record's
Annie Brown picking up Scoop of the Year at the Scottish Press
Awards for her investigation into nursery discrimination, or the
Express's Steph Spyro winning Best Environmental Reporting at this
year's MHP Mischief 30 To Watch: Young Journalist Awards.
Stories like these also bring into sharp focus our public
affairs work, through which we aim to ensure that key legislation -
from the Online Safety Bill to the Digital Markets Unit - is
crafted with a real understanding of and appreciation for the
industry. I'm now in my second and final year as Chair of the News
Media Association (NMA) and will continue to work closely with
others in the industry to preserve the long-term ability of our
titles to tell the stories that matter, independently and
sustainably.
No recap of the year would be complete without mentioning the
bravery of the reporters and photographers on the ground in
Ukraine. This war has sent shockwaves through the macroeconomic
environment which affects our business but most importantly, has
had a sobering human impact. The part we, our brands and our
journalists have played in reporting on it is something I'm very
proud of.
Leading our people through unprecedented times
There's no getting away from the fact that the circumstances we
faced in 2022 were extremely difficult for many on a personal
level, and put pressure on the business's relationship with some of
our people, with a number of editorial colleagues taking part in
industrial action. While this was not an easy period for anyone, we
worked closely and diligently with our union representatives and
our editorial teams to find an agreeable solution.
We expect economic conditions will remain challenging in 2023
and so we will continue to consider our costs very carefully. A
spirit of open debate and collaboration will again be essential as
we work together to move forward as a stronger business.
Whatever challenges we face, I am committed to maintaining a
respectful and constructive dialogue with all the teams here at
Reach and would like to thank them for their continued hard work
and the talent they bring to our shared goal of creating a
sustainable journalism business.
It is important to me, both as the CEO and on a personal level,
that Reach continues to be a stronghold for mainstream journalism,
ensuring that our newsbrands serve their audiences for years to
come. And while arriving at this position of strength demands
change, and sometimes difficult change, I am proud of the
significant investments we've made in our editorial teams over the
past three years.
A culture fit for the future
While the challenges mentioned are significant and will require
continued attention and care, I also want to recognise the real
progress we've made as we continue to develop as a business and
reshape our teams to be more agile and fit for purpose. These
include the development of our Network Newsroom to training we've
provided for our more print-focused commercial teams to be able to
pivot to digital.
This constant drive to innovate has been recognised by the
industry with big wins both in the editorial sphere (Best Newsroom
Transformation at the 2022 INMA Global Media Awards) and in the
advertising world (Commercial Team of the Year/Consumer and Best
Use of Data at the British Media Awards).
In 2022 we continued building a culture where people can thrive
- becoming more representative of society and our audiences, both
as a team, including adding diversity targets at Board and
Executive level, and through our journalism. Our Belonging Project
is a good example, as it challenges our local brands to create
content more relevant to communities that have so far been
under-served.
We continue to see this progress recognised by the industry and
by trusted external benchmarks - this year moving up to 29 in the
Inclusive Companies' list of Inclusive Top 50 UK Employers (from 42
in 2021), and earning a spot in the Social Mobility Benchmarking
ranking for the first time. While we still have far to go, I
believe in holding ourselves accountable and measuring and sharing
our progress.
I always say that I want Reach to be a place where people can
get in and get on, and in this spirit I'm proud that we're becoming
a more family friendly employer, announcing in 2022 our new and
updated policies to offer greater support to parents, carers and
those who have lost loved ones.
Formalising our approach to business responsibility
As a publisher of news, sport and entertainment people can
trust, we've always understood our responsibility to society and
communities. Our purpose - to enlighten, empower and entertain -
gives us a privileged position to use our editorial voice to
champion good causes, hold authority to account and campaign on
issues that matter to our audiences.
Our new responsible business framework will help articulate our
approach to environmental, social and governance (ESG) issues more
formally, making it easier to communicate all the great work we're
doing around the business while tracking our progress as a
responsible business, now and in the future.
From a climate perspective, we've enhanced our reporting against
the Task Force on Climate-related Financial Disclosures (TCFD),
made significant progress on our climate strategy and have begun a
review of Scope 3 emissions as part of the journey to net zero.
Welcoming our new CFO
I want to thank Simon Fuller, our former CFO, for his commitment
and support. At the start of February 2023, Darren Fisher joined us
as CFO from ITV. I'm delighted to welcome him to Reach and look
forward to working closely with him as we continue to shape a more
profitable future for the business.
Looking ahead
As we move into the new year, we expect trading conditions will
remain challenging with inflation continuing to impact input costs
and consumer demand for advertising. We are controlling the
controllables, with plans in place that support a meaningful
reduction in operating costs and continued investment in our
Customer Value Strategy. Consistent strategic delivery is
supporting the growth of higher quality digital revenues and puts
us in a strong position to grow when macro headwinds subside.
Jim Mullen
Chief Executive Officer
7 March 2023
Finance Review
Resilience for the long-term
It's been a challenging year for the business, with our
financial performance affected by the worsening of macroeconomic
conditions over the course of the year. Throughout this downcycle,
we have continued to tightly manage our cost base, which will
protect investment in our digital strategy and put us in a strong
position when the economy starts to recover.
Controlling the controllables
Revenue, which was down 2.3%, reflects more subdued demand for
advertising, particularly during the second half of the year when
we saw an industry-wide advertising blackout around the death of HM
The Queen, in addition to consistently lower yields for digital ad
space sold programmatically on the open market. Print circulation
remained robust, with additional cover price increases during the
year boosting revenue. The reduction in adjusted operating profit
also reflects an increase in operating costs, in particular the
cost of newsprint, which has risen by over 40% or 60% on a
like-for-like basis. Statutory profit, although lower, benefited
from a reduction in operating adjusted items, with last year's
profit including charges relating to the rationalisation of our
estate as we moved to flexible working.
To mitigate the impact of inflation, we've focused strongly on
managing costs within our control. During the year, in addition to
the savings from the process of continuous cost optimisation within
the print business, we also made changes to both print pagination
and to supply, managing the availability of our titles to align
more closely with demand and reduce the volume of unsold
copies.
With macroeconomic headwinds likely to persist in the near term,
we have put in place a further programme of cost reduction, which
we're confident will support a 5-6% like for like in-year reduction
in our operating costs for 2023. Savings will be generated
throughout the business and include more efficient procurement
throughout the print supply chain, the simplification of central
support functions and the removal of editorial duplication. As part
of these efficiency measures, we will unfortunately lose some
colleagues from the business, a decision which has not been taken
lightly, as we continue to focus on delivering our digital
strategy, which will secure the long-term sustainability of the
business.
The Group has a strong balance sheet and liquidity with a
closing cash balance of GBP40.4m and a GBP15.0m drawdown on the
facilities resulting in a net cash positive position of GBP25.4m.
During the year, the expiry date of the Group's revolving credit
facility of GBP120.0m was extended for a further year to November
2026.
Looking ahead
In 2020, we began our digital transformation in line with our
Customer Value Strategy - by creating the right 'future structure'
for our business. That strategy is delivering and supports a more
sustainable and higher quality digital mix, with over 30% of
digital revenue now data driven. The next 12 months will bring
fresh challenges, but we've proven over the past few years that
Reach is a resilient business. We believe in and remain committed
to our strategy - and will continue to invest as it drives Reach to
become a higher-yielding digital business.
Summary income statement
Adjusted Adjusted Statutory Statutory
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
---------------------- ----------- ----------- ------------ ------------
Revenue 601.4 615.8 601.4 615.8
Costs (498.1) (472.9) (531.5) (538.1)
Associates 2.8 3.2 1.4 1.6
Operating profit 106.1 146.1 71.3 79.3
Finance costs (2.8) (2.6) (5.1) (6.0)
---------------------- ----------- ----------- ------------ ------------
Profit before tax 103.3 143.5 66.2 73.3
Tax charge (18.8) (26.9) (13.9) (70.4)
---------------------- ----------- ----------- ------------ ------------
Profit after tax 84.5 116.6 52.3 2.9
---------------------- ----------- ----------- ------------ ------------
Earnings per share -
basic 27.1 37.6 16.8 0.9
---------------------- ----------- ----------- ------------ ------------
Group revenue fell by GBP14.4m or 2.3% with print down 3.5%
partially offset by digital revenue growth of 1.0%.
Adjusted costs increased by GBP25.2m or 5.3%, reflecting the
increase in the cost of newsprint. Statutory costs were lower by
GBP6.6m or 1.2%, with the increase in newsprint more than offset by
the reduction in operating adjusted items of GBP31.8m (GBP33.4m in
2022 versus GBP65.2m in 2021).
The lower revenue and higher adjusted operating costs drove a
GBP40.0m or 27.4% decrease in adjusted operating profit. The
adjusted operating margin of 17.6% in 2022 compares to 23.7% for
2021. Statutory operating profit decreased by GBP8.0m or 10.1% in
comparison due to the reduction in operating adjusted items.
Adjusted earnings per share decreased by 10.5p or 27.9% to
27.1p. However, statutory earnings per share increased by 15.9p to
16.8p, principally due to the combined effects on earnings per
share in the prior year of a GBP53.9m deferred tax charge and
operating adjusted items of GBP66.8m. See note 20 for more
details.
Revenue
2022 2021
Actual Actual
GBPm GBPm
--------------- -------- --------
Print 448.6 465.1
----------------- -------- --------
Circulation 307.7 312.9
Advertising 86.9 103.3
Printing 23.1 20.4
Other 30.9 28.5
----------------- -------- --------
Digital 149.8 148.3
Other 3.0 2.4
Total revenue 601.4 615.8
----------------- -------- --------
Revenue fell by GBP14.4m or 2.3% on both an actual and
like-for-like basis. In the prior year, like-for-like trends
excluded the Independent Star acquisition and the impact of
portfolio changes and impacted print revenue only. A reconciliation
is set out in note 23.
Actual Actual Actual Like-for-like
H1 2022 H2 2022 FY 2022 FY 2021
YOY YOY YOY YOY
Like-for-like % % % %
----------------- --------- --------- --------- --------------
Digital 5.4 (2.7) 1.0 25.4
Print (3.9) (3.2) (3.5) (4.7)
Circulation (5.1) 1.9 (1.7) (4.6)
Advertising (9.9) (21.5) (15.9) (4.9)
Printing 19.8 7.6 13.2 (19.0)
Print other 18.4 1.0 8.4 9.2
Total Revenue (1.6) (3.0) (2.3) 1.3
----------------- --------- --------- --------- --------------
Actual YOY
Revenue bridge GBPm %
---------------- -------- --------
2021FY revenue 616
Circulation (5) (1.7)
Advertising (16) (15.9)
Printing 3 13.2
Other 2 8.4
Print (16) (3.5)
Digital 2 1.0
Other 1 25.0
2022FY revenue 601 (2.3)
------------------ -------- --------
Print revenue decreased by GBP16.5m or 3.5% (2021: down 4.7% on
a like-for-like basis).
Circulation revenue was down 1.7% for the period, with a
stronger performance during H2 which benefited from cover price
increases, above recent historical levels, as part of the Group's
efforts to minimise the impact of inflation.
Print advertising revenue declined 15.9% (2021: down 4.9% on a
like-for-like basis), due to print volume declines and 2021 having
benefited from additional Government spend generated by public
health messaging. The second half of the year was also affected by
the impact on the advertising market from the Queen's death and
lower demand during Black Friday and Christmas.
Print revenue also includes external or third-party printing
revenues and other print-related revenues. Printing revenue
increased by 13.2% (2021: decreased 19.0% on a like-for-like basis)
reflecting the increase in newsprint input costs which are directly
passed on to third parties. Other print revenue increased by 8.4%
(2021: increased 9.2% on a like-for-like basis) reflecting an
increase in event-driven and sports printing revenues versus a
comparator period still affected by COVID.
Digital revenue increased by 1.0% to GBP149.8m (2021: 25.4%
LFL), with a decline of 2.7% in H2, offsetting 5.4% growth in H1.
There has been significant growth in strategically driven revenues
of 56%, which are now over 30% of total digital revenue (2021:
21%). This was offset by macro-related decline in advertising
demand, impacted by the war in Ukraine and growing cost of living
crisis which is reflected in a lower yield for ads sold
programmatically via the open market, down c.33% during the year
and c.40% in H2.
Costs
2022 2021 2022 2021
Adjusted Adjusted Statutory Statutory
GBPm GBPm GBPm GBPm
------------------------------- ---------- ---------- ----------- -----------
Labour (234.7) (232.1) (234.7) (232.1)
Newsprint (75.4) (52.9) (75.4) (52.9)
Depreciation and amortisation (20.2) (19.3) (20.2) (19.3)
Other (167.8) (168.6) (201.2) (233.8)
Total costs (498.1) (472.9) (531.5) (538.1)
------------------------------- ---------- ---------- ----------- -----------
Adjusted costs of GBP498.1m (2021: GBP472.9m) increased by
GBP25.2m or 5.3%. This was largely due to the higher cost of
newsprint during the period, with the price per tonne materially
increasing since the second half of 2021. This has been driven by
several factors, the most significant being rising energy prices
following the start of the war in Ukraine. On an equivalent volume
basis, newsprint prices during the year were around 60% higher than
2021.
Statutory costs were lower by GBP6.6m or 1.2% primarily due to
lower operating adjusted items which were GBP31.8m lower (GBP33.4m
in 2022 compared to GBP65.2m in 2021).
Operating adjusted items included in statutory costs related to
the following:
Statutory Statutory
2022 2021
GBPm GBPm
---------------------------------------------------- ----------- -----------
Provision for historical legal issues (11.0) (29.0)
Restructuring charges in respect of cost reduction
measures (15.5) (2.8)
Sublet of closed print plant 16.6 -
Home and Hub project - (23.7)
Pension administrative expenses and past service
costs (14.8) (3.7)
Other items (8.7) (6.0)
Operating adjusted items in statutory costs (33.4) (65.2)
---------------------------------------------------- ----------- -----------
The Group has recorded a GBP11.0m (2021: GBP29.0m) 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.
Restructuring charges of GBP15.5m (2021: GBP2.8m) incurred in
respect of cost reduction measures are principally severance costs
that relate to cost management actions taken in the period.
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
GBP11.0m and previously onerous costs of the vacant site of
GBP5.6m.
Pension costs of GBP14.8m (2021: GBP3.7m) comprise pension
administrative expenses of GBP4.2m and past service costs relating
to a Barber Window equalisation adjustment of GBP10.6m.
Other adjusted items comprise the Group's legal fees in respect
of historical legal issues (GBP5.2m), adviser costs in relation to
the triennial funding valuations (GBP1.6m), impairment of vacant
freehold property (GBP4.2m) and plant and equipment (0.8m) less a
reduction in National Insurance costs relating to share awards
(GBP2.7m) and the profit on sale of impaired assets (GBP0.4m). In
2021 other adjusted items related to adviser costs in relation to
triennial funding valuations (GBP1.2m), an increase in National
Insurance costs relating to share awards (GBP2.6m), the write-off
of an old debit balance (GBP2.9m) and the profit on sale of an
impaired asset (GBP0.7m).
Profit
Adjusted operating profit of GBP106.1m was down GBP40.0m or
27.4% reflecting the decline in revenue of 2.3% and 5.3% increase
in operating costs.
This is also reflected in our adjusted operating margin which
decreased by 6.1 percentage points from 23.7% in 2021 to 17.6% in
2022.
Adjusted YOY
Adjusted operating profit bridge GBPm %
---------------------------------- ---------- -------
2021 adjusted operating profit 146
Revenue mix (14)
inflation (38)
Investment (18)
Efficiencies 25
2021 one-offs & other 5
2022 adjusted operating profit 106 (27%)
------------------------------------ ---------- -------
Reconciliation of statutory to adjusted results
Operating Pension
Statutory adjusted finance Adjusted
results items charge results
GBPm GBPm GBPm GBPm
------------------------------ ------------- ----------- ---------- ------------
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
------------------------------ ------------- ----------- ---------- ------------
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, 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 prior year and items such as transaction and
restructuring costs incurred on acquisitions or the profit or loss
on the sale of subsidiaries, associates or freehold buildings.
Management excludes these from the results that it uses to
manage the business and on which bonuses are based to reflect the
underlying performance of the business and believes that the
adjusted results, presented alongside the statutory results,
provide users with additional useful information. Further details
on the items excluded from the adjusted results are set out in note
20.
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 GBP9.0m have been made during the year and the
provision has been increased by GBP11.0m. At the year end a
provision of GBP43.0m 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 17.
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 GBP3.3m
from GBP117.2m to GBP113.9m at the year end. The increase in the
discount rate and Group contributions has been offset by asset
return decreases. 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 engage with the Pensions Regulator as to the funding of
the remaining scheme, and, in the meantime, continue to make
payments per the existing schedule of contributions.
Group contributions in respect of the defined benefit pension
schemes in the year were GBP55.1m (2021: GBP64.7m), under the
current schedule of contributions. Group contributions in 2021
included GBP9.6m to the Westferry Printers Pension Scheme which
enabled the Trustees of the scheme to purchase a bulk annuity and
the scheme now has all pension liabilities covered by annuity
policies. 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. Contributions in 2023 are expected to
be GBP55.8m under the current schedule of contributions for the
remaining four schemes not covered by annuity policies.
Deferred consideration
Deferred consideration is in respect of the acquisition of
Express & Star. The third payment of GBP17.1m was made on 28
February 2022. The remaining amount of GBP7.0m is classified as
current liabilities (paid on 28 February 2023).
Employee Benefit Trust
The Group funded the Trustees of the Employee Benefit Trust to
enable the Trustees to purchase 521,310 (2021: 883,315) shares at a
total cash consideration of GBP1.0m (average cost 192p per share)
(2021: GBP3.3m (average cost 374p per share)). The shares are held
by the Trustees and will be used to satisfy awards granted under
the Company's employee share plans that are expected to vest in
future years.
Adjusted cash flow
Adjusted cash flow bridge GBPm GBPm
------------------------------ ------ ------
Adjusted EBITDA 126
Tax (5)
Restructuring (14)
Capex (13)
Lease payments (6)
Interest incl. on leases (3)
Working capital and other (20)
Adjusted operating cash flow 65
Historic legal issues (9)
Pension payments (55)
Dividends (23)
Purchase for share awards (1)
Adjusted net cash flow (23)
Payment for Express & Star (17)
RCF financing 15
Cash movement (25)
-------------------------------- ------ ------
Cash balances
Net cash decreased by GBP40.3m from GBP65.7m at the year end to
GBP25.4m at the year end. The Group has GBP15.0m drawn down on the
Group's revolving credit facility, with the overall total cash
position of GBP40.4m at the year end. The Group has a revolving
credit facility of GBP120.0m. During the period the facility was
extended for an extra year and now expires in November 2026.
Cash generated from operations on a statutory basis was GBP80.1m
(2021: GBP163.7m). The Group presents an adjusted cash flow which
reconciles the adjusted operating profit to the net change in cash
and cash equivalents, which is set out in note 21. A reconciliation
between the statutory and the adjusted cash flow is set out in note
22. The adjusted operating cash flow was GBP64.8m (2021:
GBP141.3m).
Dividends
The Board proposes a final dividend of 4.46 pence per share for
2022 (2021: 4.46 pence per share). The final dividend, which is
subject to approval by shareholders at the Annual General Meeting
on 3 May 2023, will be paid on 2 June 2023 to shareholders on the
register at 12 May 2023.
An interim dividend for 2022 of 2.88 pence per share was paid on
23 September 2022 (2021: 2.75 pence per share).
In proposing a final dividend of 4.46 pence per share for 2022
(2021: 4.46 pence per share), the Board has considered all
investment requirements and its funding commitments to the defined
benefit pension schemes.
Current trading and outlook
The current trading environment remains challenging and we
expect this to continue in 2023, with sustained inflation and
suppressed market demand for digital advertising. Although input
costs remain elevated, we are confident that our cost action plan
will enable us to deliver a 5-6% like for like reduction in our
operating cost base for 2023.
Trading for January and February has been in line with our
expectations. As anticipated, we have continued to see a decline in
demand for digital advertising, with open market yields and traffic
down across the whole sector, against stronger prior year
comparators, particularly during the earlier part of the year (H1
2022 up 5.4%; H2 2022 down 2.7%). Circulation revenue continues to
benefit from increased cover price activity during the second half
of 2022, with print trends overall similar to Q4 2022 and in line
with expectations. For the year to date; digital revenue year over
year was down 11.9%, print down 3.6% and circulation up 1.8%. Total
Group revenue was down 5.8%.
While external factors are affecting near term performance,
consistent strategic delivery is supporting the growth of higher
quality digital revenues, which with our US expansion, puts us in a
strong position to grow when macro headwinds subside.
Darren Fisher
Chief Financial Officer
7 March 2023
Statement of directors' responsibilities
The directors are responsible for preparing the Preliminary
Audited Results Announcement in accordance with applicable laws and
regulations. The responsibility statement below has been prepared
in connection with the Company's full Annual Report for the 52
weeks ended 25 December 2022. Certain points thereof are not
included within this Preliminary Audited Results Announcement.
The directors confirm to the best of their knowledge:
a) the consolidated financial statements, which have been prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and
b) the Preliminary Audited Results Announcement includes a fair
review of the development and performance of the business and the
position of the Group together with a description of the principal
risks and uncertainties that it faces.
By order of the Board of Directors
Darren Fisher
Chief Financial Officer
7 March 2023
Consolidated income statement
for the 52 weeks ended 25 December 2022 (52 weeks ended 26
December 2021)
Adjusted Adjusted
Adjusted items Statutory Adjusted items Statutory
2022 2022 2022 2021 2021 2021
notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- ----------- --------- ------------ ----------- --------- ------------
Revenue 4 601.4 - 601.4 615.8 - 615.8
Cost of sales (375.7) - (375.7) (329.4) - (329.4)
------------------------- -------- ----------- --------- ------------ ----------- --------- ------------
Gross profit 225.7 - 225.7 286.4 - 286.4
Distribution costs (38.1) - (38.1) (41.1) - (41.1)
Administrative expenses 5 (84.3) (33.4) (117.7) (102.4) (65.2) (167.6)
Share of results of
associates 2.8 (1.4) 1.4 3.2 (1.6) 1.6
Operating profit 106.1 (34.8) 71.3 146.1 (66.8) 79.3
Interest income 6 0.1 - 0.1 0.1 - 0.1
Finance costs 7 (2.9) - (2.9) (2.7) - (2.7)
Pension finance charge 15 - (2.3) (2.3) - (3.4) (3.4)
Profit before tax 103.3 (37.1) 66.2 143.5 (70.2) 73.3
Tax charge 8 (18.8) 4.9 (13.9) (26.9) (43.5) (70.4)
------------------------- -------- ----------- --------- ------------ ----------- --------- ------------
Profit for the period
attributable to equity
holders of the parent 84.5 (32.2) 52.3 116.6 (113.7) 2.9
2022 2022 2021 2021
Earnings per share notes Pence Pence Pence Pence
------------------------- -------- ----------- --------- ------------ ----------- --------- ------------
Earnings per share
- basic 10 27.1 16.8 37.6 0.9
Earnings per share
- diluted 10 26.7 16.5 36.5 0.9
------------------------- -------- ----------- --------- ------------ ----------- --------- ------------
The above results were derived from continuing operations. Set
out in note 20 is the reconciliation between the statutory and
adjusted results.
Consolidated statement of comprehensive income
for the 52 weeks ended 25 December 2022 (52 weeks ended 26
December 2021)
2022 2021
notes GBPm GBPm
--------------------------------------------------- -------- ------- -------
Profit for the period 52.3 2.9
Items that will not be reclassified to profit and
loss:
Actuarial (loss)/gain on defined benefit pension
schemes 15 (35.0) 102.9
Tax on actuarial (loss)/gain on defined benefit
pension schemes 8 7.4 (26.0)
Deferred tax credit resulting from future change
in rate 8 - 13.9
Share of items recognised by associates after tax (1.7) (0.6)
--------------------------------------------------- -------- ------- -------
Other comprehensive (loss)/income for the period (29.3) 90.2
Total comprehensive income for the period 23.0 93.1
--------------------------------------------------- -------- ------- -------
Consolidated statement of changes in equity
for the 52 weeks ended 25 December 2022 (52 weeks ended 26
December 2021)
Accumulated
Share Capital loss and
Share premium Merger redemption other
capital account reserve reserve reserves Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------- ---------- ---------- ---------- ------------- ------------ --------
At 28 December 2020 32.2 605.4 17.4 4.4 (92.7) 566.7
---------------------------------------- ---------- ---------- ---------- ------------- ------------ --------
Profit for the period - - - - 2.9 2.9
Other comprehensive income
for the period - - - - 90.2 90.2
---------------------------------------- ---------- ---------- ---------- ------------- ------------ --------
Total comprehensive income
for the period - - - - 93.1 93.1
---------------------------------------- ---------- ---------- ---------- ------------- ------------ --------
Purchase of own shares (note
18) - - - - (3.3) (3.3)
Credit to equity for equity-settled
share-based payments - - - - 1.7 1.7
Deferred tax credit for equity-settled
share-based payments - - - - 2.4 2.4
Dividends paid - - - - (21.8) (21.8)
At 26 December 2021 32.2 605.4 17.4 4.4 (20.6) 638.8
---------------------------------------- ---------- ---------- ---------- ------------- ------------ --------
Profit for the period - - - - 52.3 52.3
Other comprehensive loss for
the period - - - - (29.3) (29.3)
---------------------------------------- ---------- ---------- ---------- ------------- ------------ --------
Total comprehensive income
for the period - - - - 23.0 23.0
---------------------------------------- ---------- ---------- ---------- ------------- ------------ --------
Purchase of own shares (note
18) - - - - (1.0) (1.0)
Credit to equity for equity-settled
share-based payments - - - - 1.8 1.8
Deferred tax charge for equity-settled
share-based payments - - - - (2.2) (2.2)
Dividends paid (note 9) - - - - (22.9) (22.9)
At 25 December 2022 32.2 605.4 17.4 4.4 (21.9) 637.5
---------------------------------------- ---------- ---------- ---------- ------------- ------------ --------
Consolidated cash flow statement
for the 52 weeks ended 25 December 2022 (52 weeks ended 26
December 2021)
2022 2021
notes GBPm GBPm
------------------------------------------------------ -------- ------- -------
Cash flows from operating activities
Cash generated from operations 11 80.1 163.7
Pension deficit funding payments 15 (55.1) (64.7)
Income tax paid (5.0) (14.6)
------------------------------------------------------ -------- ------- -------
Net cash inflow from operating activities 20.0 84.4
------------------------------------------------------ -------- ------- -------
Investing activities
Interest received 6 0.1 0.1
Dividends received from associated undertakings 2.5 2.5
Proceeds on disposal of property, plant and
equipment 0.4 0.7
Purchases of property, plant and equipment 13 (3.0) (6.5)
Expenditure on capitalised internally generated
development 12 (10.7) (6.0)
Deferred consideration payment 16 (17.1) (16.0)
Acquisition of associated undertaking - (0.8)
Net cash used in investing activities (27.8) (26.0)
Financing activities
Interest and charges paid on borrowings (1.9) (1.4)
Dividends paid 9 (22.9) (21.8)
Interest paid on leases 16 (1.1) (1.3)
Repayment of obligation under leases 16 (5.6) (6.9)
Purchase of own shares 18 (1.0) (3.3)
Drawdown of borrowings 15.0 -
Net cash used in financing activities (17.5) (34.7)
------------------------------------------------------ -------- ------- -------
Net (decrease)/increase in cash and cash equivalents (25.3) 23.7
------------------------------------------------------ -------- ------- -------
Cash and cash equivalents at the beginning
of the period 16 65.7 42.0
------------------------------------------------------ -------- ------- -------
Cash and cash equivalents at the end of the
period 16 40.4 65.7
------------------------------------------------------ -------- ------- -------
Consolidated balance sheet
at 25 December 2022 (at 26 December 2021)
notes 2022 2021
GBPm GBPm
--------------------------------------------- -------- -------- --------
Non-current assets
Goodwill 12 35.9 35.9
Other intangible assets 12 832.9 824.3
Property, plant and equipment 13 140.1 157.3
Right-of-use assets 14 10.9 12.7
Finance lease receivable 10.4 -
Investment in associates 14.6 17.4
Retirement benefit assets 15 51.2 107.9
1,096.0 1,155.5
--------------------------------------------- -------- -------- --------
Current assets
Inventories 12.9 5.5
Trade and other receivables 95.2 102.3
Current tax receivable 13.9 13.5
Finance lease receivable 0.6 -
Cash and cash equivalents 16 40.4 65.7
163.0 187.0
--------------------------------------------- -------- -------- --------
Total assets 1,259.0 1,342.5
--------------------------------------------- -------- -------- --------
Non-current liabilities
Trade and other payables (4.5) (6.4)
Deferred consideration 16 - (7.0)
Lease liabilities 16 (26.8) (30.7)
Retirement benefit obligations 15 (202.1) (261.8)
Provisions 17 (36.6) (43.6)
Deferred tax liabilities (191.6) (188.1)
(461.6) (537.6)
--------------------------------------------- -------- -------- --------
Current liabilities
Trade and other payables (106.7) (114.7)
Deferred consideration 16 (7.0) (17.1)
Borrowings 16 (15.0) -
Lease liabilities 16 (4.9) (5.5)
Provisions 17 (26.3) (28.8)
(159.9) (166.1)
--------------------------------------------- -------- -------- --------
Total liabilities (621.5) (703.7)
--------------------------------------------- -------- -------- --------
Net assets 637.5 638.8
--------------------------------------------- -------- -------- --------
Equity
Share capital 18 32.2 32.2
Share premium account 18 605.4 605.4
Merger reserve 18 17.4 17.4
Capital redemption reserve 18 4.4 4.4
Accumulated loss and other reserves 18 (21.9) (20.6)
--------------------------------------------- -------- -------- --------
Total equity attributable to equity holders
of the parent 637.5 638.8
--------------------------------------------- -------- -------- --------
Notes to the consolidated financial statements
for the 52 weeks ended 25 December 2022 (52 weeks ended 26
December 2021)
1 . General information
The financial information, which comprises the Consolidated
income statement, the Consolidated statement of comprehensive
income, the Consolidated cash flow statement, the Consolidated
statement of changes in equity and the Consolidated balance sheet
and related notes ('Consolidated Financial Information') in the
Preliminary Audited Results announcement is derived from but does
not represent the full statutory accounts of Reach plc. The
statutory accounts for the 52 weeks ended 26 December 2021 have
been filed with the Registrar of Companies and those for the 52
weeks ended 25 December 2022 will be filed following the Annual
General Meeting on 3 May 2023. The auditors' reports on the
statutory accounts for the 52 weeks ended 26 December 2021 and for
the 52 weeks ended 25 December 2022 were unqualified, do not
include reference to any matters to which the auditors drew
attention by way of emphasis of matter without qualifying the
reports and do not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006.
Whilst the Consolidated Financial Information included in this
Preliminary Audited Results Announcement has been prepared in
accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS), this
announcement does not itself contain sufficient information to
comply with IFRS. This Preliminary Audited Results Announcement
constitutes a dissemination announcement in accordance with Section
6.3 of the Disclosure and Transparency Rules (DTR). The Annual
Report for the 52 weeks ended 25 December 2022 will be available on
the Company's website at www.reachplc.com and at the Company's
registered office at One Canada Square, Canary Wharf, London E14
5AP before the end of March 2023 and will be sent to shareholders
who have elected to receive a hard copy with the documents for the
Annual General Meeting to be held on 3 May 2023.
The Consolidated Financial Information has been prepared for the
52 weeks ended 25 December 2022 and the comparative period has been
prepared for the 52 weeks ended 26 December 2021. Throughout this
report, the Consolidated Financial Information for the 52 weeks
ended 25 December 2022 is referred to and headed 2022 and for the
52 weeks ended 26 December 2021 is referred to and headed 2021. The
presentational currency of the Group is Sterling. The Company
presents the results on a statutory and adjusted basis and revenue
trends on a statutory and like-for-like basis as described in note
2.
2. Accounting policies
Basis of preparation
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 27 December 2021. This
change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework.
The Consolidated Financial Information has been prepared in
accordance with UK-adopted international accounting standards
('IFRS') and the applicable legal requirements of the Companies Act
2006. These standards are subject to ongoing amendment by the
International Accounting Standards Board and are therefore subject
to change. As a result, the Consolidated Financial Information
contained herein will need to be updated for any subsequent
amendment to IFRS or any new standards that are issued. The
Consolidated Financial Information has been prepared under the
historical cost convention.
The accounting policies used in the preparation of the
Consolidated Financial Information for the 52 weeks ended 25
December 2022 and for the 52 weeks ended 26 December 2021 have been
consistently applied to all the periods presented. These
Consolidated Financial Statements have been prepared on a going
concern basis.
Going concern basis
The directors have made appropriate enquires and consider that
the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future, which comprises
the period of at least 12 months from the date of approval of the
financial statements.
In accordance with LR 9.8.6(3) of the Listing Rules, and in
determining whether the Group's annual consolidated financial
statements can be prepared on a going concern basis, the directors
considered all factors likely to affect its future development,
performance and its financial position, including cash flows,
liquidity position and borrowing facilities, and the principal
risks and uncertainties relating to its business activities.
The key factors considered by the directors were as follows:
-- The performance of the business in 2022 and the progress being made
in the implementation of the Group's Customer Value Strategy and the
implications of the current macroeconomic environment including inflationary
pressures. The Group undertakes regular forecasts and projections
of trading, identifying areas of focus for management to improve the
delivery of the Customer Value Strategy and mitigate the impact of
any deterioration in the economic outlook;
-- The impact of the competitive environment within which the Group's
businesses operate;
-- The impact on our business of key suppliers (in particular newsprint)
being unable to meet their obligations to the Group;
-- The impact on our business of key customers being unable to meet their
obligations for services provided by the Group;
-- The deficit funding contributions to the defined benefit pension schemes
and payments in respect of historical legal issues; and
-- The available cash reserves and committed finance facilities available
to the Group. During the year, the Group extended the expiry date
of its GBP120.0m facility for a further year to 19 November 2026.
The Group has drawn down GBP15.0m on the facility at the reporting
date.
Having considered all the factors impacting the Group's
businesses, including downside sensitivities (relating to trading
and cash flow), the directors are satisfied that the Company and
the Group will be able to operate within the terms and conditions
of the Group's financing facilities for the foreseeable future.
The directors have reasonable expectations that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the Group's annual
consolidated financial statements.
Changes in accounting policy
The same accounting policies, presentation and methods of
computation are followed in the Consolidated Financial Information
as applied in the Group's latest annual consolidated financial
statements for the 52 weeks ended 26 December 2021.
Alternative performance measures
The Company presents the results on a statutory and adjusted
basis and revenue trends on a statutory and like-for-like basis.
The Company believes that the adjusted basis and like-for-like
trends will provide investors with useful supplemental information
about the financial performance of the Group, enable comparison of
financial results between periods where certain items may vary
independent of business performance, and allow for greater
transparency with respect to key performance indicators used by
management in operating the Group and making decisions. Although
management believes the adjusted basis is important in evaluating
the Group, it is not intended to be considered in isolation or as a
substitute for, or as superior to, financial information on a
statutory basis. The alternative performance measures are not
recognised measures under IFRS and do not have standardised
meanings prescribed by IFRS and may be different to those used by
other companies, limiting the usefulness for comparison purposes.
Note 20 sets out the reconciliation between the statutory and
adjusted results. An adjusted cash flow is presented in note 21
which reconciles the adjusted operating profit to the net change in
cash and cash equivalents. Set out in note 22 is the reconciliation
between the statutory and adjusted cash flow. Note 23 shows the
reconciliation between the statutory and like-for-like
revenues.
Adjusting items
Adjusting items relate to costs or income that derive from
events or transactions that fall within the normal activities of
the Group, but are excluded from the Group's adjusted profit
measures, individually or, if of a similar type in aggregate, due
to their size and/or nature in order to better reflect management's
view of the performance of the Group. The adjusted profit measures
are not recognised profit measures under IFRS and may not be
directly comparable with adjusted profit measures used by other
companies. All operating adjusting items are recognised within
administrative expenses. Details of adjusting items are set out in
note 20 with additional information in notes 5, 8 and 15.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed
below:
Historical Legal Issues (notes 17 and 19)
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 2022, a charge of GBP11.0m (2021: GBP29.0m) has been
made, which relates to an increase in the estimate for claim
settlement values and the associated legal costs, and an increase
in common court costs as cases progress. The charge has decreased
from the prior year with the number of new claims arising in the
year, being in line with expectation. At the period end, a
provision of GBP43.0m 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 GBP32m to GBP56m (2021: GBP32m to
GBP53m). 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 currently listed in May 2023 where a
number of claims are expected to be heard) 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
19.
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
GBP8.1m (2021: GBP7.4m). 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 GBP27.2m (2021: nil to
GBP25.1m).
Retirement benefits (note 15)
Actuarial assumptions adopted and external factors can
significantly impact the surplus or deficit of defined benefit
pension schemes. Valuations for funding and accounting purposes are
based on assumptions about future economic and demographic
variables. These result in risk of a volatile valuation deficit and
the risk that the ultimate cost of paying benefits is higher than
the current assessed liability value. Advice is sourced from
independent and qualified actuaries in selecting suitable
assumptions at each reporting date.
Impairment review (note 12)
There is uncertainty in the value-in-use calculation. The most
significant area of uncertainty relates to expected future cash
flows for 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.
Restructuring and property provisions (note 17)
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 GBP818.7m) 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
2022 2021
GBPm GBPm
--------------- ------ ------
Print 448.6 465.1
--------------- ------ ------
Circulation 307.7 312.9
Advertising 86.9 103.3
Printing 23.1 20.4
Other 30.9 28.5
--------------- ------ ------
Digital 149.8 148.3
Other 3.0 2.4
Total revenue 601.4 615.8
--------------- ------ ------
The Group's operations are located primarily in the UK.
5. Operating adjusted items
2022 2021
GBPm GBPm
-------------------------------------------------------- ------- -------
Provision for historical legal issues (note 17) (11.0) (29.0)
Restructuring charges in respect of cost reduction
measures (note 17) (15.5) (2.8)
Sublet of closed print site (note 14 and 17) 16.6 -
Home and Hub project - (23.7)
Pension administrative expenses and past service costs
(note 15) (14.8) (3.7)
Other items (note 20) (8.7) (6.0)
Operating adjusted items included in administrative
expenses (33.4) (65.2)
Operating adjusted items included in share of results
of associates (1.4) (1.6)
-------------------------------------------------------- ------- -------
Total operating adjusted items (34.8) (66.8)
-------------------------------------------------------- ------- -------
Operating adjusted items relate to costs or income that derive
from events or transactions that fall within the normal activities
of the Group, but are excluded from the Group's adjusted profit
measures, individually or, if of a similar type in aggregate, due
to their size and/or nature in order to better reflect management's
view of the performance of the Group. The adjusted profit measures
are not recognised profit measures under IFRS and may not be
directly comparable with adjusted profit measures used by other
companies. Set out in note 20 is the reconciliation between the
statutory and adjusted results which includes descriptions of the
items included in adjusted items.
The Group has recorded a GBP11.0m (2021: GBP29.0m) 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 17).
Restructuring charges of GBP15.5m (2021: GBP2.8m) incurred in
respect of cost reduction measures are principally severance costs
that relate to cost management actions taken in the period.
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
GBP11.0m (note 14) and previously onerous costs of the vacant print
site of GBP5.6m (note 17). The impairment and onerous closure costs
of the vacant print site were recognised in operating adjusted
items in 2020.
Pension costs of GBP14.8m (2021: GBP3.7m) comprise pension
administrative expenses of GBP4.2m and past service costs relating
to a Barber Window equalisation adjustment of GBP10.6m.
Other adjusted items comprise the Group's legal fees in respect
of historical legal issues (GBP5.2m), adviser costs in relation to
the triennial funding valuations (GBP1.6m), impairment of vacant
freehold property (GBP4.2m) and plant and equipment (0.8m) less a
reduction in National Insurance costs relating to share awards
(GBP2.7m) and the profit on sale of impaired assets (GBP0.4m). In
2021 other adjusted items related to adviser costs in relation to
triennial funding valuations (GBP1.2m), an increase in National
Insurance costs relating to share awards (GBP2.6m), the write-off
of an old debit balance (GBP2.9m) and the profit on sale of an
impaired asset (GBP0.7m).
In the first half of 2021, the Group implemented a Home and Hub
project which set out the vision for how the Group's offices would
look and where job roles would be based. As a consequence of the
project a number of offices or floors were closed. The project
resulted in charges of GBP23.7m (impairments of GBP2.3m relating to
property, plant and equipment and GBP10.5m relating to right-of-use
assets and a GBP10.9m property rationalisation charge relating to
onerous costs of vacant properties).
6. Interest income
2022 2021
GBPm GBPm
---------------------------------- ------ ------
Interest income on bank deposits 0.1 0.1
---------------------------------- ------ ------
7. Finance costs
2022 2021
GBPm GBPm
------------------------------------ ------ ------
Interest and charges on borrowings (1.8) (1.4)
Interest on lease liabilities (1.1) (1.3)
------------------------------------ ------ ------
Finance costs (2.9) (2.7)
------------------------------------ ------ ------
8. Tax charge
2022 2021
GBPm GBPm
----------------------------------------------------- ------- -------
Corporation tax charge for the period (4.5) (4.8)
Prior period adjustment (0.7) 0.9
----------------------------------------------------- ------- -------
Current tax charge (5.2) (3.9)
----------------------------------------------------- ------- -------
Deferred tax charge for the period (9.0) (12.8)
Prior period adjustment 0.3 0.2
Deferred tax rate change - (53.9)
----------------------------------------------------- ------- -------
Deferred tax charge (8.7) (66.5)
----------------------------------------------------- ------- -------
Tax charge (13.9) (70.4)
----------------------------------------------------- ------- -------
Reconciliation of tax charge 2022 2021
GBPm GBPm
Profit before tax 66.2 73.3
----------------------------------------------------- ------- -------
Standard rate of corporation tax of 19% (2021: 19%) (12.6) (13.9)
Tax effect of permanent items that are not included
in determining taxable profit (1.2) (4.0)
Change in rate of deferred tax - (53.9)
Prior period adjustment (0.4) 1.1
Tax effect of share of results of associates 0.3 0.3
Tax charge (13.9) (70.4)
----------------------------------------------------- ------- -------
The standard rate of corporation tax for the period is 19%
(2021: 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
of GBP13.9m (2021: GBP13.5m) is net of the uncertain tax provision
of GBP19.1m (2021: GBP17.7m). At the reporting date, the maximum
amount of the additional unprovided tax exposure relating to an
uncertain tax item is GBP8.1m (2021: GBP7.4m). 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
GBP27.2m (2021: nil to GBP25.1m).
The Budget on 5 March 2021 increased the rate of corporation tax
from 19% to 25% with effect from 1 April 2023. At 26 December 2021,
this rate change had been substantively enacted by parliament
meaning that the opening deferred tax position was recalculated in
the period resulting in a GBP53.9m debit in the consolidated income
statement and a GBP13.9m credit in the consolidated statement of
comprehensive income.
The tax on actuarial losses (2021: gains) on defined benefit
pension schemes taken to the consolidated statement of
comprehensive income is a deferred tax credit of GBP7.4m (2021:
charge of GBP26.0m).
The amount taken to the consolidated income statement as a
result of pension contributions was GBP7.1m (2021: GBP10.1m).
9. Dividends
2022 2021
Pence Pence
per share per share
------------------------------------------------------- ----------- -----------
Amounts recognised as distributions to equity holders
in the period
Dividends paid per share - prior year final dividend 4.46 4.26
Dividends paid per share - interim dividend 2.88 2.75
Total dividends paid per share 7.34 7.01
------------------------------------------------------- ----------- -----------
Dividend proposed per share but not paid nor included
in the accounting records 4.46 4.46
------------------------------------------------------- ----------- -----------
The Board proposes a final dividend for 2022 of 4.46 pence per
share. An interim dividend for 2022 of 2.88 pence per share was
paid on 23 September 2022 bringing the total dividend in respect of
2022 to 7.34 pence per share. The 2022 final dividend payment is
expected to amount to GBP14.0m.
On 5 May 2022, the final dividend proposed for 2021 of 4.46
pence per share was approved by shareholders at the Annual General
Meeting and was paid on 10 June 2022.
Total dividends paid in 2022 were GBP22.9m (2021 final dividend
payment of GBP13.9m and 2022 interim dividend payment of
GBP9.0m).
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.
2022 2021
Thousand Thousand
--------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for basic
earnings per share 312,153 310,282
Effect of potential dilutive ordinary shares in respect
of share awards 4,828 8,971
Weighted average number of ordinary shares for diluted
earnings per share 316,981 319,253
--------------------------------------------------------- ----------- -----------
The weighted average number of potentially dilutive ordinary
shares not currently dilutive was 5,406,814 (2021: 1,704,886).
Statutory earnings per share 2022 2021
Pence Pence
Earnings per share - basic 16.8 0.9
Earnings per share - diluted 16.5 0.9
-------------------------------- -------- --------
Adjusted earnings per share 2022 2021
Pence Pence
------------------------------- -------- --------
Earnings per share - basic 27.1 37.6
Earnings per share - diluted 26.7 36.5
------------------------------- -------- --------
Set out in note 20 is the reconciliation between the statutory
and adjusted results.
11. Cash flows from operating activities
2022 2021
GBPm GBPm
----------------------------------------------------------- ------ -----
Operating profit 71.3 79.3
Depreciation of property, plant and equipment 15.2 15.3
Depreciation of right-of-use assets 2.9 3.6
Amortisation of other intangible assets 2.1 0.4
Impairment of property, plant and equipment 5.0 2.3
Reversal of impairment of right-of-use assets (11.0) -
Impairment of right-of-use assets - 10.5
Profit on disposal of property, plant and equipment (0.4) (0.7)
Share of results of associates (1.4) (1.6)
Share-based payments charge 1.5 1.7
Pension administrative expenses and past service costs 14.8 3.7
Operating cash flows before movements in working capital 100.0 114.5
Increase in inventories (7.4) (0.9)
Decrease in receivables 7.2 5.6
(Decrease)/increase in payables (19.7) 44.5
----------------------------------------------------------- ------ -----
Cash flows from operating activities 80.1 163.7
----------------------------------------------------------- ------ -----
12. Goodwill and other intangible assets
The carrying value of goodwill and other intangible assets
is:
Publishing Internally
rights generated Intangible
Goodwill and titles assets assets
GBPm GBPm GBPm GBPm
Opening carrying value 35.9 818.7 5.6 860.2
Additions - - 10.7 10.7
Amortisation - - (2.1) (2.1)
Closing carrying value 35.9 818.7 14.2 868.8
------------------------ --------- ------------ ----------- -----------
During the year, the Group capitalised internally generated
assets relating to software and website development costs of
GBP10.7m. 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 GBP818.7m) have indefinite economic lives due to the
longevity of the brands and the ability to evolve them in an
ever-changing media landscape. The brands are central to the
delivery of the Customer Value Strategy which is delivering digital
revenue growth. This, combined with our inbuilt and relentless
focus on maximising efficiency, gives confidence that the delivery
of sustainable growth in revenue, profit and cash flow is
achievable in the future.
There is judgement required in determining the cash-generating
units. At each reporting date management review the interdependency
of revenues across our Publishing brands to determine the
appropriate cash-generating unit. The Group operates its Publishing
brands such that a majority of the revenues are interdependent and
revenue would be materially lower if brands operated in isolation.
As such, management do not consider that an impairment review at an
individual brand level is appropriate or practical. As the Group
continues to centralise revenue generating functions and has moved
to a matrix operating structure over the past few years all of the
individual brands in Publishing have increased revenue
interdependency and are assessed for impairment as a single
Publishing cash-generating unit.
The Group tests the carrying value of assets at the
cash-generating unit level for impairment annually or more
frequently if there are indicators that assets might be impaired.
The review is undertaken by assessing whether the carrying value of
assets is supported by their value-in-use which is calculated as
the net present value of future cash flows derived from those
assets, using cash flow projections. If an impairment charge is
required this is allocated first to reduce the carrying amount of
any goodwill allocated to the cash-generating unit and then to the
other assets of the cash-generating unit but subject to not
reducing any asset below its recoverable amount.
The impairment review in respect of the Publishing
cash-generating unit concluded that no impairment charge was
required.
For the impairment review, cash flows have been prepared using
the approved Budget for 2023 and projections for a further nine
years as this is the period over which the transformation to
digital can be assessed. The projections for 2024 to 2032 are
internal projections based on continued decline in print revenues
and growth in digital revenues and the associated change in the
cost base as a result of the changing revenue mix. The Group's
medium-term internal projections are that growth in digital revenue
will be sufficient to offset the decline in print revenue and that
overall revenue will stabilise. The long-term growth rates beyond
the 10-year period have been assessed at 1.0% (2021: 0%) based on
the Board's view of the market position and maturity of the
relevant market. We continue to believe that there are significant
longer-term benefits of our scale national and local digital
audiences and there are opportunities to grow revenue and profit in
the longer term.
The discount rate reflects the weighted average cost of capital
of the Group. The current post-tax and equivalent pre-tax discount
rate used is 10.8% (2021: 10.8%) and 13.9% (2021: 14.2%)
respectively.
The impairment review is highly sensitive to reasonably possible
changes in key assumptions used in the value-in-use calculations
and there is uncertainty relating to the current challenging
macroeconomic environment. The headroom in the impairment review is
GBP183m (2021: GBP411m). EBITDA in the 10 year projections is
forecast to grow at a CAGR of 1.6% (2021: 1.3%). A combination of
reasonably possible changes in key assumptions such as print
revenue declining at a faster rate than projected, digital revenue
growth being significantly lower than projected or the associated
change in the cost base being different than projected, could lead
to an impairment if these resulted in the EBITDA in the 10-year
projections declining at a CAGR of 0.9% (2021: -5.0%).
Alternatively an increase in the discount rate by 2.4 percentage
points (2021: 5.6 percentage points) would lead to the removal of
the headroom.
13. Property, plant and equipment
Freehold
land and Plant Asset
buildings and equipment under construction Total
GBPm GBPm GBPm GBPm
----------------------------------------- ----------- --------------- -------------------- --------
Cost
At 26 December 2021 204.6 360.5 2.2 567.3
Additions - 1.7 1.3 3.0
Disposals - (24.0) - (24.0)
Reclassification - 3.0 (3.0) -
----------------------------------------- ----------- --------------- -------------------- --------
At 25 December 2022 204.6 341.2 0.5 546.3
----------------------------------------- ----------- --------------- -------------------- --------
Accumulated depreciation and impairment
At 26 December 2021 (99.3) (310.7) - (410.0)
Charge for the period (2.6) (12.6) - (15.2)
Eliminated on disposal - 24.0 - 24.0
Impairment (4.2) (0.8) - (5.0)
----------------------------------------- ----------- --------------- -------------------- --------
At 25 December 2022 (106.1) (300.1) - (406.2)
----------------------------------------- ----------- --------------- -------------------- --------
Carrying amount
At 26 December 2021 105.3 49.8 2.2 157.3
----------------------------------------- ----------- --------------- -------------------- --------
At 25 December 2022 98.5 41.1 0.5 140.1
----------------------------------------- ----------- --------------- -------------------- --------
Impairment of vacant freehold property of GBP4.2m (note 5) is as
a result of the carrying value of certain Group properties being in
excess of their market value at the reporting date. Plant and
equipment has been impaired by GBP0.8m (note 5) in the period due
to the closure of a print site.
GBP24.0m of disposals in cost and accumulated depreciation
relate to the scrapping of plant and equipment as a result of the
sublet of the vacant print site, which was fully impaired in
2020.
14. Right-of-use assets
Properties Vehicles Total
GBPm GBPm GBPm
----------------------------------------------- ----------- --------- -------
Cost
At 26 December 2021 43.1 3.4 46.5
Additions 1.1 - 1.1
Derecognition at start of sublease classified
as finance lease (14.6) - (14.6)
Derecognition at end of lease term (2.2) (0.2) (2.4)
----------------------------------------------- ----------- --------- -------
At 25 December 2022 27.4 3.2 30.6
Accumulated depreciation and impairment
At 26 December 2021 (31.8) (2.0) (33.8)
Charge for the period (2.2) (0.7) (2.9)
Reversal of impairment 11.0 - 11.0
Derecognition at start of sublease classified
as finance lease 3.6 - 3.6
Derecognition at end of lease term 2.2 0.2 2.4
At 25 December 2022 (17.2) (2.5) (19.7)
Carrying amount
At 26 December 2021 11.3 1.4 12.7
----------------------------------------------- ----------- --------- -------
At 25 December 2022 10.2 0.7 10.9
----------------------------------------------- ----------- --------- -------
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 GBP11.0m in 2022 (note 5). The sublet has been classified
as a finance lease and the net investment in the lease of GBP11.0m
is recognised as a finance lease receivable in the consolidated
balance sheet.
15. Retirement benefit schemes
Defined contribution pension schemes
The Group operates defined contribution pension schemes for
qualifying employees, where the assets of the schemes are held
separately from those of the Group in funds under the control of
Trustees.
The current service cost charged to the consolidated income
statement for the year of GBP18.1m (2021: GBP17.1m) 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 GBP73m and these are
projected to rise to an annual peak in 2034 of GBP104m 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 valuation date for all
six of the Group's schemes was 31 December 2019, although the
process to determine the 31 December 2022 valuations is now due to
commence.
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 GBP476.0m.
The Group paid contributions of GBP40.9m to the MGN Scheme in 2022
and the current schedule of contributions includes payments of
GBP40.9m 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 GBP57.2m.
The Group paid contributions of GBP5.2m to this scheme in 2022 and
agreed an unchanged schedule of contributions of payments of
GBP5.2m 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 GBP73.8m. The Group paid contributions of GBP5.9m to this scheme
in 2022 and the agreed schedule of contributions features payments
of GBP6.9m pa from 2023 to 2025, GBP7.8m pa in 2026 and 2027 and
GBP8.6m 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 GBP25.1m. The Group paid contributions of
GBP2.8m to this scheme in 2022 and the agreed schedule of
contributions includes payments of GBP2.8m pa from 2023 to 2026 and
GBP0.8m in 2027. During the year, 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 GBP9.6m to the WF
Scheme in 2021 which together with the payment of GBP5.0m 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 year were GBP55.1m (2021: GBP64.7m).
At the reporting date, the funding deficits in all schemes are
expected to be removed before or around 2029 by a combination of
the contributions and asset returns. Contributions (which include
funding for pension administrative expenses) are payable monthly.
Contributions per the current schedule of contributions are
GBP55.8m pa in 2023 to 2025, GBP56.7m pa in 2026, GBP54.7m pa in
2027 and GBP8.6m 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 16% 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 93% 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 7% 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
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 year-end reporting date show removal of the
accounting deficit by the end of 2026 for the MGN Scheme and 2028
for the MIN Scheme due to scheduled contributions and asset returns
at the current target rate. From this point, the assets are
projected to be sufficient to fully fund the liabilities on the
accounting basis. The Group is not exposed to any unusual, entity
specific or scheme specific risks. Other than the impact of GMP
equalisation and the Barber Window equalisation adjustment, there
were no plan amendments, settlements or curtailments in 2022 or
2021 which 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 December 2022.
Based on actuarial advice, the assumptions used in calculating
the scheme liabilities are:
2022 2021
-------------------------------------------------- ---------------- ----------------
Financial assumptions (nominal % pa)
Discount rate 4.90 1.83
Retail price inflation rate 3.29 3.46
1.0% pa 1.0% pa
lower than lower than
RPI to RPI to
2030 and 2030 and
equal to equal to
Consumer price inflation rate RPI thereafter RPI thereafter
Rate of pension increases in deferment 2.90 3.24
Rate of pension increases in payment 3.38 3.40
-------------------------------------------------- ---------------- ----------------
Mortality assumptions - future life expectancies
from age 65 (years)
Male currently aged 65 21.6 21.8
Female currently aged 65 24.0 24.1
Male currently aged 55 21.3 21.5
Female currently aged 55 24.5 24.6
-------------------------------------------------- ---------------- ----------------
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 2021 and 2022, the financial assumptions have been
derived for each scheme based on their individual circumstances,
rather than considering the schemes in aggregate as has been done
in the past. Note that the assumptions provided in the table above
for 2021 and 2022 are the average assumptions across all of the
schemes.
The discount rate should be chosen to be equal to the yield
available on 'high quality' corporate bonds of appropriate term and
currency. For 2021 and 2022, the discount rate has been set to
reflect the full corporate bond yield curve with a different
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 2021 and 2022, the inflation
assumptions have been set using the full inflation curve. The RPI
assumption is set based on a margin deducted from the break-even
RPI inflation curve. 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 0.3% (to broadly reflect 0.2% to 2030 and 0.4%
thereafter). The CPI assumption is set based on a margin deducted
from the RPI assumption, due to lack of market data on CPI
expectations. Based on an analysis of the CPI-linkage of the cash
flow profile of the schemes the assumed gap between RPI and CPI
inflation is 1.0% per annum up to 2030 and 0.0% per annum beyond
2030, consistent with 2021.
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
GBPm GBPm
--------------------------------------------- ------------ ---------
Discount rate +/- 1.0% pa -190/+230 -160/+200
Retail price inflation rate +/- 0.5% pa +23/-23 +15/-15
Consumer price inflation rate +/- 0.5% pa +25/-23 +24/-21
Life expectancy at age 65 +/- 1 year +75/-80 +60/-65
--------------------------------------------- ------------ ---------
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 GBP10.6m relates to a Barber Window
equalisation adjustment identified by the Trustees of the MGN
Scheme during the year. The impact relates to the equalisation of
retirement ages to 65, which was previously implemented from 17 May
1990, rather than the date of the Deed of Amendment of the Rules
which was 4 April 1991.
2022 2021
Consolidated income statement GBPm GBPm
----------------------------------------------------- ------- ------
Pension administrative expenses (4.2) (3.7)
Past service costs (10.6) -
Pension finance charge (2.3) (3.4)
Defined benefit cost recognised in income statement (17.1) (7.1)
----------------------------------------------------- ------- ------
Consolidated statement of comprehensive income 2022 2021
GBPm GBPm
Actuarial loss due to liability experience (60.1) (22.0)
Actuarial gain due to liability assumption changes 940.4 30.5
------------------------------------------------------------- ------- ------
Total liability actuarial gain 880.3 8.5
Returns on scheme assets (less)/greater than discount
rate (915.9) 48.6
Impact of IFRIC 14 0.6 45.8
------------------------------------------------------------- ------- ------
Total (loss)/gain recognised in statement of comprehensive
income (35.0) 102.9
------------------------------------------------------------- ------- ------
Consolidated balance sheet 2022 2021
GBPm GBPm
---------------------------------------------------------- ---------- ----------
Present value of uninsured scheme liabilities (1,571.5) (2,395.0)
Present value of insured scheme liabilities (288.5) (393.4)
---------------------------------------------------------- ---------- ----------
Total present value of scheme liabilities (1,860.0) (2,788.4)
---------------------------------------------------------- ---------- ----------
Invested and cash assets at fair value 1,421.8 2,242.9
Value of liability matching insurance contracts 288.5 393.4
---------------------------------------------------------- ---------- ----------
Total fair value of scheme assets 1,710.3 2,636.3
---------------------------------------------------------- ---------- ----------
Funded deficit (149.7) (152.1)
Impact of IFRIC 14 (1.2) (1.8)
---------------------------------------------------------- ---------- ----------
Net scheme deficit (150.9) (153.9)
---------------------------------------------------------- ---------- ----------
Non-current assets - retirement benefit assets 51.2 107.9
Non-current liabilities - retirement benefit obligations (202.1) (261.8)
---------------------------------------------------------- ---------- ----------
Net scheme deficit (150.9) (153.9)
---------------------------------------------------------- ---------- ----------
Net scheme deficit included in consolidated balance
sheet (150.9) (153.9)
Deferred tax included in consolidated balance sheet 37.0 36.7
---------------------------------------------------------- ---------- ----------
Net scheme deficit after deferred tax (113.9) (117.2)
---------------------------------------------------------- ---------- ----------
Mov ement in net scheme deficit 2022 2021
GBPm GBPm
Opening net scheme deficit (153.9) (314.4)
Contributions 55.1 64.7
Consolidated income statement (17.1) (7.1)
Consolidated statement of comprehensive income (35.0) 102.9
Closing net scheme deficit (150.9) (153.9)
------------------------------------------------- ------- -------
2022 2021
Changes in the present value of scheme liabilities GBPm GBPm
-------------------------------------------------------------- --------- ---------
Opening present value of scheme liabilities (2,788.4) (2,864.1)
Past service costs (10.6) -
Interest cost (49.9) (41.8)
Actuarial loss - experience (60.1) (22.0)
Actuarial gain - change to demographic assumptions 6.7 1.6
Actuarial gain - change to financial assumptions 933.7 28.9
Benefits paid 108.6 109.0
Closing present value of scheme liabilities (1,860.0) (2,788.4)
-------------------------------------------------------------- --------- ---------
2022 2021
Impact of IFRIC 14 GBPm GBPm
--------------------------------- ----- ------
Opening impact of IFRIC 14 (1.8) (47.6)
Decrease in impact of IFRIC 14 0.6 45.8
Closing impact of IFRIC 14 (1.2) (1.8)
--------------------------------- ----- ------
2022 2021
Changes in the fair value of scheme assets GBPm GBPm
------------------------------------------------------- ------- -------
Opening fair value of scheme assets 2,636.3 2,597.3
Interest income 47.6 38.4
Actual return on assets (less)/greater than discount
rate (915.9) 48.6
Contributions by employer 55.1 64.7
Benefits paid (108.6) (109.0)
Administrative expenses (4.2) (3.7)
Closing fair value of scheme assets 1,710.3 2,636.3
------------------------------------------------------- ------- -------
Fair value of scheme assets 2022 2021
GBPm GBPm
----------------------------------------- ------- -------
UK equities 27.5 58.7
US equities 48.5 157.1
Other overseas equities 28.4 181.1
Property 33.2 40.5
Corporate bonds 315.9 260.9
Fixed interest gilts 6.7 34.9
Index linked gilts - 18.3
Liability driven investment 816.5 903.4
Cash and other 145.1 588.0
----------------------------------------- ------- -------
Invested and cash assets at fair value 1,421.8 2,242.9
Value of insurance contracts 288.5 393.4
----------------------------------------- ------- -------
Fair value of scheme assets 1,710.3 2,636.3
----------------------------------------- ------- -------
The assets of the schemes are primarily held in pooled
investment vehicles which are unquoted. The pooled investment
vehicles hold both quoted and unquoted investments. Scheme assets
include neither direct investments in the Company's ordinary shares
nor any property assets occupied nor other assets used by the
Group.
16. Net cash
The net cash for the Group is as follows:
IFRS 16 lease
liabilities movement
---------------------------- ------------ -------
27 December Cash Loan 25 December
2021 flow drawdown Interest New leases 2022
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ------- ----------- ----------- ------------- ------------
Liabilities from financing
activities
Borrowings - - (15.0) - - (15.0)
Lease liabilities (36.2) 6.7 - (1.1) (1.1) (31.7)
(36.2) 6.7 (15.0) (1.1) (1.1) (46.7)
Current assets
Cash and cash equivalents 65.7 (40.3) 15.0 - - 40.4
---------------------------- ------------ ------- ----------- ----------- ------------- ------------
Net cash less lease
liabilities 29.5 (6.3)
---------------------------- ------------ ------- ----------- ----------- ------------- ------------
Net cash 65.7 (40.3) - - - 25.4
---------------------------- ------------ ------- ----------- ----------- ------------- ------------
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits with an original maturity of one week or
less. The carrying amount of these assets approximates their fair
value.
The Group has a revolving credit facility of GBP120.0m which was
extended for a further year in 2022 and now expires on 19 November
2026. The Group had drawings of GBP15.0m at the reporting date. The
facility is subject to two covenants: Interest Cover and Net Debt
to EBITDA, both of which were met at the reporting date.
Acquisition deferred consideration
Deferred consideration (which is shown separately on the face of
the consolidated balance sheet) is in respect of the acquisition of
Express & Star. Payment of the first instalment of GBP18.9m was
made on 28 February 2020. The second instalment of GBP16.0m was
made on 28 February 2021 and the third instalment of GBP17.1m was
made on 28 February 2022. The remaining amount of GBP7.0m is
classified as current liabilities (payable on 28 February 2023).
There are no conditions attached to the payment of the deferred
consideration and the transaction was structured such that no
interest accrues on these payments. However, under the sale and
purchase agreement the Group has the right to offset agreed claims
arising from a breach of warranties and indemnities and can also
offset any shortfalls on the contracted advertising from the Health
Lottery. The deferred consideration has not been discounted as we
do not believe that the impact of such discounting is material.
17. Provisions
Share-based Historical
payments Property Restructuring legal Other Total
GBPm GBPm GBPm issues GBPm GBPm
GBPm
-------------------------- ------------ ----------- ---------------- ----------- -------- --------
At 27 December 2021 (4.0) (12.3) (10.3) (41.0) (4.8) (72.4)
Charged to income
statement (0.3) - (15.7) (11.0) (1.0) (28.0)
Released to income
statement 2.7 0.4 5.6 - 1.1 9.8
Utilisation of provision 0.7 2.5 13.8 9.0 1.7 27.7
At 25 December
2022 (0.9) (9.4) (6.6) (43.0) (3.0) (62.9)
-------------------------- ------------ ----------- ---------------- ----------- -------- --------
The provisions have been analysed between current and
non-current as follows:
2022 2021
GBPm GBPm
------------- ------- -------
Current (26.3) (28.8)
Non-current (36.6) (43.6)
------------- ------- -------
(62.9) (72.4)
------------- ------- -------
The share-based payments provision relates to National Insurance
obligations attached to the future crystallisation of awards. This
provision will be utilised over the next three years.
The property provision relates to property-related onerous
contracts and onerous committed costs related to vacant properties.
The provision will be utilised over the remaining term of the
leases or expected period of vacancy.
The restructuring provision relates to restructuring charges
incurred in the delivery of cost reduction measures. The charge
includes GBP15.5m of principally severance costs relating to cost
management actions taken in the period (note 5). The sublet of a
vacant print plant has resulted in the release of GBP5.6m of
previously onerous costs (note 5). The balance at the period end
comprises severance costs of GBP4.1m and closure costs relating to
a print plant of GBP2.5m. The severance costs provision is expected
to be utilised within the next year. The closure costs provision
includes GBP0.5m expected to be utilised within the next year and
GBP2.0m 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 2022, a charge of GBP11.0m (2021: GBP29.0m) has been
made, which relates to an increase in the estimate for claim
settlement values and the associated legal costs, and an increase
in common court costs as cases progress. The charge has decreased
from the prior year with the number of new claims arising in the
year, being in line with expectation. At the period end, a
provision of GBP43.0m 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 GBP32m to GBP56m (2021: GBP32m to
GBP53m). 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 currently listed in May 2023 where a
number of claims are expected to be heard) 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 19.
The other provision balance of GBP3.0m at the period end relates
to libel and other matters and is expected to be utilised over the
next two years.
18. Share capital and reserves
The share capital comprises 322,085,269 (2021: 322,085,269)
allotted, called up and fully paid ordinary shares of 10p each.
The share premium account reflects the premium on issued
ordinary shares. The merger reserve comprises the premium on the
shares allotted in relation to the acquisition of Express &
Star. The capital redemption reserve represents the nominal value
of the shares purchased and subsequently cancelled under share
buy-back programmes.
The Company holds 5,014,410 shares as Treasury shares (2021:
8,128,176 shares). On 4 March 2022, 1,106,273 shares, 27 July 2022,
992,627 shares and 2 December 2022, 1,013,951 shares were
individually withdrawn from Treasury and transferred to the Reach
Employee Benefit Trust to satisfy the vesting of awards granted in
2019 under the Reach Long Term Incentive Plan. In the first half of
2022, 915 shares were withdrawn from Treasury to satisfy the
vesting of the share award to colleagues granted in December 2020
under the Reach All-Employee Share Plan.
Cumulative goodwill written off to accumulated loss and other
reserves in respect of continuing businesses acquired prior to 1998
is GBP25.9m (2021: GBP25.9m). On transition to IFRS, the revalued
amounts of freehold properties were deemed to be the cost of the
asset and the revaluation reserve has been transferred to
accumulated loss and other reserves.
Shares purchased by the Reach Employee Benefit Trust are
included in accumulated loss and other reserves at GBP3.9m (2021:
GBP5.2m). During the year the Trust purchased 521,310 (2021:
883,315) for a cash consideration of GBP1.0m (2021: GBP3.3m). The
Trust received a payment of GBP1.0m (2021: GBP3.3m) from the
Company to purchase these shares. During the year, 2,621,142 were
released relating to grants made in prior years (2021:
1,241,171).
During the year, awards relating to 667,448 shares were granted
to executive directors on a discretionary basis under the Long Term
Incentive Plan (2021: 608,136). The exercise price of each award is
GBP1 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 year, awards relating to 1,256,413 shares were
granted to senior managers on a discretionary basis under the Long
Term Incentive Plan (2021: 1,010,227). The exercise price of each
award is GBP1 for each block of awards granted. The awards vest
after three years, subject to the continued employment of the
participant and satisfaction of certain performance conditions.
During the year, awards relating to 121,575 shares were granted
to executive directors under the Restricted Share Plan (2021: nil).
The award was based on the average share price over the three
months prior to the date of the award of GBP2.207. The award vests
after three years.
19. Contingent liabilities
Historical Legal Issues
It is unknown how long it will take to fully resolve historical
legal issues set out in note 17 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 currently listed in May 2023 where
a number of claims are expected to be heard) and the potential for
new legal matters which could mean that the final outcome is
outside our view on the range of outcomes of GBP32m to GBP56m
(2021: GBP32m to GBP53m).
20. Reconciliation of statutory to adjusted results
52 weeks ended 25 December 2022
Operating Pension
adjusted finance
Statutory items charge Tax Adjusted
results (a) (b) (c) results
GBPm GBPm GBPm GBPm GBPm
-------------------------- -------------- ------------ ----------- ------- -------------
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
-------------------------- -------------- ------------ ----------- ------- -------------
52 weeks ended 26 December 2021
Operating Pension
adjusted finance
Statutory items charge Tax Adjusted
results (a) (b) (c) results
GBPm GBPm GBPm GBPm GBPm
-------------------------- -------------- ------------ ----------- ------- -------------
Revenue 615.8 - - - 615.8
Operating profit 79.3 66.8 - - 146.1
Profit before tax 73.3 66.8 3.4 - 143.5
Profit after tax 2.9 57.0 2.8 53.9 116.6
Basic earnings per share
(p) 0.9 18.4 0.9 17.4 37.6
-------------------------- -------------- ------------ ----------- ------- -------------
(a) Operating adjusted items relate to the items charged or
credited to operating profit as set out in note 5.
(b) Pension finance charge relates to the defined benefit
pension schemes as set out in note 15.
(c) Tax items relate to the impact of tax legislation changes
due to the change in the future corporation tax rate on the opening
deferred tax position as set out in note 8.
Set out in note 2 is the rationale for the alternative
performance measures adopted by the Group. The reconciliations in
this note highlight the impact on the respective components of the
income statement.
Items are adjusted on the basis that they distort the underlying
performance of the business where they relate to material items
that can recur (including impairment, restructuring, tax rate
changes) or relate to historical liabilities (including historical
legal and contractual issues, defined benefit pension schemes which
are all closed to future accrual). Other items may be included in
adjusted items if they are not expected to recur in future years,
such as the property rationalisation in the prior year and items
such as transaction and restructuring costs incurred on
acquisitions or the profit or loss on the sale of subsidiaries,
associates or freehold buildings.
Impairments to non-current assets arise following impairment
reviews or where a decision is made to close or retire printing
assets. These non-cash items are included in adjusted items on the
basis that they are material and vary considerably each year,
distorting the underlying performance of the business.
The opening deferred tax position is recalculated in the period
in which a change in the standard rate of corporation tax has been
enacted or substantively enacted by parliament. The impacts of the
change in rates are included in adjusted items on the basis that
when they occur they are material, distorting the underlying
performance of the business.
Provision for historical legal issues relates to the cost
associated with dealing with and resolving civil claims for
historical phone hacking and unlawful information gathering. This
is included in adjusted items as the amounts are material, it
relates to historical matters and movements in the provision can
vary year to year.
The Group's defined benefit pension schemes are all closed to
new members and to future accrual and are therefore not related to
the current business. The pension administration expenses, 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.
Included in adjusted items in 2022 are the reversal of an
impairment in right-of-use assets of GBP11.0m and previously
onerous costs of GBP5.6m due to the sublet of a vacant print site
which was closed in 2020. Other adjusted items comprise the Group's
legal fees in respect of historical legal issues (GBP5.2m), adviser
costs in relation to the triennial funding valuations (GBP1.6m),
impairment of vacant freehold property (GBP4.2m) and plant and
equipment (GBP0.8m) less a reduction in National Insurance costs
relating to share awards (GBP2.7m) and the profit on sale of
impaired assets (GBP0.4m). These are included in adjusted items as
they relate to historic liabilities or are one-off items not
expected to recur.
Included in adjusted items in 2021 are costs relating to a Home
and Hub project which set out the vision for how the Group's
offices would look and where job roles would be based. As a
consequence of the project a number of offices or floors have been
closed. The project has resulted in charges of GBP23.7m
(impairments of GBP2.3m relating to property, plant and equipment
and GBP10.5m relating to right-of-use assets and a GBP10.9m
property rationalisation charge relating to onerous costs of vacant
properties). Restructuring charges include GBP1.4m of costs
relating to the integration of the Irish Daily Star which was
acquired in 2020 and a further GBP1.4m of restructuring relating to
the closure of two print sites at the end of 2020. Other items
relate to adviser costs in relation to the triennial funding
valuations costs (GBP1.2m), National Insurance costs relating to
share awards (GBP2.6m) and the write-off of an old debit balance
(GBP2.9m) partially offset by profit on sales of print assets
(GBP0.7m). These are included in adjusted items as they relate to
historic liabilities or are one-off items not expected to
recur.
21. Adjusted cash flow
2022 2021
GBPm GBPm
------------------------------------------------------ ------- -------
Adjusted operating profit 106.1 146.1
Depreciation and amortisation 20.2 19.3
Adjusted EBITDA 126.3 165.4
Net interest and charges paid on borrowings (1.8) (1.3)
Income tax paid (5.0) (14.6)
Restructuring payments (13.8) (15.1)
Net capital expenditure (13.3) (11.8)
Interest paid on leases (1.1) (1.3)
Repayment of obligation under leases (5.6) (6.9)
Working capital and other (20.9) 26.9
Adjusted operating cash flow 64.8 141.3
Historical legal issues payments (9.0) (11.0)
Dividends paid (22.9) (21.8)
Purchase of own shares (1.0) (3.3)
Pension funding payments (55.1) (64.7)
Adjusted net cash flow (23.2) 40.5
Bank facility drawdown 15.0 -
Acquisition-related cash flows (17.1) (16.8)
Net (decrease)/increase in cash and cash equivalents (25.3) 23.7
------------------------------------------------------ ------- -------
22. Reconciliation of statutory to adjusted cash flow
Statutory Adjusted
52 weeks ended 25 December 2022 (a) (b) 2022
2022 GBPm GBPm GBPm GBPm
Cash flows from operating
activities
Adjusted operating
Cash generated from operations 80.1 (24.3) 9.0 64.8 cash flow
Pension funding
Pension deficit funding payments (55.1) - - (55.1) payments
Historical legal
- - (9.0) (9.0) 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) - -
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
Acquisition-related
Deferred consideration payment (17.1) - - (17.1) cash flow
Net cash used in investing
activities (27.8)
Financing activities
Interest and charges paid
on borrowings (1.9) 1.9 - -
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
Purchase of own shares (1.0) - - (1.0) 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.
Statutory Adjusted
52 weeks ended 26 December 2021 (a) (b) 2021
2021 GBPm GBPm GBPm GBPm
-------------------------------------- ---------- ------- ------- --------- ------------------------
Cash flows from operating
activities
Adjusted operating
Cash generated from operations 163.7 (33.4) 11.0 141.3 cash flow
Pension funding
Pension deficit funding payments (64.7) - - (64.7) payments
Historical legal
- - (11.0) (11.0) issues payments
Income tax paid (14.6) 14.6 - -
-------------------------------------- ----------
Net cash inflow from operating
activities 84.4
-------------------------------------- ----------
Investing activities
Interest received 0.1 (0.1) - -
Dividends received from associated
undertakings 2.5 (2.5) - -
Proceeds on disposal of property,
plant and equipment 0.7 (0.7) - - Net capital expenditure
Purchases of property, plant
and equipment (6.5) 6.5 - - Net capital expenditure
Expenditure on capitalised
internally generated development (6.0) 6.0 - - Net capital expenditure
Acquisition-related
Deferred consideration payment (16.0) - - (16.0) cash flow
Acquisition-related
Acquisition of associate undertaking (0.8) - - (0.8) cash flow
Net cash used in investing
activities (26.0)
Financing activities
Dividends paid (21.8) - - (21.8) Dividends paid
Interest and charges paid
on borrowings (1.4) 1.4 - -
Purchase of own
Purchase of own shares (3.3) - - (3.3) shares
Interest paid on leases (1.3) 1.3 - -
Repayment of obligations under
leases (6.9) 6.9 - -
Net cash used in financing
activities (34.7)
-------------------------------------- ---------- ------- ------- ---------
Net increase in cash and cash
equivalents 23.7 - - 23.7
-------------------------------------- ---------- ------- ------- ---------
(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.
23. Reconciliation of statutory to like-for-like revenue
Revenue trends on an actual and like-for-like basis are the same
in 2022.
For 2021 versus 2020 revenue, the like-for-like trends excluded
the Independent Star acquisition and the impact of portfolio
changes and impacted print revenue only.
2021 v Statutory Like-for-like Statutory Like-for-like
2020 2021 (a) 2021 2020 (a) (b) 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ---------- ------- -------------- ---------- ------- ------- --------------
Print 465.1 (10.6) 454.5 479.3 (1.0) (1.5) 476.8
--------------- ---------- ------- -------------- ---------- ------- ------- --------------
Circulation 312.9 (8.7) 304.2 319.7 (0.8) - 318.9
Advertising 103.3 (1.8) 101.5 108.4 (0.2) (1.5) 106.7
Printing 20.4 - 20.4 25.2 - - 25.2
Other 28.5 (0.1) 28.4 26.0 - - 26.0
--------------- ---------- ------- -------------- ---------- ------- ------- --------------
Digital 148.3 - 148.3 118.3 - - 118.3
Other 2.4 - 2.4 2.6 - - 2.6
Total
revenue 615.8 (10.6) 605.2 600.2 (1.0) (1.5) 597.7
--------------- ---------- ------- -------------- ---------- ------- ------- --------------
(a) Exclusion of Irish Daily Star (purchased on 24 November 2020).
(b) Exclusion of Manchester Metro following ending of franchise
agreement in June 2020 and other portfolio changes in 2020.
Principal Risks and Uncertainties
We have considered all risks in the context of delivering our
strategy, and the continuing economic uncertainty following the
COVID pandemic, inflationary challenges, supply chain challenges,
and the changing regulatory and compliance landscape. The
continuing economic uncertainty has caused the following risks to
increase - deterioration in the macroenvironment; deceleration of
digital growth; and supply chain disruption. The risk of a cyber
security breach has also become more likely given the external
environment. Throughout the year we have worked further to enhance
the mitigating actions we have in place. The Board has undertaken a
robust risk assessment and review of our principal risks in this
context, which are set out in the table below.
Principal risks and uncertainties
Risk Description Mitigation What we've done
this year
Deterioration Continued deterioration The economic uncertainty continues. We have closely
in in macroeconomic We closely monitor the risk monitored and assessed
macroeconomic conditions could and imapact and continue to the macroeconomic
conditions result in an take action when needed. We factors and during
uncertain trading have a proven track record the year we have
Risk owner: environment of responding quickly and seen increased inflation
Executive with reduced delivering additional cost pressure in relation
Committee customer and savings as necessary when to energy and newsprint
advertiser spending, faced with unexpected revenue costs. We have continued
Increase higher interest declines. to take action to
rates, higher closely monitor
inflation and costs and be as
increased costs, efficient as possible,
leading to lower taking timely actions
cash flow and to mitigate inflation
profits. cost pressures in
the year.
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Deceleration Changes in the Our strategic development Our strategy, led
of digital traditional is led by an experienced Board by an experienced
growth publishing industry and Executive Committee. Executive Committee,
alongside have led to We have an Investment Committee is built around
acceleration an ongoing decline in place to approve business moving to a digital-led
in decline in print advertising plans when reviewed against model and remains
of print and circulation strategic goals. the key strategic
revenues revenues, which We focus on developing digital focus for the Executive
is being exacerbated revenue streams through the Committee.
Risk owner: by macro-economic Customer Value Strategy. During the year
Executive factors. A lack We continue to take tactical we have focused
Committee of appropriate measures to minimise print on building our
strategic focus revenue declines and maintain direct relationships
Increase could result profits, such as taking appropriate with customers;
in us losing cash mitigation or pricing social video content;
further revenue measures. our strategy for
from existing We have governance structures affiliates; and
products, while which enable the ongoing review launched Curiously
also failing of performance against targets which aims to grow
to grow digital and strategic goals, including revenue from new
revenues quickly a weekly structured trading audiences.
enough to offset meeting.
the decline We keep under consideration
in print. acquisition, joint venture
and other corporate development
opportunities, which are aligned
to our Customer Value Strategy.
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Risk Description Mitigation What we've done
this year
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Cyber An internal All business-critical systems Given our increasing
security or external are well established and are focus on customer
breach cyber threat supported by appropriate disaster data as part of
or attack, or recovery plans. our strategy, the
Risk owner: a breach within We regularly assess our vulnerability potential impact
Chief one of our suppliers, to cyber attack and our ability of a cyber security
Financial could lead to to re-establish operations breach is increasing
Officer/Chief breaches of in the event of a failure. all the time. During
Information confidential The technical infrastructure the year we continued
Officer data, interruption supporting our websites is to deliver our cyber
to our systems within the cloud and our sites security improvement
Increase and services, have been designed to provide programme and have
reputational adequate resilience and continued focused on raising
damage with performance in the event of awareness of cyber
our stakeholders a significant failure. security, provided
and financial We continue to invest in enhancing cyber security training,
loss. our cyber security infrastructure enhanced segregation
as new threats emerge. of our network,
completed further
work on the mitigations
to reduce the impact
of a ransomware
incident, performed
a series of penetration
tests, undertaken
cyber incident training,
and run exercises
to re-establish
operations in the
event of a failure.
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Supply Disruption or We carefully monitor and manage A number of our
chain failure in our all our third-party print print suppliers
disruption supply chain and information systems and are seeing the longer-term
could lead to technology providers - these trend of declining
Risk owner: business disruption, include: demand being exacerbated
Chief increased costs, * Ad producers and planners in recent times
Operating reduced service by the COVID pandemic
Officer/Chief and product and followed more
Financial quality, and * wholesalers and distributors recently by increases
Officer ultimately mean in the costs of
we are unable materials and energy.
Increase to deliver our * newsprint suppliers This in turn increases
strategy. the risk of supply
Print: Our chain disruption
print products, * manufacturing maintenance and parts providers and price increases.
which rely on During the year
a small number we have increased
of key suppliers * IT providers; and the monitoring of
(for example, our key suppliers,
newsprint suppliers, reviewed our contingency
wholesalers * global digital partners arrangements and
and distributors), ensured there are
could be adversely contingency measures
affected, operationally We have business continuity/disaster in place with our
and financially, recovery plans in place with suppliers, and reviewed
by changes to all our key partners. and enhanced our
supplier dynamics. For our IT partners, we have stock management
Information clear governance arrangements processes.
systems and covering risk management,
technology: change control, security and
A major failure, service delivery.
breach or prolonged
performance
issues at a
third-party
provider could
have an adverse
impact on our
business.
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Risk Description Mitigation What we've done
this year
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Health Failure to adhere Every site has a professionally During the year
and safety to our health qualified and experienced we reviewed our
issue and safety systems health and safety manager Health and Safety
could result and an occupational health policy and framework
Risk owner: in our employees provider. The health and safety to further enhance
Chief or other workers manager oversees the implementation our current arrangements.
Operations on our sites of our health and safety management We have continued
Officer having accidents, system, which includes an to enhance our risk
including, potentially, adverse event reporting system. assessment processes
No change fatal ones. This allows investigations for events, and
to be carried out in a timely for work in both
manner by the Health and Safety hostile and high
team. risk environments.
The system includes a process We have continued
for assessing risks in different to offer appropriate
areas of the business, and health and wellbeing
covers risks such as external support to all of
work in hostile and high risk our employees. Online
environments. threats and abuse
It also includes internal towards our journalists
and external auditing to ensure is an area of increasing
continuing compliance across concern, considering
our print and publishing sites. the impact it can
We offer health and wellbeing have on their wellbeing,
support, including mental so this year we
health, to all our employees. invested in online
safety. Addressing
this issue and protecting
our journalists
will continue to
be a priority for
us.
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Lack of Our main financial Financing Financing
funding risk is the * We have committed loan facilities sufficient to * During the year we extended our full loan facility by
capability lack of funding deliver our strategy another year, reducing the immediate risk of any
capability to unexpected increases in interest rates or liabilities
Risk owner: meet business
Chief needs. This * Through regular dialogue, we maintain constructive
Financial may be caused relationships with our syndicate banks
Officer by a lack of Commitments
working capital, * We made significant payments to our pension schemes
No change unexpected increases * We forecast and monitor cash flow regularly through in the year and we remain committed to addressing our
in interest our Treasury reporting processes historical pension deficits
rates or increased
liabilities,
in particular: * Our exposure to foreign exchange fluctuation is * During the year we continued to deal with HLI claims
limited in a professional and efficient manner, and will
* pension deficits may grow at such a rate that annual continue to do so
funding costs consume a disproportionate level of
profit; and
Commitments
* Regular reporting to the Board
* volume and level of claims for historical legal
issues (HLI) may continue to have significant cost
implications. * We hold regular discussions with pension scheme
trustees
* We continually review ways of de-risking our pension
liabilities
* We continually monitor and manage ongoing HLI claim
levels, and work with external lawyers on HLI civil
claims and related investigations
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Inability The inability We continually monitor and During the year
to recruit to recruit, review: we reviewed the
and retain develop and * digital capabilities of our workforce; effectiveness of
talent retain talent how we recruit people,
with appropriate and restructured
Risk owner: skills, knowledge * turnover levels; our approach to
Group Human and experience align it with our
Resources would compromise approach to diversity
Director our ability * pay and benefits; and inclusion, to
to deliver our ensure we are recruiting
No change strategy. and developing staff
* opportunities to expand our talent pool (for example, from the widest
outside London); possible pool of
talent.
* the recruitment channels we use; and
* diversity and inclusion.
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Risk Description Mitigation What we've done
this year
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Damage Breaches of We have highly experienced As we continue to
to brand regulations and capable people in our embed our strategy,
reputation or editorial key senior management roles. we continue to be
best practice Our governance structures aware of the risk
Risk owner: guidelines; provide clear accountability created in a digital-led
Executive editorial errors; for compliance with all laws environment due
Committee and issues with and regulations, and we have to the 24/7 nature
employees' behaviour policies and procedures in of our operations
No change or the tone place to meet all relevant and the need to
of our editorial requirements, including a move with pace.
could damage crisis management procedure During the year
our reputation, that is communicated to all we enhanced our
cause us to relevant staff. Editorial Risk Policy,
lose readership, We train editorial employees including reviewing
and put us at on how to create content that all relevant policies,
risk of legal complies with relevant legislation. raised awareness
proceedings. We continually monitor upcoming in this area, and
legislative changes and emerging enhanced our training
trends. arrangements.
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
Data A contravention We have clear governance structures During the year
protection of the General to direct and oversee our we continued to
failure Data Protection data protection strategy. focus on embedding
Regulation (GDPR) We have a Senior Data Protection data protection
Risk owner: could lead to team and a Data Governance controls and processes
Group General monetary penalties, team to monitor and improve and ensuring that
Counsel/Data reputational how we use customer data across data protection
Protection damage and a the Company. forms part of 'business
Officer loss of customer Our Data Protection Officer as usual' in everything
trust. and Data Protection Team promote we do. This included
No change and advise on compliance with reviewing and enhancing
data protection regulation, our Data Protection
address rights requests, provide risk and reporting
oversight and help mitigate framework, implementing
the risk of compliance breaches. new workflow systems
We have established data protection to improve effectiveness
policies and processes to and efficiency,
govern how colleagues carry and ensuring all
out day-to-day activities colleagues completed
involving the handling of their mandatory
personal data, and all our data protection
staff must undergo awareness awareness training.
training.
When developing new products
and services, we use a 'data
protection by design and default'
approach to collecting and
using personal data, to ensure
we remain compliant with data
protection regulation.
----------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------
LEI: 213800GNI5XF3XOATR61
Classification : 3.1 Additional regulated information required
to be disclosed under the laws of a Member State
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March 07, 2023 02:00 ET (07:00 GMT)
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